Property outline LAND SALE CONTRACTS Most transfers of land are preceded by contracts of sale. These normally contemplate escrows (delivery of deed to a third person to be held until purchase price paid) before closing (exchange of purchase price and deed). Statute of Frauds To be enforceable, a land contract must be memorialized in a writing that is signed by the party to be charged. The writing need not be a formal contract; a memorandum suffices— e.g., escrow instructions or e-mails can be contracts of sale. The Statute of Frauds requires that the writing contain all “essential terms” of the contract. These are: (i) a description of the property (need an address, meets and bounds test), (ii) identification of the parties to the contract, and (iii) the price and manner of payment (if agreed upon). SOF Exceptions: courts can enforce even where SOF not satisfied where there is: a. Doctrine of Part Performance – 1 of 2 must be satisfied: i. Buyer is in possession of real property and?/OR? ii. 2 prongs: part payment: either buyer paid some portion of purchase price or buyer made valuable improvements to the property b. Detrimental Reliance/Equitable Estoppel – when a party pleads SOF, but this would really allow them to commit fraud, courts won’t let them do this i. Requires detrimental reliance; SOF is a shield, not a sword Incidental matters (e.g., prorating of taxes, furnishing of deeds, title insurance, etc.) can be determined by custom; they need not appear in the writing nor even have been agreed upon. Implied Warranty of Marketable Title (clear title) implied in every Real Estate K a. ?????Marketable title can be violated by claim in executory period (but not claim after closing) ????? There is an implied covenant in every land sale contract that at closing the seller will provide the buyer with a title that is “marketable.” a. “Marketability” Defined—Title Reasonably Free from Doubt Marketable title is title reasonably free from doubt, i.e., title that a reasonably prudent buyer would be willing to accept. It need not be a “perfect” title, but the title must be free from questions that might present an unreasonable risk of litigation. Generally, this means an unencumbered fee simple with good record title. (but this casts a wider net-Themis) a) Adverse Possession On the bar exam, title acquired by adverse possession is unmarketable, b) Defects in Record Chain of Title i. Title may be unmarketable because of a defect in the chain of title. ii. Examples include: a significant variation in the description of the land from one deed to the next, a deed in the chain that was defectively executed and thus fails to meet the requirements for recordation, and evidence that a prior grantor lacked capacity to convey the property. Many courts hold that an ancient lien or mortgage on the record will not render title unmarketable if the seller has proof of its satisfaction or the statute of limitations on the claim would have run under any possible circum- stance, including tolling for disabilities. b) Future Interest Held by Unborn or Unascertained Parties ....C’s title will become a marketable fee simple at that time. 2) Encumbrances mortgages, liens, DETRIMENTAL easements, and covenants, existing zoning violations, render title unmarketable unless the buyer waives them. The majority of courts, however, have held that a beneficial easement (e.g., utility easement to service property) does not constitute an encumbrance OR An easement that was visible or known to the buyer does not constitute an encumbrance 3) Zoning Restrictions on Marketable title Generally, zoning restrictions do not affect the marketability of title; they are not considered encumbrances. An existing violation of a zoning ordinance, however, does render title unmarketable. 2. Quitclaim DeedNo Effect The fact that a contract calls for a quitclaim deed, which does not contain any covenants for title, does not affect the implied covenant to provide marketable title (unless so provided in the contract). DEEDS Must be delivery of deed + intent to convey Legal description of property Identifiable grantees Deed principles acceptance of delivery of the deed by the grantee is presumed unless specified otherwise (ie the grantee explicitly rejects it upon delivery “take it right back”) acceptance by the buyer of the deed’s terms is presumed even if the buyer does not sign the deed unless specified otherwise The deed stated that the conveyance was subject to the lender's mortgage and that the grantee expressly assumed and agreed to pay the mortgage obligation as part of the consideration. While the developer did not sign the deed, the developer accepted the deed and recorded it, thereby agreeing to the mortgage assumption. When the developer assumed the mortgage obligation, the developer became personally liable to the lender, and the landowner became merely a surety. The developer, having sufficient assets to pay the deficiency judgment, must do so. Merger of K with Deed If the buyer permits the closing to occur, the contract is said to merge with the deed upon closing (i.e., the contract disappears) and, in the absence of fraud, the seller is no longer liable on the implied covenant of marketable title. However, the buyer may have an action for violation of promises made in the deed, if any (see D., infra). Note: The merger rule does not apply to most nontitle matters, such as covenants regarding the physical condition of the property. [Campbell v. Rawls, 381 So. 2d 744 (Fla. 1980)] =Although a covenant that title will be marketable is implied in a contract for the sale of land, the doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted. In this case, if the buyer has a remedy, it would be based on the deed he received, not on the contract of sale. And so, if the buyer sues on the contract issue, the seller will prevail on the breach of contract claim. Equitable CONVERSION in between signing a K and until closing: buyer=EI + HAS RISK OF LOSS after signing seller =Legal Title until closing/execute. Execution conveys LEGAL TITLE to the buyer significance of EC: addresses who bears the risk for damage or destruction of a property after the sale contract is executed. 