Notes from Reading
January 14, 2002
Pages 549 -569
Steps to purchase a house
1. Consult a Real Estate agent
2. Reasonable buyer will employ an attorney to draft a contract and steer him through the legal and financial shoal which lie ahead. Some may just sign a contract supplied by the real estate agent but this is very risky for the buyer
3. Buyer will pay a down payment and give a mortgage to the seller
After buyer has signed the contract the buyer will require 2 things, credit and assurance that the seller has good title to convey
4. Prior to this time the agent will have obtained some sort of informal commitment for the necessary loan.
5. The investigation of the title – there are three types of ways to investigate
i. System of direct search and the attorney gives his client a written statement called “certificate of title” to state that the attorney has made an examination and that on the basis on what the attorney has found the fee simple is vested in the vendor free and clear of any encumbrances other than those noted in the exceptions.
ii. Abstracts – corporation takes a copy of all public records then re – indexes them to make the contents readily available. This is called the title plant. Abstract companies prepares the “title” and then gives it to an attorney for review. The attorney signs off and it is passed form seller to buyer.
iii. Local title insurance – local title companies are in direct competition with the bar. Does not need attorney’s signature
Certificate of title insurance – additional security 3 advantages
1. the substitution of a contract for tort liability
2. Replacement of a mortal individual assurer by an immortal corporation
3. Additional protection against defects of title not appearing on the record
6. The Closing – brings all interested parties together to complete the transaction
7. The mortagee’s attorney will sent he deed and mortgage to the courthouse for the attachment of revenue stamps and recording.
January 15, 2002
Conveyance – process by which land is bought and sold, transferred
Same basic rules apply to both residential and commercial property
More people involved in real estate transaction in WV than most states
Steps involved in Real Estate Transaction
1. Typically go to a real estate broker – average percentage is 6% for the agent. If the property is commercial or unimproved the commission could be higher possibly 10%. Listing contract is what the owner of the property enters into with the broker. Broker is regulated in WV by statute. WV 47-12-§1-23. Broker is higher requirement license the Broker is who the agent works for. Assume buyer finds house they like
2. They buyer will then make an offer and the agent is an intermediary between the buyer and seller and a price will be agreed upon. The agent will then have the buyer and seller enter into a uniform purchase agreement. The well informed buyer and seller should consult with lawyers before signing agreement but it seldom happens. This agreement should reflect the meeting of the minds of the buyer and seller. Types of problems that may develop, items that will remain in the house,
3. After K is signed the buyer then will have to arrange for the financing of the house which is obtain a loan which usually run from 15 – 30 years. Amortization schedule is on page 169 sets forth amount of monthly payments. Buyer need to set forth in the K the necessity of the loan and what type of loan you can afford. There is no implied provisions in the K that notes the need for financing. Need to set forth in the K amount needed to borrow and how to borrow it. Need interest % and years and so on and so forth. Bank will be interested in security which is value of house, bank will get an appraisal they will also be concerned with the income of the borrowers and the amount of debt the borrowers have. Bank will get a credit report on the borrowers. Depending on type of loan there may be other requirements. Secondary marker means bank sells the loan to a third party. In recent years it is common for banks to sell loans on the secondary market. If loan is going to go to secondary market there will be additional requirements.
4. Title examination – someone will have to do a title exam to see if there are any problems with title such as leins, eminent domain proceeding etc¼ It varies on how far back they will look for typical residential usually 60 years. IF commercial or significant investment the title exam will go back to the very beginning which is the conveyance from the state or the crown in England. A patent is the orginal conveyance from a state to an individual.
5. Following singing of deeds certain documents are recorded. This gives protection to the holders of the documents protects against other people buying the property. Bank will record the deed of trust.
