Property Outline
Transfers of Land
· Purchase and sale agreement
1. First, remember the statute of frauds. SOF has two relevant applications (Purchase and sale agreement, and to the deed itself)
· For purchase and sale agreements, SOF requires the contract:
· Must be in writing
· Must be signed by the person against whom enforcement is sought
· Must describe the land
· Must state some consideration for purchase price
Exceptions to SOF (Circumstances when a contract for the sale of land may be enforcement notwithstanding the fact that it is not in writing):
1.) Partial Performance Rule
Oral agreement for the transfer of land might be enforceable where either of the following is true:
1.) The buyer takes physical possession and pays all or a substantial part of the purchase price,
OR
2.) The buyer takes physical possession and makes substantial improvements
2.) Estoppel Rule: (Not really an exception, but rather a defense, or action to rescind a sale contract)
Oral agreement for the sale of land can be enforced under this rule when both of the following are true:
1.) The oral agreement is admitted or clearly proven, AND
2.) The party seeking performance has taken detrimental action in reliance upon the agreement which the other party either intended or could have reasonably foreseen.
Ex. A promises to sell his house to B. If A could have reasonably foreseen B would sell his house in reliance on the promise. B may be able to enforce the K under the estoppel rule.
Equitable Conversion: “Equity regards as done that which ought to be done” (i.e. the performance of the contract)
· Equitable Title: Although Legal title does not pass until closing (i.e. the time the K is performed and the deed changes hands) equitable title and the risk of loss, pass to the buyer at the time of the execution of the contract.
· Rule of caveat emptor (Buyer beware)
“Generally speaking, sellers are not under any obligation to make warranties of fitness or habitability.” It is the buyer’s obligation.
§ Two Exceptions to the Rule of Caveat Emptor:
1.) When Non-disclosure is a basis for rescission: Where the seller has created a condition that material impairs the value of the property and the condition is peculiarly within the knowledge of the seller or unlikely to be discovered by a reasonably prudent purchaser.
· This does not mean that a legal transfer by a valid deed can be undone for failure to disclose because this is rescission of a sale contract! Therefore, the purchaser must call the sale off before closing.
2.) Where the seller is also the builder. The contract includes an implied warranty of workmanlike quality (i.e. an implied warranty that the house is fit for habitation [this is akin to the warranty of habitability]).
· How far does this warranty go?
o Majority Rule:
§ The warranty is implied only in the contract between the builder and the first buyer.
o Minority Rule:
§ The builder is liable to subsequent purchasers for breaches of implied warranty of workmanlike quality that are made manifest after the subsequent purchase which a reasonable inspection would fail to discover and which become manifest within a reasonable period of time.
Two other implied warranties in all contracts of sale:
1. Implied warranty of merchantable title (fairly expansive, but included in every sales contract): Title that is free of reasonable doubt and does not subject the buyer to a substantial hazard of litigation[1]. Litigation from what?
a. The threat of litigation must be in rem not in personam.
i. Ex. A threatened nuisance action would not suffice to breach the IWMT.
b. However the litigation may arise out of either of the following:
i. A claim of an interest in the land from a third person, OR
ii. Violation of a covenant or land use regulation (violations of restrictions upon use)
2. Implied obligation for the seller not to make any false statements of material facts. The seller is under no obligation to make any disclosures but if the seller does make a disclosu
f interest in property, other than leases for less than three years, but certainly all transfers of freehold estates must be in writing.
2.) The writing must be signed by the grantor and delivered to the grantee
How do we know if the deed has been delivered:
· Deliver of the deed is established if the evidence indicates that the grantor intended to make delivery. Our focus is on the grantor’s intent (This is a question of fact to be resolved with reference to all the circumstances).
Promises contained in the deed:
· Because of the doctrine of merger and because the buyer’s recourse after closing is going to be only to the deed, it is important to know what promises the deed contains.
· There are three different kinds of deeds. Each has its own package of covenants and warranties
1.) Quit Claim Deed
a. Contains no warranties of any kind
2.) Special Warranty Deed
a. Contains one warranty- the grantor has neither done nor suffered anything to be done to cloud the title.
3.) General warranty deed (six warranties –three present three future)
a. Present Warranties (which are breached, if at all, at the time of conveyance. After TOC, they cease to exist)
1.) Covenant of sesin
a. “I own it”
2.) Covenant of right to convey
a. “I have authority”
3.) Covenant against encumbrances (Remember: This is narrower than the warranty of merchantable title under sale contract)
a. “No interest in third parties giving rise substantial probability of litigation”
No property interest in third parties which is inconsistent with the quantum of estate
[1] What renders title unmerchantable:
· Zoning violations
· Adverse Possession
· Encumbrances