2) Common law of Equitable Conversion: buyer entitled to specific performance in sale of real property, so same for seller (=both are entitled to specific conversion...this rule just makes it clear that the buyer can even though he does not have legal title) 3 types of deeds: 1. The quitclaim deed “quitting my claim” contains NO WARRANTIES/promises/assurances i.e., if the deed contains warranties, it is not a quitclaim deed. Cannot sue for breach Quitclaim Deed conveys all of owner’s interest to the grantee Only an idiot would use this – but it is quick 2. General Warranty Deed Contains 6 promises Conveys clean title since forever, promises all is ok since forever 3. Special warranty deed (~more limited warranties) conveys clean title since lived there, promises all is ok since he lived there Easements -acquiring rights in land no acquisition of title +NO Writing Required Implied – from prior use Necessity – no other way Prescriptive – AP Terminated by: abandonment w/ intent OR + merger (2 properties become owned by 1 person) Abandoning an easement: intent to abandon + abandoning possession (>1yr) Vs. Abandoning a TIC: Abandoning Ownership abandoning possession 2) Merger of Easement Easements are terminated when the servient estate merges with the easement, i.e., when the same owner comes to own both the easement and the servient estate. The easement is not revived when the ownership is subsequently split. Equitable redemption =borrower’s right to pay off even after default (until foreclosure sale) TIME UP TO foreclosure sale where resident can still keep his property During which time he may still pay off the defaulted debts to keep property whether documents say it or not Equity of redemption continues until it is cut off by an order of foreclosure = Lender’s recourse: Foreclosure proceeding – closing the equity of redemption (ability of borrower to redeem) Statutory Redemption TIME AFTER a foreclosure sale where resident can still keep his property The right arises only by statute and only after there has been a foreclosure of the mortgage. If thejurisdiction provides a statutory right of redemption, it does not matter whether the property being redeemed is residential, commercial, or another type of property, unless the statute so notes. Ex. Question A man owned property that he used as his residence. The man received a loan, secured by a mortgage on the property, from a bank. Later, the man defaulted on the loan. The bank then brought an appropriate action to foreclose the mortgage, was the sole bidder at the judicial sale, and received title to the property as a result of the foreclosure sale. Shortly after the foreclosure sale, the man received a substantial inheritance. He approached the bank to repurchase the property, but the bank decided to build a branch office on the property and declined to sell. If the man prevails in an appropriate action to recover title to the property, what is the most likely reason? D. The jurisdiction provides for a statutory right of redemption. ___ Future Interests FSD (while", l'during", or l'until" or as long as”) automatic - possibility of reverter FSS2CS (l'but if" or l'upon condition that") right of reentry the language "for the purpose that", FSAwhich has no effect on the title, so the church held fee simple absolute. Therefore, after the church transferred title to the developer, the developer held in fee simple. There are two types of vested remainders: 1. vested in one person or class 2. vested remainder subject to open (aka subject to partial divestment" or 'subject to partial defeasance") vested in a class whose members are not yet fully discernible, A class is considered to be open or undiscerned where there is a possibility for more people to become members of the class in the future. Duties- 2 each Landlord – warranty of habitability, make repairs +deliver possession on first day of lease Tenant - Pay rent, no waste Types of Mortgages “you can take ”: Purchase Money Mortgage- takes priority in settling of debts after foreclosure sale If the Borrower fails to pay as obligated by the note, i.e., defaults, then Lender generally has two choices against the principal borrower: 1. Lender can sue directly on the note; 2. or, as mortgagee, Lender can foreclose on the security property. For many reasons, foreclosing is almost always the remedy pursued. Example of personally/suing directly (1) If the mortgagee forecloses on the property and the foreclosure does not pay off the obligation, that will leave a deficiency. (2) If the mortgagee subsequently brings an action on the note to collect that amount