PROPERTY II COURSE OUTLINEI. TRANSFERS OF LANDTHE LAND TRANSACTIONVoluntary (willing parties in the sale), intervivos (between living people) transfers of land. We want a lot of land to be transferred easily. Alienability is our goal and we put a premium on this policy goal. Time is very important when we look at transfers of land. Make sure you make a timeline when presented with a fact-pattern Pre-K———-K/SOF———-Escrow—————-Deed/$ Transferred———–Post-Deed Period negotiations financing, inspections close of escrow deed warranties title search marketable title/duty defects sof IWQ THE CONTRACT OF SALENegotiation is over, now the contract is being drawn up. SOF comes into play here. The agreement for the purchase and sale of lands must be in writing and then the actual transfer itself has to be in writing- there is no such thing as an oral deed. Must be a writing at both points- 1- when contract is made/the agreement itself and 2-when the deed is transferred, the deed must be a writing not an oral deed, must be a documentDuring the escrow period: There is already a binding contract. Buyer discovers a title defect during escrow- like a lien or a tax injunction, or the seller’s name is not on the title- there is another name on the title, there is an easement on the property, physical encumbrance, there is a covenant Physical or Financial Encumbrances: if you as the buyer discover one of these things, what do you do? You have to give the seller a chance to cure the problem. The seller can either take care of it before close of escrow, they can rescind the contract, or they can say they would take care of that but they can’t. If they can’t or won’t cure the defect, the buyer can get out of the contract. Name of your claim is a Marketable Title claim. The remedy is rescission and restitution- out of contract and money for damages incurred. Seller’s implied promise in the contract that title will be free from reasonable doubt at the close of escrow.1- Sellers implied promise- always there whether the contract says it or not2- Will be reasonably free from doubt- does not have to be an absolutely perfect title, the seller must be able to deliver a title that will not get the buyer involved in a lawsuit. 3- At the close of escrow- seller has until close of escrow to cure the defect. “time is of the essence” should be in the contract so the seller has to deliver title within the days stipulated as the close of escrow. Statute of Frauds: If you want to transfer land, it has to be in writing. There are two points where the statute of frauds may come up- 1- At the sale/contract for sale and 2- with the deed delivered. Requirements of the writing: 1- must be signed against the person bound by it, signed by both parties at the time it is conceived 2- must describe the real estate, minimal description of the property 3- must state a price (if no price set or agreed upon, then fair market value).Ways to get around the statute of frauds: Courts tend to be liberal in enforcing these exceptions and enforcing the contract1- Part Performance- no writing, but there is performance to prove there was an agreement, acts by a party that make no sense unless there was an agreement, an oral agreement may be enforced even if it violates the statute of frauds if there is performance. Conduct would be payment for land, or improvements on the property. A party must show irreparable injury and an affirmative act like an improvement 2- Estoppel- justifiable detrimental reliance. Reliance on the oral agreement. Look at the acts to look if the party was relying on the agreement. To show it was detrimental, show that the party spent money and that the person acted reasonably, that is, the other party knew what the party was doing and just sat by and did nothing. Go through estoppel by showing reliance- what you did, detrimental- then justifiable the other party knew. Unjust enrichment- must show the other side will be unjustly enriched. Justifiable Detrimental Reliance + Unjust EnrichmentHickey- G sold house to H, H made down payment and sold his house in reliance on new house he just agreed to buy. G changes mind days later and sells to someone else. The agreement was no in compliance with the sof. Rule: A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with sof if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement. Ct held that even though this agreement was not in writing under the sof, it was still enforceable because of reliance by H on the agreement. Ct held that specific performance should be ordered immediately. Estoppel applies to both legal and equitable actions whereas part performance usually is limited to equitable action. Marketable Title: An implied condition of a contract for the sale of land is that the seller must convey to the buyer a “marketable title”. If this does not occur, the buyer can rescind the contract. Marketable title: a title not subject to such reasonable doubt as would create a just apprehension of it validity in the mind of a reasonable, prudent, intelligent persons… would be willing to take and for