Land conveyances

What are the two steps in a conveyance of real estate?

Land contract, and closing, where deed becomes the operative document.

Four requirements of land contract

Writing, signed by parties to be bound, describe the land, state consideration

What remedy if the parcel sold is smaller than contract states?

Specific performance with pro rata reduction in purchase price

Doctrine of part performance - equity will decree specific performance of an oral contract for sale of land when 2 of 3 are satisfied:

B takes possession, B pays all or part of the purchase price, B makes substantial improvements

Because of the doctrine of equitable conversion, what happens when a contract for sale of real estate is signed?

B owns the land and bears risk of loss unless the contract says otherwise

What does it mean to provide marketable title?

Title free from reasonable doubt - unencumbered fee simple

What are the implied promises in every land contract (2)?

Title from reasonable doubt, not to make any false statements of material fact (majority: also failure to disclose latent material defects)

What three circumstances render title unmarketable?

Adverse possession (of even part of land), encumbrances (servitudes/mortgages/liens - unless buyer waived), zoning violations

Seller is on the hook for…

lies and material omissions

Will a general disclaimer of liability (property sold "as is" or "with all faults") excuse seller from liability for fraud or failure to disclose?

No

Does a land contract contain implied warranties of fitness or habitability?

No - the standard is caveat emptor, except for the sale of a new home by a builder-vendor

How does the deed pass legal title from seller to buyer?

LEAD - LAWFULLY EXECUTED AND DELIVERED

Is "all of O's land in Essex County" sufficient for a deed?

Yes

Is "some of my land in Sussex County" sufficient in a deed?

No - even w/ research we won't know what "some" means

What does a deed do?

Passes legal title from seller to buyer

What is the standard for description of land in a deed?

Unambiguous description

Delivery requirement could be satisfied when:

Grantor physically or manually transfers the deed to the grantee

Is it OK to use mail/messenger/agent for delivery of a deed?

Yes

Does delivery of a deed require physical transfer of the document?

No

What is the standard for delivery of a deed?

Whether grantor had present intent to be bound, irrespective of whether the deed itself was literally handed over

Does a deed need to recite consideration?

No

Need consideration pass to make a deed valid?

No

What defeats delivery of a deed, despite grantor's present intent to be bound?

Recipient's express rejection of the deed

What happens if a deed that is absolute on its face is transferred to grantee with an oral condition?

The oral condition is void and delivery is done.

How does delivery of an executed deed by escrow work?

Grantor delivers executed deed to escrow agent, with instructions that deed be delivered to grantee once certain conditions are met. Once the conditions are met, title passes automatically to grantee.

What happens if grantor dies or becomes incompetent before escrow conditions are met?

Title will still pass

What covenants does a quitclaim deed contain?

None - grantor isn't even promising that he has title to convey

What is the worst deed buyer could hope for?

A quitclaim deed

What is the one saving grace in a quitclaim deed?

Grantor did implicitly promise in the land contract to provide marketable title at closing. But the promise is short lived - grantor is off the hook re problems that manifest post-closing

What is the best deed a buyer could hope for?

The general warranty deed

Why is a general warranty deed so great?

It contains present and future covenants that warrant against all defects in title including those due to grantor's predecessors

When does the statute of limitation for breach of a present covenant begin to run?

At the instance of delivery

What does the covenant of seisin do?

Promises that grantor owns the estate

What does the covenant of right to convey promise?

That grantor has the power to make the transfer (of majority age, etc…)

What is the covenant against encumbrances promise?

That there are no servitudes or liens against Blackacre.

What are the three present covenants?

Covenant of seisin, covenant of right to convey, covenant against encumbrances

What does the covenant for quiet enjoyment promise?

Grantee won't be disturbed in possession by a third party's lawful claim of title

What are the three future covenants?

Covenant for quiet enjoyment, covenant of warranty, covenant for further assurances

What does the covenant of warranty promise?

Grantor promises to defend grantee should there be lawful claims of title brought by others

What does the covenant for future assurances promise?

Grantor promises to do whatever future acts are reasonably necessary to perfect the title if it later turns out to be flawed

When is a future covenant breached?

Only when grantee is disturbed in possession

When does the statute of limitations for breach of a future covenant begin to run?

When grantee is disturbed in possession

What is a statutory special warranty deed?

Contains two promises that grantor makes only on behalf of himself - NOT his predecessors in interest

What promises does grantor make in a special warranty deed?

He hasn't conveyed Blackacre to anyone other than grantee, Blackacre is free from encumbrances made by grantor

When can 2d purchaser B defeat first purchaser A in a notice jurisdiction?

If B is a bona fide purchaser she wins (but note - B can't be a bona fide purchaser if A records before B buys, because B would be on record notice)

When can 2d purchaser B defeat first purchaser A in race-notice jurisdiction?

