PROPERTY 2 OUTLINE
TRANSFERS OF LAND – Voluntary, inter vivos, transfers of interest in land.
i. Claims that arise DURING escrow
1. Contract clams
2. Equity relief for rescission or restitution.
ii. Claims AFTER escrow closes
1. Property claim based on deed.
2. Money damages
THE CONTRACT OF SALE
i. STATUTE OF FRAUDS
1. Rule – Statute that states that some contracts need to be in writing.
2. Policy: to prevent fraud in contracts which are susceptible to fraud.
a. Note: Raise SOF on exam if there are no facts about a signed agreement or lots of facts.
3. Both the CONTRACT and DEED must be in writing to be enforceable.
4. Can’t raise SOF claim based on the contract after the deed is recorded.
5. SOF is raised as a defense to an enforceable contract.
a. Other side will raise exceptions.
6. Minimum Requirements – Must:
a. *Describe the real estate
b. Be signed by the party to be bound
c. Purchase price IF determined
7. Exceptions:
a. Part Performance
i. Acts – Acts that would not make sense outside of a contract.
1. Paying part of the purchase price.
2. Improvements to property
3. Selling a house is not an act because you would have acted anyway in the absence of a contract.
ii. Irreparable Injury – The party that wants to enforce the contract relied on a contract and cannot be made whole unless the contract is enforced.
b. Estoppel
i. Justifiable – What did the person who does not want the contract to be enforced do while the other person was acting in reliance of the contract?
ii. Detrimental – Money or time that is spent that one cannot get back unless the contract is enforced.
iii. Reliance – Acts in reliance.
ii. MARKETABLE TITLE
1. RULE: The sellers implied promise in the contract that the title will be free from reasonable doubt at the close of escrow.
a. Reasonable doubt – Likely to lead to litigation.
b. Must notify the seller and give him time to cure prior to close of escrow.
c. Buyer may rescind the contract if the seller cannot cure by the close of escrow.
d. Arises before close of escrow and is a CONTRACT based claim.
i. Rescission and Restitution are the damages obtained.
e. TITLE DEFECT (Reasonable doubt)
i. Financial encumbrances – judgment / tax liens
ii. Physical encumbrances – Private party agreements – Easements, Covenants, Zoning violations, utility easements.
1. The mere existence of public zoning laws is NOT a title defect but the violation of one is.
EQUITABLE CONVERSION – Who bears the risk of loss if the house is destroyed.
2. Old common law – Buyer is the equitable owner after the date the contract was signed
3. Modern law – No ownership by the buyer until the deed is delivered at the close of escrow.
4. Uniform Act – the person in possession bears the risk of loss. (CA)
iii. THE DUTY TO DISCLOSE PHYSICAL DEFECTS
1. Common Law – Caveat Emptor (buyer beware) no duty to disclose defects.
a. Exception – Fraud – Seller cannot actively misrepresent.
2. Modern Law – Seller has duty to disclose to the buyer physical defects that are KNOWN to the SELLER that are MATERIAL and LATENT.
a. Material – Substantial defect
i. Jurisdictions vary between subjective and objective standards.
1. People who work graveyard and need a quite place during the day then noise can be subjective.
b. Latent – Hidden defects.
i. Can be road noise, roof leaking, noisy neighbors, broken A/C in winter, dogs barking.
iv. MERGER
1. The contract merges
Must Contain (5)
a. Consideration
i. Not required for the validity of a transfer by deed.
ii. Must state consideration to become a bona fide purchaser of value to invoke the protection of the Recording Acts. Donees are not protected.
b. Description of the tract
i. Street address
ii. Parcel map #
iii. Rural area (Mrs. Browns farm) Ok.
c. Parties identified
d. Words of grant “I hear by grant”
e. Signed / delivered
2. Stolen or forged deed – Will not pass title to a bona fide purchaser. Void from the beginning.
a. Policy – We want to discourage stolen deeds and the efficient market that would ensue.
b. Forged – Signing someone else’s name.
c. Stolen – Stolen from desk drawer.
3. Fraudulent Deed – The bona fide purchaser is protected. The grantor may pass good title to a BFP and the grantor may go after whoever he obtained the property from who defrauded him.
a. Fraudulent – Obtained by active misrepresentations.
4. General Warranty Deed – A deed with promises regarding title that covers the seller’s acts and the acts of all of the seller’s predecessors in interest. The promise contains 6 covenants, 3 present, 3 futures.
5. Special Warranty Deed – A deed with promises regarding title that covers only the seller’s past acts. The promise contains 6 covenants, 3 present, 3 futures.
6. Quit Claim Deed – No warranties. Used in family transactions and to clear up clouds in title.
