Chapter 11LAND SALE CONTRACTS, MORTGAGES AND DEEDS
I. LAND SALE CONTRACTS
A. Statute of Frauds: The Statute of Frauds is applicable in all states to any contract for the sale of land, or for the sale of any interest in land. Therefore, either the contract itself, or a memorandum of it, must be in writing. [372]
1. Brokers:
a. This says that no transfer of title except a lease for less than 3 years may not be in writing. All contracts for the sale of land must be in writing.
b. Theres a period of time between the contract of sale and the time of closing-
c. The broker is the seller’s agent.
d. Comparative market analysis- this is when they do research of houses of the same type in the same area nad what those houses went for.
e. Types of brokers-
i. Ones that only work on rental property
ii. Investal brokers
iii. Residential brokers
iv. Business brokers
v. When Commission Earned:
1. Entitled to commission if she produces a buyer who is ready willing and able to buy with the terms and price set by the buyer.
2. Seller pays the broker the commission.
3. Traditional Old Rule: If the deal falls through because of the buyer the broker still gets the commission.
I. Even if you try to put this into your K with the seller today it is ruled as unconscionable.
4. New Rule: must complete the transaction in order to get the commission
I. If the deal falls through because of the buyer the seller doesn’t have to pay.
II. If the deal falls through because of the seller the seller is liable to the broker.
f. Two levels of professionals
i. Real Estate Agents- they are the sellers and have a license and will be associated with the broker.
ii. Real Estate broker- higher level of an agent.
1. You need a high school degree and
2. at least 16 years old
g. Exceptions to the S of F-
i. Part Performance- allows the specific enforcement of oral agreements when particular acts have been performed by one of the parties to the agreement.
1. Example- the buyer taking possession and paying for the property
ii. Estoppel- applies when an unconcionable injury would occur from denying enforcement of the oral contract after one party has been induced but the other seriously to change his position in reliance on the L. Also this can apply when unjust enrichment would occur.
h. THINGS A BROKER CANNOT DO:
i. Making any material misrepresentation–
1. The value of the house
2. And to disclose it to another buyer
ii. Making any false promise to influence or pursuade
iii. Acting for more than one party in a transation without te knowledge of all parties for whom he acts
2. Memorandum satisfying What needs to be in the K of sale: A memorandum of the parties’ agreement, summarizing some terms but not the entire oral agreement, will satisfy the Statute if it specifies the following: (1) the names of the parties; (2) the land to be conveyed; (3) normally, the purchase price; and (4) the signature of the party to be charged (i.e., the party against whom enforcement is sought). (Example: Seller writes a letter to Buyer, confirming the provisions of their oral contract for the sale of Blackacre. This letter will constitute a sufficient memorandum if Buyer seeks to enforce the contract against Seller, but not if Seller seeks to enforce it against Buyer.) [372 – 373]
3. Part performance exception: There is one major exception to the Statute of Frauds for land sale contracts: under the doctrine of part performance, a party (either buyer or seller) who has taken action in reliance on the contract may be able to gain at least limited enforcement of it. [373 – 375]
a. Acts by vendor: If the vendor makes a conveyance under the contract, he will then be able to sue for the agreed-upon price, even if the agreement to pay that price was only oral.
b. Acts by purchaser: Courts are split as to what acts by the purchaser constitute part performance entitling him to specific performance.
i. Possession plus payment: Many states hold that if the buyer takes possession, and also makes payments, this will be sufficient part performance that the seller will be required to convey the property.
ii. Improvements: Also, in many states, a buyer who takes possession and then either makes permanent improvements, or changes his position in reliance, can require the seller to convey.
iii. “Unequivocally referable” requirement: Most courts say that the buyer’s part performance must be “unequivocally referable” to the alleged contract. Thus the buyer must show that the part performance was clearly in response to the oral contract, and not explainable by some other aspect of the parties’ relationship. (Example: D orally promises to convey Blackacre to P if P will move in with D and care for D in his old age. P
purchaser cannot cancel the contract prior to the closing date because of this fact. [381]
D. Defects in the Premises:
I. Duty to Disclose Defects
What does the seller have to reveal to the buyer?
Caveat Emptor Rules: the old common law- NY- this means buyer beware. They have to find all latent defects on their own.
You hire an engineer to inspect the house and he reveals the latent defects.
Seller could fill out a form with all latent defects
OR you could pay $500 to not fill this out.
Exceptions to Caveat Emptor:
Where a seller publicized her house locally as inhabited by ghosts it has been held that an out of town buyer who did not know of the reputation can rescind the K of sale. Stambovsky v. Ackley.
Note: the seller created the situation and a physical inspection by the buyer was highly unlikely to reveal the ghosts.
D. Remedies for failure to perform: Where one party fails to perform a land sale contract, the other party may have two remedies: (1) a suit for damages; and (2) a suit for specific performance. [383 – 385]
1. Damages: If one party breaches a land sale contract, the other may almost always sue for money damages. Generally, P recovers the difference between the market price and the contract price (the “benefit of the bargain” rule).
2. Specific performance: Usually, an action for specific performance may be brought against the defaulting party, whether the defaulter is buyer or seller. Most commonly, the seller changes his mind, and buyer is able to get a decree of specific performance ordering seller to convey the property. (Each parcel of land is deemed unique, so the court presumes that money damages would not be adequate to compensate the buyer.)
3. Deposit: If buyer is unable to close on the appointed date, most courts do not allow him to recover his deposit (on the theory that a suit to recover a deposit is in effect an action at law, and time will be deemed to be of the essence in a suit at law).
4. Remedies for the Buyer:
– Recission- buyer canot rescind prior to closing but if before closing the buyer notifies the seller that the title is defective and the buyer therefore rescinds the K the buyer not the seller is in breach.
– Specific Performance: this is an equitable remedy the buyer has a right to specific performance if the seller breaches.
– Abatement in Price: where there is a defect and the buyer wants the property their only remedy is to ask for abatement in the price. (ex. An easement).
– Damages- in most states the buyer may sue for the difference between the K price and the market value of the property on the date performance is due (benefit of bargain damages).
5. Remedies for the Seller:
– Recission: if the buyer breaches the seller may rescind.
– Specific Performance: the sller can usually get specific performance but there is a trend to deny that the seller can easily resell and sue at law for damages.