6. Ways title examiniations are performed
Abstracts – duplicated relevant portion of public records
Direct examiniation – most common in WV, basis on which other 2 operate
7. Title insurance – one time premium, this insurance will provide certain types of coverage. Lawyer exams title and gives a report and then insurance policy will cover those defects not discovered. You are insuring against what was not covered during title examination. Banks may require title insurance to the amount of the loan. Title insurance is relatively cheap because you are excluding the risk, important if there is negligence on the part of the lawyer.
8. Closing statement – how the money is distributed, seller will pay real estate commission, documentary transfer tax, existing outstanding liens, buyer will pay for recording, pro rate real estate taxes, appraisal, inspections.
9. Money is then distributed – seller usually gets less than expected and buyer usually pays more than anticipated.
Multi Listing – Agents can show houses of others and the commissions will be split between the 2 agents.
State v. Buyers Service Co.
State alleged that was engaged in the unauthorized practice of law by
1. Preparation of Instruments
contends the preparation of deeds, notes and other instruments related to mortgage loans and transfers of real property that the forms are standard and require no creative drafting
argues the preparation falls within the definition of the practice of law
Court agrees with State saying it is for the protection of the public from the potentially severe economic and emotional consequences which may flow from erroneous advice given by persons untrained in the law.
Only the Supreme Court has the power to make the rules of what is within the practice of law
2. Title Abstracts
The same principles which render the preparation of instruments the practice of law apply equally to the preparation of title abstracts. Title examination when done for another constitutes the practice of law.
Court says can only prepare title abstracts for the benefit of lawyers
3. Real Estate Closings
Circuit said could still practice the handling of real estate closings with the restriction that no legal advice be given to the parties during closing sessions.
AC says closings should only be conducted under the supervision of attorneys
4. Recording Instrument
Circuit court allowed to continue its practice of mailing instruments to the courthouse for recording. argues this is a practice of law and SC agrees.
The physical transportation of documents to the courthouse is not considered the practice of law but when this step takes place as part of a real estate transaction it is considered a practice of law
Some courts say that brokers must fully disclose their interest and conflicts to buyer and seller if no attorneys are present at time of closing
January 15, 2002
Issue is whether people can unauthorized practice of law.
Questions asked during real estate transactions the answers frequently involve the rendering of legal advice. Such as difference in TIC and JT, or differences in warranties. This case is concerned is it appropriate for someone not trained in law to deal with real estate closings. This courts said it is not appropriate and broke it down by transactions.
Conflicts of interest are dealt with here also.
Title may be good for bank but not buyer such as an easement across the property, or single family homes only.
Seller and real estate agent has a conflict the agent wants the commission, the seller wants highest possible price.
As a general statement in WV who will the lawyer be representing on the buyer side, the lawyer is typically representing the lender, lender is one that says they need title certification before money is lended
Conflict of Interest statement in WV – If parties are properly informed and advised one lawyer can proceed with a real estate transaction. But to protect the lawyer the proper consent needs to be obtained. Fisher says this is a very common practice. Moment problem arises the lawyer needs to get out of it because it cannot represent both sides.
What about closing the closing needs to be handled by lawyer and transfer of documents, this is in SC.
Unauthorized practice of law will be a hot topic in the upcoming years.
Greatest stretch in this decision was the delivery to the court for recording according to Fisher
When is the commission earned? Historically earned when you have a willing buyer and willing seller reflected by signing of K. If the deal falls through the seller would still have to pay the commission. The Ellsworth case was the bench mark case which said the normal expectations of the parties say the commission is not earned until the sale is consummated and then the commission will be earned, If seller is at fault agent can still earn commission.
WV 1984 V. Brown 321 SE 2d 685 – Seller signed exclusive leasing agreement with agent to sell house within 30 days. Agent showed house several times after 30 days expire. In august several months after expiration agent called and ask to show house seller said o.k. Deal was struck but seller backed out because of a second deed of trust. Several months later seller said the real estate agent would not get commission because listing had expired. Lower court for Brown. On appeal court held oral extension of listing. Award to agent is in accord with general rule is that he is entitled to commission when buyer is willing, able, ready to buy not when sale takes place. This is the old rule not consistent with Ellsworth decision. If buyer is at fault the WV court should adopt Ellsworth rule (according to Fisher)
Must have subject to financing in contract it will not be applied.
