Property (Land Finance) Outline

LAND FINANCE OUTLINE
(2) Merger of Title Covenants: A well-known doctrine termed “merger” holds that if the PURr has some objection to the title on the basis of the implied covenant of marketable title (or an express K covenant concerning title) she must raise it prior to accepting delivery of the deed. Unless the K says otherwise, if the PURr accepts the deed she is deemed to be satisfied that she is getting the title Ked for, and any future objection she might make must be based on the covenants of title in the deed itself, if any. The rule that says the K’s title covenants are “merged into the deed” does not apply to most non-title
à no authority to modify K. Need a writing by those who are sought to be bound.à part performance). A deed may not be sufficient (for example, if there is fraud in the inducement)
1) INTRODUCTION TO REAL PROP
a) What is real prop?: It includes the land, the mineral underneath the land, the prop on the top of the land, and some air rights. In some occasions it may also include water and waterways. The issue w/ water is whether the ebb and flow of sea water affect the body of water to which your prop is attached.
i) Is it the dirt itself, or just the right to control the dirt?
ii) Are two parcels ever the same?
iii) How do you locate the boundary of the prop?
iv) How do you determine a boundary if it is an ocean or bay (tidally influenced), or a river or lake (not tidally influenced)?
b) What aspect of real prop is subject to ownership?
i) Land
ii) Water – Who owns the water?
iii) Surface vs. Subsurface rights vs. Air Rights
c) Who can own real prop
i) Individual or entity
(1) Corp and LLC
(2) Partnership and LLP
(3) Profit vs. nonprofit
ii) W/ partners
iii) W/in a family
iv) Husband and wife
v) Trusts
vi) REIT’s
d) Forms of joint ownership
i) Tenants in Common
ii) Joint Tenants
iii) Joint Tenants w/ right of survivorship\
iv) Tenants by the entireties
e) Rights of ownership
i) Improve it
ii) Pledge it as collateral for a loan
iii) Sell it
iv) Live on it
v) Conduct activity on it (criminal vs. non-criminal)
f) Statutory requirements for owning and encumbering real prop
i) Deed and Ownership requirements
ii) Mort requirements
iii) Recording statutes
iv) Environmental laws
v) Surface water and stormwater management controls
vi) Zoning and permitting
vii) Regulation of condominium and homeowner associations
viii) Condemnation
ix) Access Rights
x) Rights to provide Utilities
g) Use of Instruments to declare ints in real prop
i) Ownership
(1) deeds w/ warranties
(2) easements
ii) Security Int
(1) mort
(2) rights upon default
h) Use of Official Records to declare int in real prop
i) Priority
(1) Requirement to record in the public records
(2) Method of priorities
(a) Race
(b) Notice
(c) Race-Notice
(d) Statutory Scheme
(3) Error in the public records
(a) Caused by owner or prior owner
(b) Caused by the Clerk who maintains the public records
ii) How far back do we have to search to know who owns the prop
(1) U.S. Gvt Patent Deeds
(2) Spanish Treaty of Amity
(3) Spanish Land Grants
(4) TIIF Deeds
(5) Adverse Possession, Boundary by AGREEt, Boundary by Acquiescence
iii) Rights of Gov to lien or claim ownership
(1) Condemnation
(2) Forfeiture
(a) Criminal
(b) Civil
(c) Taxes: IRS, DOR
(d) Ad Valorem Taxes
i) How to describe the parcel of real prop
i) Legal Description / Legal Title
ii) Specificity in description of prop
(1) Can a surveyor find it
iii) Role of the US Gov
iv) Role of the State Gov
j) LDer requirements for security int in loan collateral:
i) Description of the prop – legal description
ii) Grant of rights in the prop – pledge, rents, power of sale
iii) What amount is secured by the lien on real prop
(1) Principal amount borrowed (promissory note)
(2) Other Amounts owed under the mort
(a) Late fees
(b) Other charges
(c) Legal fees
(3) Discharge
(4) Satisfaction
(5) UCC Article 3
k) Types of Ks used in a RE transaction
i) Sale and Listing AGREEts
ii) Broker AGREEts for Buyer
iii) Ks for Sale and PUR of Real Prop
iv) Bank Lending Commitments
v) Inspection of Buildings & Mechanical Equipment
vi) Appraiser
vii) Surveyor
viii) Abstractor / Title Comp
ix) Termite and Pest Inspection
x) Roof Inspection
xi) Environmental Inspection
xii) Consultants to confirm compliance w/ Applicable Law (i.e. ADA)
xiii) Others?