which they would be willing to pay fair value. The title must be legitimate. Lohmeyer- L and B enter a contract for the sale of a lot with a house. Title is transferred and $ is paid. L’s lawyer informs him of numerous municipal restrictions on the land. L tried to rescind the contract. He sued B and B cross-claimed asking for specific performance of the contract. Violations were present at the time of purchase and the title was conveying these violations as well. A marketable title to real estate is one which is free from reasonable doubt, and a title is doubtful and unmarketable if it exposes the party holding it to the hazard of litigation. (L would be subject to litigation by the state for violating the restriction out in place on that property). Municipal restrictions on a property are not such encumbrances or burdens on title as to make the title unmarketable and the contract avoidable. Ct holds for L, that the contract should be rescinded because the title is not marketable. Ct holds that the unmarketability does not come from the fact that there are restrictions on the piece of property, but that those restrictions have been violated by B and therefore, L would be buying a house in violation of code. Ct does not see the restrictions as a hindrance of the title, but they do see the fact that the house does not meet these restrictions as reason to find the title unmarketable and therefore, not what L bargained for and assented to Zoning ordinance is not a violation of a marketable title, a private covenant is a violation of a marketable title unless it is waived and a violation of either private or municipal zoning is a violation of marketable title. TYPES OF TITLES: from best type to worst 1- Good Record Title-you would want this over the other two 2- Marketable Title- second3- Insurable Title- third A title is marketable if the seller has a fee simple, the title is free from any encumbrances, and the buyer is entitled to possession. The fact that the buyer cannot legally enter the property does not make it unmarketable, IL App Court 1985. Conklin- a sale of land, seller has title to land under adverse possession but has not made a filing for a quiet title. Purchaser finds out and wants to rescind the contract because he is afraid since someone else also has title to the land. It is implied by law that a title must be marketable even when the contract is silent on that point. “The law assures to a buyer a title free from reasonable doubt, but not from every doubt… if the only defect in the title is a very remote and improbable contingency, a slender possibility only, a conveyance will be decreed.” A title resting in adverse possession, if clearly established, will be held marketable. Ct finds that if a seller has title by adverse possession, that is fine and title to that land is still marketable, Ct notes that when this is the situation, the seller, not the buyer, has the burden of proof and must show that he does have title under adverse possession. Ct does not think that a pure title is necessary in order for a contract for the sale of that land. With adverse possession- title transfers as an operation of law, then if you want it in writing, you have to bring an action for quiet title. Record owner would then be the defendant. The buyer is sol because he signed a contract seeking marketable title, not record title. So he has to settle with marketable title and he cannot rescind the contract. All real property is unique so specific performance is the remedy- w/o money damages even being considered as a remedyEquitable Conversion: if there is a specifically enforceable contract for the sale of land, equity regards as done that which ought to be done. Who has the most risk of loss? Usually the purchaser, but some Courts place it on the seller. The buyer is viewed in equity as the owner from the Date of the contract. Merger: common law doctrine/ What happens to the contract once you have accepted the deed? It mergers into the deed and you can no longer bring a contract-based claim. The basis of you claim will now be a warranty in the deed- deed based claims. This is only if you have a warranty deed. If you accepted a deed without a warranty, you are screwed and you have no claim at all. Duty to Disclose Defects- This does not deal with title defect, but physical problems with the property. “Duty of the seller to disclose known physical defects to the buyer on the sale of real property”- Common Law- caveat emptor, there was no duty on the seller, the buyer had to inspect the property-they were responsible. Property is so complex now that this common law approach is unfair and it has changed drastically in the modern law. In CA, there exists the most detailed disclosure statute in the country. Stambovsky- Haunted House. Buyer does not know of the reputation of the house. Seller knew about the condition. She did not tell him and he is seeking rescission since the value of the contract is now less. NY is a state where buyers beware rules. Where a condition which has been created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due care with respect to the subject transaction, nondisclosure constitutes a basis for rescission as a matter of equity. No duty unless there is an active concealment or an affirmative misrepresentation. Ct holds buyer should be allowed to rescind the contract due to the ghosts. This is not a case of caveat emptor because a reasonable inspection by the buyer would not allow him to discover the ghosts and he had no way of knowing about the ghosts. Ct carves out an exception to the common law (they keep the common law NY rule). Exception is undiscoverable conditio
