Real Estate Transactions (Property) Flashcards
(20 cards)
What are the phases of a real estate transaction?
pre-contract phase, executory phase, and the closing.
What are the major risks in a real estate transaction?
Title risks and physical condition risks
What are the 3 types of notice?
- Actual notice: A person has actual notice of a fact if the person has been given notice of the fact.
- Record notice: notice a person would obtain by performing a diligent record search.
- Inquiry notice: Notice of facts that would have been found if a) a reasonable person under the circumstances would have inquired further into the facts and b) a person had performed a diligent inquiry into these circumstances.
What are the 3 types of statutes?
Race statutes:** In a race statute jx, the first person to record wins.
Notice statutes: Subsequent purchasers or lenders will win so long as they had no notice of a prior unrecorded interest at the time they acquired their interest.
Race-notice statutes: Mixture. To win under this, a subsequent interest holder must both take the subsequent interest without notice of the prior interest and record first.
What is a mechanics’ lien and how does it work?
Anyone who does work can have a lien on your house.
- Relating back: The lien gets priority from the date of visible construction and not the date of perfection. Also, a mechanics’ lien may be effective against a subsequent purchaser even though the subsequent purchaser could not have found the lien through a diligent records search. This is called a secret lien.
What are some title risks?
- Issues with ownership of title: The seller might not have any interest in the property at all. Or, more commonly, the seller might own less than she is purporting to convey to the buyer.
- Encumbrances: There may be one or more encumbrances. Liens, mortgages, easements, and covenants all encumber the title to property.
- Encroachment: There may be an encroachment. An encroachment is a physical intrusion onto the property.
What did we learn from Harper v. Paradise?
If a person acquires land rights without knowledge of existing prior conveyances and records his deed, his rights receive priority over previous conveyances from the same owner that were not recorded.
What did we learn from In Re Clare House Bungalow Homes?
Residents who held leases have rights to occupy the property that take priority over creditors’ right in a bankruptcy, despite failure to record the leases, if the creditors had inquiry notice of the residents’ occupancy.
What did we learn from Lohmeyer v. Bower?
The purchaser of real property may choose to cancel the sale if the title to the land is found to be unmarketable. “it is the presently existing violation of one of these restrictions that constitutes such encumbrance, in and of itself.” 423.
What is title marketability?
- Seller of real property is obligated to provide the buyer with marketable title. Most real estate contracts contain an express marketable title provision. If title is not marketable, the buyer can usually abandon or back out of the contract as it wasn’t an obligation to begin with.
- The mere existence of encumbrance makes title unmarketable.
What is the merger doctrine? How do you avoid the merger of some contract terms?
- makes the contract go away and the deed controls. the deed is the final expression of agreement between buyer and seller. the contract is about the time between the signing and the closing. after the closing, you can only sue on the deed.
- There are some exceptions. the less a promise has to do with title, the more likely it is to survive merger. Promises about the quality or physical condition of the property, for example, are often deemed to fall outside of the scope of merger.
- Avoiding merger of contract terms: Including the language “this provision will not merge into the deed and will survive closing” will protect a contract provision from merger.”
What are deed warranties? What sort of deeds are there?
Deed warranties are here to hold a seller accountable for title defects. General warranty deeds, special warranty deeds, and quitclaim deeds. General warranty is the gold standard. Anything that existed on this day is warranted. Special warranty deeds are the silver standard. Only from the seller’s ownership of the property. A quitclaim deed has no warranties.
What are the six warranties contained in a warranty deed?
- The covenant of seisin: The grantor promises that she owns the interest that she is conveying.
- The covenant of right to convey: The grantor promises that she has the right to convey the interest.
- The covenant against encumbrances: The grantor promises that there are no encumbrances on the property.
- The covenant of general warranty: The grantor promises to defend the grantee against lawful claims of title by another person and to compensate the grantee for any losses that result for such a claim.
- The covenant of quiet enjoyment: The grantor promises that the grantee will have quiet enjoyment in their possession and ownership of the property.
- The covenant of further assurances: The grantor promises to execute any document, or take any similar steps, necessary to fix any title problems that later arise.
What should we know about breaches?
- For us, the SoL is 6 years and the SoL start to run at the start of the breach. For present covenants, they run at the closing. For future covenants, they run at that time.
- most of the time you wont be able to sue on present covenants since the SoL is so short. despite this, you can sue under the future covenant as only when the problem arises does the SoL time start ticking.
How do future covenants work?
- Future covenants run with the land. when i buy land, im D (A>B>C>D). I have the future covenants from C, B, and A. This also means if C gave me a quitclaim deed and didn’t make any promises, I can still go after B and A. Whatever warranties given run with the land. present covenants aren’t the same. for our purposes, present covenants don’t run with the land. At some point, these sort of disappear, but in theory they still stick around. The reason they disappear is often because the individuals in the past die.
- Counterparty risk: “as time goes by, it will be harder to find and bring a claim against the grantor. the grantor might, for example, have moved away or died.”
What are surveys and physical inspections good for?
surveys can identify encroachment and boundary issues and can identify discrepancies between the parties’ understanding of the property being conveyed and the legal description of the property in the deed. a survey lets you know the exact boundaries of your property. a physical inspection is a non-invasive physical observation of a property. in some ways, less useful than a survey and better in other ways.
Caveat Emptor vs full disclosure?
- courts first moved through a stage of non-concealment—you don’t have to say anything, but you just can’t lie. the third stage is that you have to disclose (residential transactions). states then started passing statutes for disclosure. These forms are not limited to defects and provide for the disclosure of a wide range of fact relating to the physical condition of the property.
- Caveat emptor is still widely applied in the commercial context. We will use disclosure laws and the developed common law for residential properties only and caveat emptor for commercial properties.
What is a contingency?
contingencies allow one party to withdraw from the contract if some conditions are met or not met. inspection contingencies and mortgage contingencies are the two most common. list of things to inspect for on 454.
What is a fixture?
fixtures on page 459. fixtures transfer with the property, generally. trade fixtures don’t count (buy a restaurant and they may be able to take equipment or the fancy bar, etc). one of the biggest fights are about appliances. appliances are not fixtures.
How do we analyze misrepresentations?
- Per Davis, we are given 6 things to look at for a misrepresentation case. If a seller of property knows of facts materially affecting the value or desirability of the property that are not observable or known to the buyer, the seller has a duty to disclose them to the buyer:
- a false statement
- material fact
- representers knowledge that its false
- an intention that the representation induce another to act on it
- actual inducement
- consequent injury