2) CHAPTER 1: THE TRANSFER OF OWNERSHIP
a) Role of Buyer and Sler
b) Role of the RE Broker [read pages 1-16] i) Who the broker represents depends on the K w/ them
ii) Usually the broker represents Sler
iii) The broker cannot force a Sler to sell (even though he may be liable for refusing to sell)
iv) When the Sler signs the K, broker will be agent of Sler. Exceptions to this:
(1) Buyer enter K w/ broker that broker is his agent
(2) Dual agency (not allowed in FL)
v) Transaction broker takes no responsibility for either side; doesn’t rep. either side
vi) Two types of broker
(1) Listing broker: provides access to MLS
(2) Selling broker: broker who actually sells the prop
vii) Types of listing
(1) Open listing: prop owner agrees to pay the listing broker a commission if that broker effects the sale of the prop but retains the right to sell the prop himself as well the right to procure the services of another broker
(2) Exclusive agency listing: for a certain time; authorizes only one broker to sell the prop but permits the prop owner to sell the prop himself w/o incurring a commission
(3) Exclusive right to sell listing: sale of the prop during the K period, no matter by whom negotiated, obligates the prop owner to pay a commission to the listing broker
c) Liability for Representations; Duty to disclose material facts
i) Broker should talk to Sler and get prop disclosure
ii) Broker should conduct “reasonably competent and diligent inspection”
iii) Broker has a duty to disclose to buyer all material defects known to broker
d) Drake v. Hosley When is a commission earned?:
i) What is the extent of a broker’s authority?
ii) Facts: Broker brought buyers and Sler signed K, then refused. Sler sold to another PURr. Buyers tendered funds w/in Kual period. Atty Wickwire called Hosley and said wanted to close by 4/11 b/c ex-wife had a lien and wanted her money. Broker can’t agree to change closing date
iii) Trial ct concluded that Hosley fulfilled terms of K w/ Sler by finding a buyer who entered into K for PUR. Affirmed.
(1) Traditional Rule: Broker is entitled to commission when he produces buyer who is ready, willing and able.
(2) Dobbs Rule: need a closing for Broker to earn commission.
(3) Here, Dobbs would not apply, b/c Sler was responsible for default
iv) Holding: Broker entitled to commission b/c he fulfilled Kual duties.
e) Statute of Frauds and Part Performance [read pages 16-39] i) Fla. Stat. §725.01: No action shall be brought whereby to charge any executor or administrator upon any special promise to answer or pay any debt or damages out of her or his own estate, or whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person or to charge any person upon any AGREEt made upon consideration of marriage, or upon any K for the sale of lands, tenements or hereditaments, or of any uncertain int in or concerning them, or for any lease thereof for a period longer than 1 year, or upon any AGREEt that is not to be performed w/in the space of 1 year from the making thereof, or whereby to charge any health care provider upon any guarantee, warranty, or assurance as to the results of any medical, surgical, or diagnostic procedure performed by any physician licensed under chapter 458, osteopathic physician licensed under chapter 459, chiropractic physician licensed under chapter 460, podiatric physician licensed under chapter 461, or dentist licensed under chapter 466, unless the AGREEt or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therew/ or by some other person by her or him thereunto lawfully authorized.
ii) Need for a detailed K
(1) Buyer wants to know that Sler actually owns the prop and that Sler has good title
(2) Buyer prob needs to borrow money and banks won’t lend it w/o a K
iii) Shelton v. Williamson (p. 22)
(1) Facts: Looney (decedent) sold land in back of his house in installment K to P. P had no written AGREEt, but had cancelled checks. Trial ct said SOF met b/c essential terms apparent. Essential terms: parties, subject matter, consideration, price promises upon both terms
(2) Holding: Past consideration can be used to overcome accusations of overreaching. Judgment affirmed.