orrect covenant. Ct holds p cannot sue for breach of CQE because that was never disrupted and he could have possessed the subsurface without disturbance. Ct finds p was not even in possession of the subsurface and is not entitled to relief. SOL for Breach of Present Covenant of Seisin had run out long ago. (Breach of Seisin must occur at the time the deed is conveyed). To late on covenant of seisin and too early on covenant of quiet enjoyment – cause no one has interfered yet. The general rule is that an easement that is a burden on the estate granted and which diminished its value constitutes a breach of the covenant against encumbrances in the deed, regardless of whether the grantee has knowledge of its existence or that it was visible and notorious. Rockafellor- R: If at the time of the conveyance, the grantor did not own the land, the covenant of seisin is broken immediately. It is not necessary, in order to recover, to allege or prove ouster or eviction. There is a 10-year statute of limitations. R loses the property due to a foreclosure for failing to pay mortgage. He was never correctly served therefore claims the judgment against his property is not binding. C, who got the property from the foreclosure was the target of all other subsequent owners b/c C gave a GENERAL WARRANTY DEED, promising that the title was good regardless of defects arising in the past or under his ownership. D who got the property from C conveyed the property to H & G under a SPECIAL WARRANTY DEED, which makes no promises for defects arising prior to D’s ownership. Since R was given the property back, C never had title to the property he purported to convey (therefore no one else after that did either). THE CAUSE OF ACTION (BREACH) AROSE WHEN C CONVEYED THE PROPERTY TO D THAT HE DID NOT HAVE TITLE TO Modern Law: The cause of action IS ASSIGNABLE to subsequent purchasers as long as the SOL has not run out. Common law it dies with the transferESTOPPEL BY DEED: If grantor coveys land to grantee that the grantor does not own, and he warrants the title to the land, and then he later acquires the title, the grantee does not have to sue him under warranty, the law makes the title just transfer to the grantee automatically.DELIVERY: A deed must be delivered with the present intent that it be operative. “To be effective a deed must be delivered”Delivery Defined: Grantor’s present intent to pass some interest to the grantee, look for acts of the grantor that show a present intent to pass title (need to show evidence that the grantor intended to pass title to the grantee NOW, instead of in the future/ look for conduct and statements of the grantor)Exceptions: Doctrine of Relation Back- an equitable doctrine, take the date the event would happen (close of escrow) and we move the date back when the present intent happened- the date of the contract not the close of escrow. To make things work out the way we want to. In cases of death of Grantor. Deed is usually handed to the buyer, usually the handing over coincides with the intent to pass title- There could be a handing over that does not amount to a delivery because there is no present intent. Conditional Delivery- Grantor wants delivery on a condition. Need a third party to hold it- a trustee- until the condition occurs and then they give it to grantee. Grantor’s intent is met when the deed is handed over to third party. Cannot hand it directly to the grantee- have to give it to a third party and tell them the condition, which must be met before grantee get it. The Usual Case: Grantor wants deed handed over to grantee by the third party when he dies- this happens in family situations- this sounds like a will, cts said you need a will and cannot make the death of grantor the condition, but after many years, the cts said this can happen between families as long as deed is handed over the a third party- This is called a Donative Transaction/a gift Delivery Rules: 1-Grantor hands to grantee with present intent= delivery2- Hands to grantee with right to revoke, but never revokes= delivery 3- G/or to 3rd party with oral condition before the third party hands to grantee= delivery4- G/or to grantee with oral condition before passes to grantee-delivery, condition is disregarded= no deliveryCondition is grantor’s death- delivery but must be donative, not for considerationPresumptions: moves the burden of proof to the other party if you have a presumption in your favor- this is called a rebuttable presumption
