Every conveyance of real estate consists of two step process
Step 1: The land contract, which endures until step 2
Step 2: The closing, where the deed becomes our operative document
Land Contract, Statute of Frauds
Land K must be in writing; signed by party to be bound, defendant. Must describe property & state some consideration.
What happens when amount of land recited in contract is more than the actual size of the parcel?
Specific performance with pro rata reduction in purchase price.
Statute of Frauds Exception: Doctrine of Part Performance
If on the facts have two of the following three:
1. Buyer takes possession
2. Buyer pays all or part of purchase price, and/or
3. Buyer makes substantial improvement
Risk of Loss, Land Contracts
Apply doctrine of equitable conversion: Equity regards as done that which ought to be done. Once contract is signed buyer owns the land.
Risk of Loss, Destruction, Land Contracts
If property is destroyed between contract and closing through no fault of either party then Buyer bears the risk of loss unless contract says otherwise. Buyer bears loss from moment contract is signed!!!
Two implied promises in land contracts
1. Seller promises to provide marketable title at the closing.
2. Seller promises not to make any false statements of material fact.
Standard for marketable title
Title free from reasonable doubt, free from lawsuits, and threat of litigation.
Title rendered unmarketable when?
1. Adverse possession: if part of title rests on adverse possession it is unmarketable. Need good record title
2. Encumbrances: servitudes and mortgages render title unmarketable unless buyer waives them.
3. Zoning violations
Seller promises not to make any false statement of material fact
1. Failure of seller to disclose latent material defects and material omissions.
2. If contract includes disclaimer "as is" or "with all faults" it wont excuse seller from liability for fraud or failure to disclose.
Land contract contains no implied warranties of fitness or habitability
Common law: Caveat emptor, Buyer beware. Exception: Implied warranty of fitness and workmanlike construction applies to the sale of a new home by a builder-vendor. Sale by builder.
Controlling document is now the deed. The deed passes legal title from seller to buyer.
How does deed pass legal title from seller to buyer? It must be lead!
Lead! L E A D: Lawfully Executed and Delivered
Lawfully Executed Deed
1. Must be in writing signed by grantor
2. Standard. Deed need not recite consideration, nor must consideration pass to make deed valid.
3. Description of land does not have to be perfect. Need unambiguous description and a good lead.
Delivery requirement, Deeds
Delivery requirement could be satisfied when grantor physically or manually transfers deed to grantee. Permissible to use mail, or messenger, or agent. Does not require actual physical transfer of instrument. Legal standard.
Legal Standard for deed delivery
Test solely of present intent. Ask: Did grantor have the present intent to be bound irrespective of whether or not the deed was handed over. "I'm coming home" - intent to deliver + acceptance.
Express rejection of deed
Deed transferred to grantee with oral condition
If deed, absolute on its face, transferred to grantee with an oral condition the oral condition drops out. It is not provable and delivery is done!
Delivery by escrow
Is OK!!! Grantor may deliver executed deed to an escrow agent, 3rd party, with instructions to deliver to grantee once conditions are met. Then title passes to grantee.
Advantages of escrow
If grantor dies or becomes incompetent or is otherwise unavailable before the express conditions are met title still passes from escrow agent to grantee after conditions are met.
Covenants for title and three types of deeds
1. The quitclaim deed
2. General warranty deed
3. Statutory special warranty deed
Wholesale abdication of responsibility. Contains no covenants. Grantor isn't even promising he has title to convey. Worst deed a buyer could hope for. Note: grantor still promised in land contract to provide marketable title at closing but any problems post closing and grantor off the hook.
General Warranty Deed
Best deed a buyer could hope for. Warrants against all defects in title including those due to grantor's predecessors. Contains six covenants. Three are present covenants and three are future covenants.
Present covenants, statutes of limitations
Present covenants are breached, if ever, at the time of delivery. Statute of limitations for breach of a present covenant begins to run from the instant of delivery.
Covenant of seisin
Grantor promises he owns this estate. Present covenant.
Covenant of right to convey
Grantor has power to transfer. No temporary restraints on alienation. Grantor is of requisite age, and of sound mind. No restraints on capacity to sell. Present covenant.
Covenant against encumbrances
No servitudes or liens on Blackacre. Present covenant.
Future covenants, Statutes of limitations
Future covenants are not breached, if ever, until grantee is disturbed in possession. Thus the statute of limitations for breach of a future covenant will not begin to run until that future date.
Covenant for quiet enjoyment
Grantee wont be disturbed in possession by 3rd party's lawful claim of title.
Covenant of warranty
Grantor promises to defend grantee against any lawful claims of title brought by others.
Covenant for further assurances
Grantor will do what is needed in future to perfect the title if it somehow later turns out to be imperfect. A housekeeping assurance. Will take all reasonably needed measures.
The statutory special warranty deed
Provided for by statute in some states. Contains two promises that grantor makes only on behalf of himself. 1. Has not conveyed property to anyone other than grantee. 2. Blackacre free from encumbrances made by grantor.