Prof. Barros
Property II
I. Real estate transactions
A. Broker
1. Represents seller usually
2. Fiduciary duties (loyalty, care) – must put principal’s interest above yours as agent
a. Must disclose certain things (p. 465)
b. Buyer’s broker is a subagent of seller’s broker
B. Commission
1. 2 views on when due
a. Majority – when broker procures a buyer who is ready, willing, and able to buy house
b. Minority – when transaction closes
2. Commission is actually paid after closing because most use proceeds from sale to finance commission
3. If transaction falls apart
a. Majority – broker still entitled to commission
b. Minority – broker not entitled
C. Statute of Frauds
1. Needs to be in writing if:
a. Lease for more than 3 years (some states vary)
b. Any transaction of real property or having to do with
i. K for sale of land must be in writing AND
ii. Evidence of transfer (deed)
c. Look to who the court will most likely help (i.e. detrimental change in position or does the other party know your change in position)
2. Split of opinion of SOF – some judges like to use whereas others don’t
3. Writing needs to include:
a. Signed by party to be bound
b. Describe real estate
c. State the price
4. E-sign statute – electronic transfers can be enforced series of email exchanges – does it satisfy SOF
a. 2 ideas
i. Email is informal so doesn’t count OR
ii. It does count
5. Exceptions to SOF
a. Part performance
i. Need to show evidence of reasonable and detrimental reliance
a. Reliance must be unequivocally related to oral promise; not enough to show only detrimental reliance
b. Hickey case showed this by selling own house
D. Deed
1. Validation of deed
a. To be effective, deed must be delivered OR in writing
i. Intent important if not handed over – was there intent to transfer future in property now OR intent to transfer at death
a. If latter, INVALID
ii. Usually not a problem because usually given at time of closing either by escrow agent or seller
a. If given to escrow and seller dies, still ok
b. Don’t need to physically hand over deed if says in deed when it will be handed over
1. Example: Statute of Wills
a. If want to hand over deed at death, MUST say in will
b. Recording a deed is irrelevant to whether it is valid or not or the relationship between parties
i. Recordation only has to do with reliance of third parties
c. Description of tract should be in typical deed, however price does not need to be in there
d. Forged deed is void v. deed procured by fraud is voidable against grantee
i. Difference because in case of fraud, true owner has some fault because not careful whereas in forgery, no fault of true owner so should prevail
ii. Forgery – sub purchaser loses against true owner
iii. Fraud – sub purchaser wins against true owner
2. 3 kinds of deeds
a. General warranty
i. Seller promises to fix problem for any or all defects in title (irrelevant who caused problem)
a. Not a substitute for a title search
ii. 6 warranties included: 1-3 present, 4-6 future
a. Covenant of seisin
1. Grantor warrants that he owns estate he purports to convey
b. Covenant of right to convey
1. Right to convey property
c. Covenant against encumbrances
1. Warrants no encumbrances on property
a. Includes mortgages, liens, easements and covenants
2. There is a breach when..
a. If encumbrance affects title, then there is breach of covenant
3. Maybe…
a. If affects physical condition of property, split in authority on whether breach. Court will look at how much it affects land.
i. Policy: want buyer and seller to talk about things in writing or refer to in deed rather than arguing whether encumbrance obvious or not
b. Municipal ordinances
i. Frimberger: not an encumbrance
ii. Bianchi: any substantial violation is an encumbrance of municipal ordinances if seller can determine that property violates local zoning/building regulations at time of conveyance
4. No breach…
a. Presence of hazardous waste is not an encumbrance
b. Violation of wetland ordinance is not an encumbrance (Frimberger v. Anzellotti)
5. Measure of damages
a. If encumbrance easily removable (i.e. mortgage) then measure of damages is cost of removal
b. If not easily removable (i.e. restrictive covenant/easement), measure of damages is diff in value between land w/encumbrance and w/o encumbrance
d. Covenant of general warranty
1. All lawful claims and compensate grantee for an y loss may sustain by assertion of superior title
a. i.e. if someone claims title by adverse possession and then loses, breaches this cov
. Davis) – where seller of home knows of facts materially affecting value of property which are not readily observable and are not known to buyer, seller under duty to disclose them to buyer (now majority rule v. caveat emptor)
a. DO NOT have duty to disclose facts that are readily observable
i. Stigmatized properties must be disclosed (i.e. murder in house or former occupant had AIDS)
ii. Duty to disclose sex offender in neighborhood
iii. Broker has same duty as client to disclose something
iv. Hazardous waste must be disclosed not just on property but in area as well
b. Definition of “material” (2 views)
i. Objective test – whether reasonable person would attach importance
ii. Subjective test – would this particular buyer find this to be a problem
H. Merger clause (“as is”)
1. Does not protect seller from facts that only seller knows
a. As is’ clause not upheld if there is
i. Fraud
ii. Affirmative misstatements
iii. Affirmative nonstatement (concealment)
iv. Innocent misrepresentation
a. Representation of material fact
b. Made for the purpose of inducing the purchase
c. Representation is untrue
2. Justifiable reliance by P on rep by D
I. Merger doctrine
1. Common law doctrine – at closing, the K and deed are merged
a. Deed controls therefore put things you want in deed
i. i.e. if seller makes warranties in K but in deed does not have warranties; no warranty because K disappears when deed
b. Use K language in K itself to say that these warranties are independent of deed à means they survive past closing
J. Implied warranty of quality
1. Original purchaser can sue the merchant of housing
2. Most courts say do not need privity to sue for IWQ
a. Lempke v. Dagenais – subsequent purchaser can sue under IWQ without privity
i. Only applies to latent defects AND
ii. Limited to reasonable period of time
iii. Warranty of quality only applies when seller is merchant (people that are in business of selling/building homes such as developers)
3. Traditional rule: sue for only personal damages
4. Modern rule: both personal and economic