Traditional banks only lend 80% of purchase price.
B. The Contract of Sale
Most law relating to SOF is judge made law not statutory.
To satisfy the SOF a memorandum of sale must, at a minimum be signed by the party to be bound, describe the real estate, and state the price. Where the price has been agreed upon, most courts regard it as an essential term that must be set forth. But if no price was agreed upon, a court may imply an agreement to pay a reasonable price. Under the Uniform Land Transactions Ace the parties may enter into a binding K without having agreed upon the price. However the agreement is not enforceable unless the parties refer to price and indicate the method they intend to use in fixing it
A contract for sale at “Fair Market Value” is enforceable
Exceptions to SOF
Part Performance – allows the specific enforcement of oral agreements when particular acts have been performed by one of the parties to the agreement
Estoppel – where injury would result from denying enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the K
January 16, 2002
In WV agents and brokers must be licensed.
Commission is earned – WV case states old rule (mentioned above); Fisher personal belief is if case went to supreme court they would adopt the Ellsworth Rule
36-1-1 – Real Estate Provisions SOF – Requires writing that has a dignity (more formal type of writing) of a deed or a will,
1. If freehold interest, or
2. If it is a term for more than 5 years, or
3. An interest where a portion of a corpus is either taken or destroyed (corpus = coal timber, limestone etc.) the taking away of some aspect of the property.
36-1-3 – Real Estate Provisions SOF – A K for the sale of land or a lease that is more than 1 year needs to be in writing or some memo thereof and signed by the party to be charged.
These are code sections that we have to know and will see on the final. Do not read in a hurry.
Exception to SOF
Part performance – judicially recognized designed to keep the SOF from making fraud possible
One view requires paying a portion of price and taking possession of land – these 2 elements are necessary to perform part performance. Wigman v. Clark WV case – 3 things must occur
Agreement certain definite –
Acts must be made in pursuance of that agreement
Agreement so far executed that refusal would operate as fraud to the parties
Callahan v. 1st Natl Bank of Hinton 30 SE2d 735 – Recognizes that for specific perf. To apply payment of purchase price in whole and part coupled with possession of land or improvements of land I think either takes
98 WV law Review page 449 – NEED TO MAKE COPY OF THIS
Agreement with 3rd person probably not enough but may be enough for estoppel
Estoppel – a person creates set of facts someone acts on those facts to detriment of reliance court then comes in and says we are going to stop the person from rescinding the K. Can get estoppel without going into possession. Concept of estoppel is well recognized in WV but Fisher does not know of a case that uses the word “estoppel”
Hickey v. Green
orally agreed to sell land to and accepted check as deposit. relied on this and sold his house. knew that sold his house in reliance on the K. sued for specific performance.
Under RSC – Party must have reasonable reliance on the K and has changed his position that injustice can be avoided only by specific performance.
The ’s relying on oral promise moved rapidly to make their sale without obtaining any memo of the terms of sale
There is no doubt the made the promise that the relied on and she repudiated it because of a better opportunity.
Since this case has been extended so long the AC needs to know if the facts are still the same that specific performance is a must. AC tells trial court to examine these facts
January 16, 2002
Seller had oral agreement with Buyer – SOF says cannot enforce because not in writing; If stopped here would have a disappointed purchaser, not enforceable because not in writing.
Check is not sufficient writing because it was not signed by the party to be charged which in this case is the seller. Probably would be enough for the buyer.
Based upon fact he had a lot on which he could build he told seller he was going to sell his property so that he could build on her property. Buyer did this relatively quickly.
Court says buyer has not put himself into position either he must sell his property or be in litigation not to sell, both are these are sufficient for reliance
Appellate court remands to see if circumstances have changed for reliance to see if sp is relevant and not restitution. Facts may have changed in the years it took for case and the appeals.