If B is a bona fide purchaser, B wins only if she records properly before A does

Who do recording acts protect?

Bona fide purchasers and mortgagees.

What is a bona fide purchaser?

One who purchases Blackacre for value, without notice that someone else purchased Blackacre first

How much consideration must B provide?

"Substantial pecuniary consideration"

Do recording statutes protect donee's heirs/devises?

No, unless the shelter rule applies.

What three kinds of notice may be attributed to buyer B?

AIR - ACTUAL, INQUIRY (whatever an exam of the land would show, whether he inspects or not; if recorded instrument makes reference to an unrecorded transaction, grantee is on inquiry notice of whatever a reasonable follow-up would show about the transaction, RECORD - B is on record notice of A's deed if at the time B takes A's deed was properly recorded)

Which two types of notice are imputed?

Inquiry, record

Does a buyer of land have a duty to inspect to see whether someone else is in possession?

Yes - this plays into inquiry notice

Notice statute

A conveyance of an interest in land shall not be valid against any subsequent purchaser for value without notice thereof, unless the conveyance is recorded

What must B do to prevail in a notice jurisdiction?

Be a BFP.

Race-notice statute

Any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded.

What must B do to prevail in a race-notice jurisdiction?

Be a BFP and win the race to record

"… unless the conveyance is recorded" refers to?

A - it's a notice statute

"… whose conveyance is first recorded" refers to?

B - it's a race notice-statute

What effect if A properly records before B purchases?

A wins! A's proper notice puts later buyers on record notice, thereby defeating their status as BFPs

To give record notice to subsequent takers, the deed must be recorded properly, within…

the chain of title

What is the chain of title?

The sequence of recorded documents capable of giving notice to later takers

How is the chain of title established?

Through a title search of the grantor/grantee index

What are the three chain of title problems?

Shelter rule, rule of the wild deed, rule of estoppel by deed

Shelter rule

One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against.

Who does the shelter rule protect?

B, the BFP, by making it easier for B to successfully transfer

Rule of the wild deed?

If a deed, entered on the records, has a grantor unconnected to the chain of title, the deed is a wild deed. It is incapable of giving record notice of its existence - it's a nullity

What is the recording of a wild deed?

A nullity. A subsequent bona-fide purchaser wins in a notice jurisdiction and wins if she records in a race-notice jurisdiction.

Rule of estoppel by deed?

One who conveys realty in which he has no interest is estopped from denying the validity of the conveyance if he later acquires that previously transferred interest

Can one assume that no one sells land until they first own it?

Yes - that's part of the rule of estoppel by deed

In a mortgage, what do parties intend the land to be?

Collateral

A mortgage is the union of which two elements?

Debt, and a voluntary lien on debtor's land to back up or secure the debt

Need a mortgage be in writing?

Yes usually

What are other terms for a legal mortgage? (5)

Note, deed of trust, mortgage deed, sale-leaseback, security interest in land

When does an equitable mortgage arise?

When a mortgagor gives a mortgagee a deed that is absolute on its face, rather than a note or mortgage deed

Is parol evidence admissible to show the original intent in a dispute between mortgagor and mortgagee related to an equitable mortgage?

Yes

What if mortgagee who holds a deed related to an equitable mortgage sells Blackacre to bona fide purchaser X?

X owns Blackacre - O's only recourse is to sue the mortgager for fraud and sale proceeds

Rights once mortgage has been created - debtor-mortgagor

Title and right to possess

Rights once mortgage has been created - creditor-mortgagee

Lien

Mortgage automatically follows

A properly transferred note

Creditor-mortgagee can transfer interest by

Endorsing note and delivering it to transferee, or executing a separate document of assignment

If a note is endorsed and delivered, the transferee is eligible to become

A holder in due course

The holder in due course takes the note/may foreclose despite

Personal defenses that could've been raised against the original mortgagees

Personal defenses include (5)

Lack of consideration, fraud in the inducement, unconscionability, waiver, estoppel

Holder in due course is still subject to these seven "real defenses":

MAD FIFI4 (MATERIAL ALTERATION, DURESS, FRAUD IN THE FACTUM - lie about the instrument, INCAPICITY, ILLEGALITY, INFANCY, INSOLVENCY)

To be a holder in due course, what five criteria must be met?

Note must be negotiable, made payable to the named mortgagee; the original must be endorsed, signed by the named mortgagee; the original must be delivered to the transferee; transferee must take the note in good faith without notice of any illegality; transferor must pay more than nominal value

If O, debtor-mortgagor, sells Blackacre, which is now mortgaged,

The lien remains on the land, so long as the mortgage was properly recorded

A later buyer takes subject to a …

properly recorded lien

If B assumes O's mortgage, who is personally liable?

O and B are personally liable. B is primarily liable, O is secondarily liable

If B takes O's property "subject to the mortgage," who is personally liable?