still owed, i.e., the deficiency, it is called an action for a deficiency judgment. When can Lender sue a subsequent buyer Directly on the previous buyer’s note? If the subsequent borrower “assumes” the previous owner’s note/mortgage obligations(Y) If the subsequent borrower takes title “subject to” the previous mortgage (N) Bank always can foreclose Primary note holder always remains DIRECTLY liable for deficiency UNLESS NOVATION by all parties But, could Carla, the person who sold the property to Darla, also be held liable for a deficiency judgment? The answer is "yes," unless Carla was released by agreement or operation of law, e.g., contract doctrine or statute. The answer is the same for a person who sells land "subject to a mortgage." Liable = directly liable Assumablenew AND original owner liable (you assume all rights and obligations-you take over payments of the mortgage) =New owner ‘assumes’ the mortgage/the original owner’s original obligation to pay In other words, the new owner/susbequent buyer would have to contractually obligate himself to pay as the note provides. "assumed the mortgage" is inaccurate. What the transferee is assuming is the note, not the mortgage. Subject to-risky!- original owner liable + New owner NOT directly Liable! Risky-have to make sure original owner continues paying or the bank will foreclose your home with you on it =New owner takes the property ‘subject to’ the original owner’s continuing obligations Oliver takes out a mortgage loan from BANK and purchases a house. Then Oliver sells the house to Andy. Nothing was said or put in writing about the mortgage. For the two months following Andy's purchase of the house, Lender didn't get a mortgage payment.-->BANK CAN FORECLOSE on Andy’s new house because Andy's title to the home was subject to Oliver’s mortgage. Oliver didn't have the power to sell the house free of the mortgage. If he did, then the mortgage wouldn't be much security for the loan. So, Lender could still reach this collateral by a foreclosure action. Subsequent grantees do not become personally liable on the mortgage unless they explicitly assume the mortgage. Therefore, the mortgagor will always be personally liable on the mortgage, all subsequent grantees who assume the mortgage will be personally liable on it, and all subsequent grantees (whether they assume the mortgage or not) can lose the property through foreclosure if the mortgage is not paid. The facts state that the friend did not assume the mortgage, so she has no personal liability to the bank with regard to mortgage payments. Although she voluntarily made such payments for a few months, she was under no obligation to do so. Therefore, answer A is correct. The bank, however, has the right to foreclose on the mortgage if the payments are not made, so the friend stands to lose the property unless either she or the carpenter makes the payments. Lien theory- bank has an equitable interest (lien) on the house / new owner has LEGAL TITLE FL Jx Title theory – bank has LEGAL TITLE / new owner has an equitable interest new owner cannot convey the property new owner gets legal TITLE when mortgage is paid off The board may fine or punish the board member, but may not remove the trees. If authorized by statute or the governing documents, a common-interest ownership community may, through its board, impose restrictions on the structures or landscaping that it places on individually owned property, or on design, materials, colors, or plants that may be used. Therefore, the restriction imposed as to the oak trees by the board is a valid one. Additionally, a community has the power to enforce its governing documents along with its adopted rules and regulations. To ensure compliance, a board may: (i) impose fines, penalties, and late fees; (ii) withdraw privileges to use common recreational or social facilities; (iii) require prior submission of plans for projects to ensure compliance with existing restrictions; (iv) conduct reasonable inspections of property for violations, with a reasonable belief that such violation exists; and (v) deny voting privileges or board positions. However, the board may not remove the trees. Waste The husband's conveyance created a life estate in the wife and a vested remainder in the daughter. As a life tenant, the wife has a duty not to commit voluntary or permissive waste she has no obligation to pay the principal. As a life tenant, the wife has a duty not to commit voluntary or permissive waste she has no obligation to pay the principal. commit voluntary or permissive waste relevant to the property during her life tenancy. A failure to keep the property in repair, pay taxes on the property, or pay interest on any mortgage on the property all constitute permissive waste. Although the wife's duty not to commit permissive waste requires her to pay the interest on the mortgage, she has no obligation to pay the principal. a. Types of Waste 1. Voluntary (Affirmative) Waste 2. A tenant is liable to the landlord for voluntary waste. Voluntary waste results when the tenant intentionally or negligently damages the premises. Voluntary waste also includes exploiting minerals on the property unless the property was previously so used, or unless the lease provides that the tenant may do so. Permissive Waste = neglect that occasions harm to the premises =A failure to keep the property in repair, pay taxes on the property, or pay interest on any mortgage on the property all constitute permissive waste. 