(3) Part performance can be used to overcome SOF. (Lost writing
(4) What is sufficient to satisfy the Statute of Frauds
(5) Note 1: Any memorandum which contains the necessary info about the K and is properly signed will do. The writing will suffice even though:
(a) It is a letter, a check, or some other type of document not drawn for the purpose of the K.
(b) It consists of several related documents which can be tied together by the crt to embody, in toto, the necessary elements
(c) It has been destroyed prior to trial, or is otherwise unavailable for introduction into evidence, if there is credible proof that it existed
(d) It was written long after the K was formed
(e) Although signed by one party, it has never been delivered to the other party
(f) The person seeking to enforce the K did not know the writing existed until after the litigation was commenced.
(6) Note 2: The deed as a writing: The deed is sufficiently definite as to the terms of the K, the names of the Vor and Vee, and a description of the land to be conveyed to satisfy the statute of frauds.
(7) Note 3: What must the writing contain? The Statute requires that the writing contain only the essential elements of the K, not every term agreed to.
(a) The parties
(b) The subject matter
(c) The consideration
(d) The price
(e) Promises upon both sides
(8) Note 4: Who must sign? — the Statute requires the signature by the “party to be charged” that is, the person who is resisting enforcement of the K, usually the defendant in the suit. Some states require that the signature must be that of the Vor, but the signed writing must be delivered to, accepted by, or otherwise acknowledged by the PURr.
(9) Note 5: Modification and rescissions: It is usually said that an oral rescission of a RE K is binding, while and oral modification is not. A modification which is not evidenced by writing and is therefore unenforceable is simply ignored by the crts, leaving the original K in effect. But part performance of the K as modified may take the modification out of the Statute and make it binding.
(10) Note 6: Modifying time of performance: Oral modification or waivers of the K clause that states the time of performance are widely upheld.
(11) Note 7: Can an admission substitute for the writing? Can the defendant admit in pleadings, depositions, or on the witness stand that there was a K (albeit oral), yet still avoid its enforcement by raising the Statute of Frauds as a defense? The traditional answer was that he could do so, but several crts have been uncomfortable w/ that position.
(12) Note 8: Electronic communication. Electronic signatures are as binding as written ones.
(13) Note 9: Remedies in the absence of a writing: Even if the Statute is not satisfied, the PURr can still rescind and recover her earnest money (since that is not “enforcement” of the K).
iv) Rounder v. Waner (p. 33)
(1) Facts: Deed from parents was already recorded, BUT parents wanted retain it (under kids names)
(2) Was there delivery? Can you have an oral promise?
(3) Similar to specific performance; kids won b/c they proved part performance
(4) Exceptions to Statute of Frauds
(5) Notes #1: Acts of part performance: The three most often mentioned by the crts are the PURr’s:
(a) Payment of part (or all) of the PUR price.
(b) Going into possession on the realty.
(c) Making substantial improvements.
(d) (some crts require more than one factor)
(6) Note 2: Are these acts really “performance?” Which of the factors listed in Note 1 above can fairly be termed “performance” of the K?
f) RE Ks and Remedies for Breach of K [read pages 40-61] i) Written Terms vs. Oral Representations
ii) Specific Performance
iii) Damages
(1) actual damages
(2) liquidated damages
iv) What can be done if Sler/buyer doesn’t perform at closing?