Only O.

What is B's risk, if he takes O's property subject to the mortgage?

B assumes no personal liability, but if recorded the mortgage sticks with the land - if O does not pay, the mortgage may be foreclosed

What if the proceeds from the sale of Blackacre at foreclosure are less than the amount owed?

Mortgagee brings a deficiency action against debtor

What if proceeds from the sale of Blackacre at foreclosure are greater than the amount owed?

Junior liens are paid in order of priority. Remaining surplus goes to debtor

In a foreclosure sale, who takes off the top?

Attorney fees, foreclosure expenses, accrued interest in <foreclosing> bank's lien

How are sale proceeds divided among mortgagees?

In order of priority; each claimant is entitled to satisfaction in full before a subordinated lienholder may take.

Which interests will foreclosure terminate?

Junior interests/mortgagees/lienholders

Which parties must the foreclosing party join?

Those with subordinate mortgages and the debtor-mortgagor.

What is the effect of failing to include a necessary party in a mortgage action?

It results in the preservation of the party's claim, despite the foreclosure and sale - his mortgage remains on the land.

What is the effect of foreclosure on a senior interest to the mortgage being foreclosed?

The buyer at the sale takes subject to the interest - he is not personally liable, but he takes the risk that senior creditor will foreclose (so he should pay senior creditor, and lower the price he pays for Blackacre accordingly)

As a creditor, you must…

Record

Once recording, priority is determined by the norm of

First in time, first in right

What is a purchase money mortgage?

A mortgage given to secure a loan that enables the debtor to acquire the encumbered land

What priority does a purchase money mortgagee have?

Super-priority! Assuming he records, first priority, because he financed the parcel

What is an after-acquired collateral clause?

AKA a floating lien - "whether now owned or hereafter acquired"

What is a subordination agreement?

Senior creditor may agree to subordinate its priority to a jr. creditor

At any time prior to the foreclosure sale…

debtor may try to redeem the land

Once a valid foreclosure has taken place…

the right of redemption is gone

May a debtor/mortgagor waive the right to redeem in the mortgage document itself?

No - this is clogging of the equity, violates public policy

What is statutory redemption?

It gives the debtor-mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred, for the foreclosure sale price (not the amount of the original debt)

In states with statutory redemption, may the mortgagor possess Blackacre during the statutory (grace) period?

Yes, in most states

What is the effect of redeeming under statutory redemption?

It undoes the foreclosure sale

What is the standard for lateral support?

Negligence

When does strict liability attach to lateral support claims?

Only if P can prove that because of D's actions, P's land would've collapsed even in its natural state

Riparian doctrine

Water belongs to those who own the land bordering the watercourse, known as riparians

What right do riparians share?

Reasonable use of the water

When is a riparian liable

If his use unreasonably interferes with others' use

What is the prior appropriation doctrine?

Water belongs initially to the state; the right to divert and use it can be acquired by any individual (not necessarily a riparian); rights are determined by priority of beneficial use - usually first in time, first in right

Groundwater is also known as

percolating water

Who may use groundwater and under what conditions?

Surface owner, but use may not be wasteful

What is surface water?

Water that comes from rain, springs, melting snow, which have not reached a natural watercourse or basin

How may a landowner combat the flow of surface water?

By changing drainage or making any other changes/improvements on his land (in many courts - without causing unnecessary harm to others' land)

Trespass

An invasion of land by tangible physical object

What action may a landowner take to remove a trespasser?

An action in ejectment

Private nuisance

Substantial and unreasonable interference w/ another's use and enjoyment of land

What is a hypersensitive plaintiff

One that has a super-specialized nuisance issue (e.g., objects to high frequency sound heard by dogs but not people)

Eminent domain comes from which Amendment

Fifth

What is eminent domain?

Government's power to take a private property for public use in exchange for just compensation

What is an implicit or regulatory taking?

A regulation that works an economic wipeout of the investment

What is the remedy for a regulatory taking?

Government must compensate owner or terminate the regulation and pay owner for damages occurring while the regulation was in effect

What is the root of zoning power?

Police powers

What does zoning power allow?

Governments may enact statutes to reasonably control land use

What does a proponent need to get a variance?

To show undue hardship and that the variance will not decrease neighboring property values

How is a variance granted?

Administrative action

What happens when a use becomes nonconforming because of a new zoning option?

It can't be eliminated all at once unless just compensation is paid (otherwise, it'd be an unconstitutional taking)

What is an exaction?

Amenities that government seeks in exchange for granting permission to build, such as streetlights, parks, wider roads

When is an exaction unconstitutional?

When it is not reasonably related in nature or scope to the impact of the proposed development

What effect does destroying a deed have on title?

None - a deed only evidences title

When there is a mistake or inconsistency in the description of property, which takes precedence, physical description or quanty description?

Physical description