Land Sale Contracts
What is the SOF performance exception for land sale contracts?
You must have 2/3
- payment (parital/full)
- possession OR
- substantial improvement
What is adverse possession? What are the elements? What is the rule for each element?
Adverse Possession - Taking of another's land through actual, exclusive, continuous, hostile, open possession.
Actual - Must be physically present
Exclusive - You are not using the land in conjunction with the owner
Open/Notorious - Use is not hidden - reasonable owner could discover
Hostile - You're acting without the consent of the owner
Continuous - Must be continuous for the statutory period
What is a mortgage?
An interest in real property that's security for an obligation.
What is delivery? What is sufficient to establish delivery of a deed?
Delivery - the intent to make a transfer of property at the time of transfer
Sufficiency - Delivery of a deed manifests the intent to transfer. NOTE - Can be done via mail or handing the deed to the grantee/agent
What is the effect of foreclosure on the (1) mortgagor, (2) purchaser of property, (3) senior interests, (4) junior interests?
Mortgagor - Foreclosure eliminates interest in the property
Purchaser of property - takes interest free of junior mortgage and subject to senior mortgage
Senior interests - not typically impacted by foreclosure sale
Junior interests - interests are destroyed
What is the right of first refusal?
What's and option contract in a land sale?
ROFF - The right that gives the holder the chance to get property before the transfer to another
NOTE - Can be limited in time and scope
Option Contract - The right to purchase a contract during a specific period
What is tacking? Disability of the owner?
Tacking - You may tack (stack) your time to meet the statutory period if there is privity between successive possessors.
Disability of the owner - If an owner has a disability at the start of AP the the SOL won't run against the true owner.
What is defaulting of a mortgage?
What is lien theory? Title theory? Redemption?
Default - Failure to continue to pay the mortgage
Lien theory (majority) - borrower is treated as the owner of the real property, lender is the holder of the lien on the interest
Title theory (minority) - lender is treated as the owner of the real property, borrower has the right to regain ownership upon paying the mortgage
Redemption - After default, but before foreclosure, borrower can retain mortgage if they pay the outstanding balance
What's not delivery?
Transfer to third party - If a grantor gives a deed to a third party, asking them to transfer the deed to another in the future, the grantor may retain the deed if the language suggests so.
What are the distribution of proceeds in descending order?
1. costs associated with the sale
2. mortgage obligation being foreclosed on
3. mortgage obligations owed to the junior interest holders
4. remainder goes to debtor-mortgagor
What is a marketable tittle?
What is the duty to disclose defects?
What is the implied warranty of fitness?
What is merger?
Marketable title - A standard covenant that is a title free from defects that create risk of litigation
Duty to disclose defects - the duty to disclose all material physical defects
Implied warranty of fitness - A warranty for new homes assuring that the construction is of good quality. NOTE - this replaced caveat emptor
Merger - Contracts are merged into the deed upon the sale of the home.
What's a general warranty deed? What's included in it?
General warranty deed includes three present covenants and three future covenants.
Present covenants - Seisin, right to convey, against encumbrances
Future covenants - quiet enjoyment, warranty, further assurances
What is foreclosure?
When a borrower defaults and the mortgagee (lender) takes the interest. This occurs after default and notice to the borrower.
What are the requirements of a valid deed?
A deed must contain: identity of grantor/grantee, words of transfer, description of property grantors signature. NOTE - consideration is NOT required.
Words of transfer - must contain "granting clause" i.e. "do grant and convey"
Decryption of property - must be reasonably definite - can use extrinsic evidence to clarify
What happens if there's a deficiency from the sale?
The lender is permitted to bring a deficiency action against the party who has assumed the mortgage.
If there is a nonrecourse loan, then the lender cannot recover the deficiency from the new buyer.
What are the three remedies for breach in a land sale contract?
Damages, buyers deposit, and specific performance.
Define all present and future covenants.
Present Covenants
Seisin - The grantor owns the land in the deed
Right to convey - You have the right to transfer title
Against encumbrances - You are free from undisclosed encumbrances
Future Covenants
Quiet enjoyment - The grantee's possession won't face a third party claim for title
Warranty - the grantor will defend the grantee in the event of a third party claim for title
Further assurances - the grantor will do whatever is necessary to perfect the title if its defective
Within foreclosure, what is the priority of interests?
In general - if there are 2+ mortgages, then any junior interests are terminated. Senior interests are preserved. It is then "first in time, first in right"
What are the type of recording acts?
What are the types of notice?
Do not define them, yet.
Types
Notice
Race
Race-Notice
Notice
Actual
Inquiry
Record
Bonus question - What is the difference between the elements for adverse possession and prescriptive easement?
Prescriptive easements do not need to be exclusive.
What do damages entail?
What does the buyer's deposit entail?
What is specific performance?
Damages - expectation damages available - difference between the contract price and market value
Buyer's deposit - A buyer can receive their deposit back as liquidated damages
Specific performance - The buyer is entitled to specific performance due to property being unique.
What's a special warranty? How about a quitclaim deed?
Special warranty deed - The same covenants of a general warranty, but ONLY for defects that occurred when the grantor had the title.
Quitclaim deed - You are promised NO covenants of title.
What are the exceptions to priority of interests in foreclosure?
Purchase money mortgage - Typically has priority over any existing lien
Recording act - A subsequent mortgage that satisfies a state recording act has priority over an unrecorded prior mortgage
Subordination agreements - If you hold a prior mortgage, you can subordinate your interests to the holder of a subsequent mortgage
Mortgage modifications - If you are a senior mortgagee and you transfer your mortgage to a junior mortgagee, then the new mortgage gets the same priority as the old one.
Define all types of recording acts and types of notice.
Types
Notice - You need notice of the prior interest to prevail
Race - whoever records first prevails
Race-Notice - can take interest without notice of prior interest AND be the first to record
Notice
Actual - Actual personal knowledge of the interest
Inquiry - A reasonable investigation would disclose the prior interest
Record - If something was recorded, then you have constructive notice of its existence
Bonus question - If a person purchases a home in a foreclosure sale, do they have a claim under a violation of the covenant against encumbrances if third parties try to litigate the property?
Generally, no - the purchaser at a foreclosure sale will have notice that the property is encumbered by senior interests.