3. Unless the lease provides otherwise, the tenant has no duty to make any substantial repairs (i.e., to keep the premises in good repair). However, the tenant has a duty to make ordinary repairs to keep the property in the same condition as at the commencement of the lease term, excluding ordinary wear and tear (unless the tenant covenanted to repair ordinary wear and tear; see c.2 For example, it is the tenant’s duty to repair broken windows or a leaking roof and to take such other steps as are needed to prevent damage from the elements (i.e., keep the premises “wind and water tight”). If the tenant fails to do so, he is liable to the landlord for any resulting damage, but not for the cost of repair. Under the URLTA, residential tenants have additional duties: (i) not to cause housing code violations; (ii) to keep the premises clean and free of vermin; and (iii) to use plumbing, appliances, etc., in a reasonable manner. Note that even when the burden of repair is on the landlord, the tenant does have a duty to report deficiencies promptly to the landlord. 3) Ameliorative Waste =changes that allegedly enhance the value of the premises w/out L’s consent A tenant is under an obligation to return the premises in the same nature and character as received. Therefore, a tenant is not permitted to make substantial alterations to leased structures even if the alteration increases the value of the property. RC PRIVITY between original owner and the person suing (not the D) There are four elements that must be met for a covenant to run with the land at law: (i) intent that it runs with the land; (ii) notice; (iii) l'touch and concern" of the covenant to the land; and (iv) privity of estate. The facts indicate that all four elements are present. Here, when the owner sold the lots, each deed contained this covenant, so the intent and notice elements are fulfilled. There is both horizontal and vertical privity, because the owner covenanted at the time with the woman that none of the lots would have mobile homes. The woman purchased directly from the owner, so her deed has a restrictive covenant that runs with the land An equitable servitude is a written promise or contract involving land; Not a restrictive covenants because RCs require privity includes negative/implied reciprocal servitude (common scheme) The accompanying remedy is injunctive relief. In order for an equitable servitude to be binding on successors, there must be (i) a writing; (just like restrictive covenants) (ii) an intent to bind successors; (iii) the promise must touch and concern the land; and (iv) the successors of the burdened land must have notice of the promise. Privity is not required (unlike RCs) still run with land to sucessors Here, the agreement was recorded and stated that it was enforceable by and against successors, as well as concerned the land itself in that it prohibits detached storage sheds on the land and the daughter had notice of the equitable servitude. Therefore, the equitable servitude is binding on the daughter as a successor. A joint tenancy cannot be created without the l'four unities" (time, title, possession and interest), and can be terminated in one of two ways: by partition or by severance. Severance: Where one joint tenant makes an inter vivos conveyance of their interest in the property, a severance occurs and the interest transferred is that of a tenant in common. Similarly, where one joint tenant executes a mortgage, a severance may also occur. In this case, although there was no conveyance or mortgage, it appears that the sister may still have lost her rights in Greenacre. She agreed to allow her brother to do as he wished with the northern half of the property, declared that she would do the same on the southern half, and proceeded to voluntarily relinquish possession of the lower half to a conservation society. If the brother's son prevails, it will be because the sister's actions estop her from asserting title. TBE -also requires the 4 unities (in time, title, possession, person) + marriage A tenancy by the entirety may only be severed: (i) by divorce; (ii) by the death of one spouse; (iii) by a creditor of both spouses; or !?!?!?!?!?! (iv) by consent / mutual agreement between the husband and wife. In this case, the man and woman are not husband covenants vs conditions Covenant is a promise and/or obligation to perform whereby failure to do so may be subject to a suit for breach, with such remedies as damages, specific performance and rescission Condition is merely a statement that a party’s obligation to perform some covenant is dependent upon the happening of some event or occurrence There can also be options Assumable mortgage – new owner (secondarily liable) will be liable (unless there is a release) liable) and original owner (primarily Notice of commencement – must always be filed after the mortgage that contemplates and gives the construction money. Otherwise, when a construction lien is filed, it will come ahead of the mortgage. You can cancel/terminate NOC within a few days You have to get rid of a NOC or all liens will relate back to _____ Priority of construction liens Forced insurance – banks pay a huge premium 1. Bank placed it because someone did not keep 2. Youre looking at a horrible expense-bank requires a large payment from the buyer