(1) Benefit of bargain doesn’t apply easily in prop law b/c prop is unique
(2) FARBAR K Clause “S”: Failure of performance
(3) Under FL K, if buyer fails to perform, all deposits may be kept by Sler as liquidated damages; Sler (at Sler’s option) may bring action in equity for specific performance. If Sler breaches, buyer can sue for specific performance OR sue to for return of deposit w/ waiving action for damages (must be breach other than not being able to provide marketable title). MUST choose b/w liquidated damages and actual damages.
v) Donovan v. Bachstadt (p. 40) – Sler’s Breach
(1) Plaintiff buyers prevailed in a suit for specific performance, when defendant Sler was unable to perform b/c of a defect in title. The appellate crt held that N.J. Stat. Ann. § 2A:29-1 was declarative of the general common law right to recover consequential damages for breach of a K and that the statute modified the preexisting law, which limited plaintiffs’ to recovery of his deposit upon a defendant’s breach due to a defective title. On appeal, the crt modified the order of the appellate crt and remanded the case back to the trial crt. The crt held that where defendant agreed that title would be marketable, defendant’s liability depended upon his breach of that promise. Consequently, plaintiffs were permitted to recover compensatory damages when defendant breached his promise. The crt held that the measure of damages was the fair market value of the prop at the time defendant failed to comply w/ the judgment of specific performance. The crt also held that plaintiffs were entitled to their expenditures for the survey, search, and counsel fees for services rendered in preparation of the aborted closing
(a) Whether titles are clear may be ascertained by record searches. N.J. Stat. Ann. § 46:21-1. Moreover, limitation periods may be applicable. N.J. Stat. Ann. § 2A:14-30. It is standard practice for title examiners to search the back title for 60 years and until a warranty deed is found in the chain of title. Further the parties may insert appropriate provisions in their AGREEts protecting them from title defects so that to a very large extent Slers may control the measure of redress.
(b) Serious losses should not be borne by the Vee of RE to the benefit of the defaulting Vor.
(c) Compensatory damages are intended to recompense the injured claimant for losses due to the breach, that is, to give the innocent party the benefit of the bargain.
(d) Compensatory damages are designed to put the injured party in as good a position as he would have had if performance had been rendered as promised.
(e) Where two parties have made a K, which one of them has broken, the damages which the other party ought to receive, in respect of such breach, should be such as may fairly be considered either arising naturally, i.e., according to the usual course of things, from such breach of K itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the K, as the probable result of the breach of it.
(f) The PURr will usually be entitled to the return of the amount paid on the PUR price w/ int thereon. Costs and expenses incurred in connection w/ the proposed acquisition, such as for the title search and survey, would fall in the same category. The traditional test is the difference b/w the market price of the prop at the time of the breach and the K price.
(2) Compare English Rule to American Rule
(a) English: reimbursement
(b) American: expectation damages (i.e. benefit of bargain)
(3) Notes #2, #3, 4, #5
(a) # 2 Incidental and consequential damages: In addition to the traditional loss-of-bargain damages, available to a buyer only if the prop’s value is higher than the K price, what other elements of damages (“incidental” or “consequential”) might an innocent buyer attempt to recover?
(i) Expenditures for title examination, survey, and attorney’s fees in preparation for the closing?
(ii) Airfare for travel to negotiate and execute the K which the Sler subsequently breached?
(iii) Additional rent, taxes, morts int, and other carrying costs at her present location while she locates and PURs substitute prop?
(iv) Loss of particularly favorable financing from a bank or savings association, no longer available as a result of int rate changes?
(v) The cost of leasing temporary quarters elsewhere, including rent, advertising for a place to lease, and the expense of moving to the leased premises?
(b) #3 Date of valuation. Consider the damages recoverable by the Sler when the buyer breaches. The traditional measures of loss-of-bargain damages measures the prop’s market value as of the date of the breach, this may not be a fair or