This is estoppel and not part performance because buyer never occupied the property
Court sent back with remand to see if facts have changed for enforcement of sp
Kansas case on 566 the court held it was not enforceable, it is different from principle case because – the length between selling and buying is not clearly established.
Question 2 page 567 – The conveyance back to O from A must be one of a like conveyance it must have been another conveyance in writing giving same deed back is not sufficient.
1. Recording not necessary to transfer it is required to protect
36-1-1 – Is pretty much the majority rule in the country
Question 2 part 2 – A would own because A must have separate writing for B the whiteout is not sufficient. A would be owner because of survivorship when O dies.
A. No because there are no contingencies in the K. The 1st sentence is a K for sale of property, it is enforceable. Suppose K does not specifically set forth rights and responsibilities the termites is not implied by the K so the K is enforceable
B. No buyer cannot rescind the K – subject to financing will not be applied it must be expressed, also must express terms you need to have in order to purchase it.
C. Question is whether there is K or not was there a meeting of the minds. If the K binding. The 2 courts ruled different
Deed is a transfer of title, it is determined by an intent to transfer the interest
Manning v. Bleifus 272 SE 2d 821 – Manning agreed to sell to B which was subject to financing. B applied for a loan and bank appraised at 68 and agreement was for 76, bank would only 80% of 68, B could not get the loand and tried to terminate K. Seller sues B for sp or pay me the difference between K price and price ultimately sold for which was 63. Court used advisory jury said B failed to make reasonable effort because he only went to one bank this was not sufficient attempt to get financing court then said B need to use reasonable effort to get financing since it was set forth in K. One bank was not sufficient enough. Interpretation will be put to other provision in the K. Reasonable effort. Reasonable effort is a question of fact. Buyer ended up paying difference of K and selling price
Advisory jury – jury tells judge facts and judge makes decision. Need to look up
A K for sale of real estate time is not of essence unless specifically stated in K; for example if entered into agreement to close on 2/1 and it comes and goes without closing has there been a breach of K general law yes but
ler of house was also builder of house. House had a foundation problem, Seller says had no duty to disclose they had a foundation problem, court for Seller but SC reversed, when a vendor is aware of defects and existence is unknown to purchaser and not be found by reasonable inspection, the seller has to disclose to the purchaser. There is a duty on seller to disclose info. That would substantially affect the value and existence is not known to purchaser and not be found by reasonable inspection. The seller must disclose to the buyer. Reasonable inspection is a jury question
What is the law as it relates to real estate agents?
Lengyel v. Lint 280 SE2d 66 (1981) – TC granted summary judgment in favor of real estate agent. purchased and moved into house 8 days later wanted out of K saying there was fraud that was contained in advertisement and those that were orally made. Court reversed summary judgment and said developing area and needed facts explored and real estate agent may be liable. Real Estate agents can be liable for purchaser for fraud. Case was remanded to TC for proceedings. 6 years later issue back at SC
Chamberlain and Flowers v. McBee 356 SE2d 626 (1987) – Before signing K buyer asked about leaking roof and assured by real estate agent that it had been fixed. After K signed buyer still noticed problems with roof and asked for contractors to look at it. Seller refused to fix roof. Buyer did not show up for closing and several suits were filed including who entitlted to down payment. SC reversed summary judgment and said whether agents knew of roof poor condition and if in fact roof’s condition was poor. Not enough facts to know if real estate agent could be liable
441 SE2d (1984) – Teeter v. Old Colony Co. – There was building inspection and real estate agent made notations on report saying not a problem, court held that real estate broker may be liable to purchaser if material misrepsentations are made with regard to residential property or fails to disclose material defects in property in which broker is aware or reasonable should be aware and buyer is not aware or reasonable should become aware. Broker same as seller. Court declines to hold that broker has independent duty of inspection.
