Two Step Process to Convey Real Estate
- The Land contract, which endures until step 2. 2. The closing, where the deed becomes operative document.
The Land Contract - Requirements
- must be in writing,
- signed by the party to be bound
- describe property transferred
- state some consideration
EXCEPTION to writing req. = Partial Performance by buyer - 2 of 3:
- Buyer takes possession
- Buyer pays all or part of price
- Buyer makes substantial improvements
Risk of Loss in Land Sale K
Equitable conversion - treats the seller as merely holding the title in trust for the buyer until closing. (A retains right of possession until closing)
If property destroyed through NO fault of either party, B bears the risk of loss, unless the K says otherwise.
Implied Promises in Landsale K (2)
- Marketability: Seller promises to provide marketable title at the closing.
- = free from reasonable doubt - free of questions that present an unreasonable risk of litigation
- Seller promises not to make any **false statements of material fact **(lie or omission)
- Disclaimer ineffective
- NO implied warranty of fitness or habitability
- Except: implied warranty of fitness and workmanlike construction in sale of new home buy builder.
Implied promise not to make false statement of material fact
- implied in land sale contract
- applies both to lies and ommissions of latent material defects.
- Disclaimer (e.g. “as is”) will NOT relieve seller of liability for fraud or failure to disclose)
Title rendered unmarketable by:
(3 ways)
- Adverse Possession - even if only PART of tutle rests on AP
- Encumbrances - servitudes and mortgages render title unmarketable, unless buyer has waived them.
- Zoning Violations - title is unmarketable when property currently violates an existing zoning ordinance
Closing Requirements
LED
- Lawful Execution
- Delivery
For “Lawful Execution” Deed must:
- be in writing
- be signed by grantor
- need NOT recite consideration (nor must consideration pass to make deed valid - can be gratuitous)
- Description of the land - not perfect, only requires “good lead”
“Good Lead” meaning
A deed must describe land such that it provides a “good lead” meaning a buyer/court can research and know the meaning of the words used.
e.g. “O conveys all O’s land in King Co.” = good lead;
“O conveys some land in King Co.” = NOT good lead
Delivery Requirement
- All that is required is PRESENT INTENT of grantor to be bound.
- satisfied when grantor physically transfers the deed to the grantee
- Permissible to use mail, an agent, or messanger
- Delivery does NOT require physical transfer of deed itself - only present intent required
- Recipient’s express rejection defeats delivery.
Oral Conditions at Transfer or Deed
If deed, absolute on its face, is transferred with an oral condition, the oral condition is void. It’s not provable.
Delivery in escrow
- always available
- grantor may deliver an executed deed to a 3rd party (escrow agent) with instructions that deed be transferred to grantee once conditions are met.
- Advantage: title passes from escrow agent to grantee even if grantor dies or becomes incompetent or unavailable before express conditions are met.
Three Types of Deed
- Quitclaim Deed
- General Warranty Deed
- Special Warranty Deed
Quitclaim Deed
Carries NO covenants. Grantor isn’t even promising that he has title to convey.
BUT NOTE, even here, grantor did implicitly promise in land sale contract to provide marketable title at closing - just not liable for any problems post-closing.
General Warranty Deed
Warrants against ALL defects in title, including those caused by grantor’s predecessors.
Three Present Covenants (breached, if ever, at time of delivery):
- Covenant of Seisin
- Covenant of Right to Convey
- Covenant against Encumbrances
Three Future Covenants (statute of limitations begins to run on any future date when grantee’s right in possession is disturbed):
- Covenant for Quiet Enjoyment
- Covenant of Warranty
- Covenant for Further Assurances
Covenant of Seisin
- promise that grantor owns the estate transferred.
- present covenant that attaches to general warranty dead.
Covenant of Right to Convey
- promise that grantor has the power to transfer, i.e. that there are no disabilities (capacity problems) or temporary restraints on alienation.
- present covenant that attaches to general warranty deed
Covenant Against Encumbrances
- present covenant that attaches to general warranty deed
- promise that there are no servitudes or mortgages on blackacre
Covenant for Quiet Enjoyment
- future covenant that attaches to general warranty deed
- promise that grantee won’t be disturbed in possession by a 3rd party’s lawful claim of title.
Covenant of Warranty
- Future covenant
- promise that grantor will defend grantee against any lawful title claims asserted by 3rd parties (related to covenant for quiet enjoyment - if by some chance there IS another w/ lawful claim of title, grantor will defend against it)
Covenant for Further Assurances
- Future Covenant
- promise that grantor will do whatever is needed in the future to perfect the title if it turns out to be imperfect
Special Warranty Deed
- A creature of statute, available in many states
- TWO promises on grantor’s own behalf (grantor makes NO representations on behalf of predecessors in interest)
- grantor promises he has not conveyed blackacre to anyone other than grantee
- grantor promises that blackacre is free from all encumbrances made by grantor