Real Estate agents now give fairly lengthy questionnaire to seller of property
WV 10 years statute of repose – no discovery rule on builder Will come back to next week
Mutual mistake before and after deed
WV takes the objective test on page 586
CA case of noisy neighbor on page 586, do you have to disclose this CA said yes, there is no decision in WV that gives any guidance
Stigma problems ex. Sex offender within neighborhood, does seller have duty to disclose that information, WV has not ruled on any of this
Environmental issues? These problems are very real and important; Environmental cleanup is an exception because of the expense. Innocent purchaser defense is designed to protect innocent purchaser but hard to prove that you are an innocent purchaser. Should have learned of environment inspection. Customary now to have phase 1 and 2 inspections.
Brownfield legislation is certain cleaning is done the purchaser will not be liable if there are still damages.
When you do title work beware of environmental scan of the property. Does it affect marketability is not totally resolved.
WV residential property has subsidence insurance it is required
January 28, 2002
Notes From Reading
An old doctrine that says once a K merges into a deed and once the deed is accepted, the deed is deemed the final act of the parties expressing the terms of their agreement
The buyer can no longer sue the seller on promises in the K for sale not contained in the deed, but much sue the seller on the warranties if any, contained in the deed.
The merger doctrine principally applies to questions of title or quantity of land.
Lempke v. Dagenais p 590
January 29, 2002
Merger – typical re purchase arrangement start with a K then end up with a deed. IN a K there is the implied warranty of marketability (reasonable purchaser will except title). The concept of merger is when deed is delivered K merges into it and the deed survives, the implied marketability in the K is no longer there, only those matters set forth in the deed effect the rights in the buyer in seller. No implied warranties in a deed. Can state the deed is collateral or the K is collateral; Things want to have stated in deed you need to take precautions in the K saying they will still be binding when deed is delivered.
Implied warranty of quality
Landlord tenant will take up later but there is an implied warranty of quality in these agreements. Substantial departure from common law. Same thing is true with sale and purchase, caveat emptor usually applied with the quality of house but in more recent times the law has begun to change with implied warranty of title.
Lempke v. Dagenais p 590
did not have direct dealings with the
2 basic theories of law discussed with this
1. Contract – not good because the K was between the and the seller of the property. was not involved in the K for the garage. Remedy here would be the repair or replacement of the garage
2. Tort – negligence, or been injured by negligence of the other; typical remedy would be compensatory damages.
2 traditional remedies do not fit well in this case, so the court go with the implied warranty
Court says if there is an implied warranty between and seller and caveat emptor is NA why should it only effect seller. For public policy reasons court does not restrict the implied warranty, it will affect subsequent purchasers.
Court says is not an insurer, why? Could be other reasons wrong for builder’s actions, builder maybe not have done anything wrong. Also restrict it to latent defects which is not usually observable on reasonable inspection this is because if there is an obvious defect it will be factored into price of house. as to length of time can be liable is only for a reasonable period of time
Gamble v. Main 300 SE2d 110 – (1983) K with to build a house, house built and front yard began to slip away because of septic tank. Implied warranty exists in WV, workmanlike manner and property be reasonably fit and habitability. Do not believe does not extend to adverse soil condition that owner could not discover by reasonable care.
Same problem as case in book Sewell v. Gregory 371 Se2d 82 (1988) – Court held implied warranty of habitability and fitness for use of family home can be extended to subsequent purchase for reasonable length limited to latent defects not discovered by reasonable inspections and become manifest after purchase. Same as case in book
Marketability not implied in deed but quality is.
Seller has duty to disclose that which they know, a builder has an implied covenant of habitability and fitness, this goes to the structure the implied marketability goes to the title.
Workmanlike manner and intended purpose
In 1983 WV adopted 55-2-6a – 10 SOL which is a Statute of repose for suing builder in these cases. Wording is very broad. Period of limitation does not begin to run until occupied or accepted by owner of the real estate.
Uniform Land Transactions