67 terms

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Escrow
1. Must check the chain of title

- may not include a Covenant or Easement

2. Must walk the property

Buyer will be charged with what the above actions will reveal
Questions for Pre-Closing
Can the buyer get out of the K?

1. Start w/ determining the quality of title they contracted for (default is marketable but that can be contracted around)

2. Then check the quality of the defect (like recorded encumbrances, unrecorded encumbrances, and chain of title defects)
If Buyer Can't Get Out
First, check recording acts

Second, see whether they can sue grantor on warranties in the deed
Recording Acts
If problem is found post-closing and it falls underneath RA, then it will be extinguished

Notice Approach
Race Notice Approach
Race Approach

Generally, don't apply the RA to property interest that arise by operation of law

Must have good faith the grantor has title
Notice Approach
Any purported property interest is not valid against subsequent transferees unless the subsequent transferees have notice of the transfer or the interest is recorded.

Any one of these disqualify a subsequent bona fide purchaser w/o notice:

- Actual Notice

- Record (constructive) Notice

- Inquiry (constructive) Notice

- Record/Inquiry Notice
Race Notice Approach
Any purported property interest is not valid against subsequent transferees if the subsequent transferees have acquired the property in good faith and for valuable consideration, whose conveyance is first duly recorded.
Actual Notice
Actual Knowledge
Record (constructive) Notice
Charged w/ whatever proper search of the recording system would have exposed in that jx
Inquiry (constructive) Notice
Duty to inquire arises when a person discovers facts that would give rise to concerns or suspicions such that a rx person would inquire.

If they fail to inquire, then are charged with the true state of affairs. If they inquire diligently and nothing, then they aren't charged

- can happen by walking or learning facts

- Some jx: where possession appears consistent w/ the state of title, then you don't need to inquire

- Other jx: inquire everyone but the person who is on the land
Record or Inquiry Notice
As you go through recorder you have to duty to read all deeds in your chain of title.

Where one says it is a replacement deed, bc og is lost a subsequent party should try to find the og, if not they are charged with knowledge of the true state of affairs
Checking Title in Indexes
Is potential grantee dealing with someone who had actual title?

- If no, are they protected under RA?

-- go through grantee index until state owns it and come forward to grantor index

-- start looking at the date of execution of the deed purporting to give the person title, stop looking when the first deed recorded purporting to give a property interest to another party

- then we search at the new grantor

--- under std scope of search we can rely on the information index, don't have to look at each and every deed

--- may need to do an extended scope search depending on jc

- if yes, they get the actual title
Scope of Search (checking title)
Majority: duty to search grantor index & if it indicates that it might affect the property interest in question then there is a duty to review that deed

- proper spelling of name, effecting our parcel of property
Economic Analysis
Apply a relation back doctrine, so the deed is effective from the moment grantee had the power to get the deed
Expanded Scope of Search (checking title)
Some jx: duty to search all deeds out from the grantor and charged with notice thereof

Minority jx in Estoppel by Deed Scenarios: duty to start searching before the date of execution of the deed by a minimum of 50 years

Minority jx in Senior in Interest, Junior in Recording: duty to continue searching after the execution of the deed until the proposed transaction for everyone in the chain of title
Idom Sonum
duty to search based on the ear, not on sight of phonetic spellings that start with the same letter (if the names sound the same then you have a duty to search under it)
Buying from Heirs
If party buys from heir and don't have notice that the heir didn't have title - then they would be protected
Wild Deed
Deed that is recorded but doesn't show up

Not deemed to give notice to the whole world
Expressed Restriction
If there is an expressed restriction in a deed indicates that it runs with the land all the deeds following have the expressed restriction whether it is explicitly stated or not

However, if it does not indicate that it runs with the land then it is just a K between those 2 parties
Zimmer Rule
A purchaser must record their deed and ensure the entire chain of title is recorded

remember recording out of order doesn't necessarily mean there is a hole in the chain of title
Acknowledgment
Notary verifying that the person signing it is the grantor and provided proof that they are that person on the last page of the document

Majority: deed must be properly acknowledged

If there is a defect, ask what the defect is and what the legal consequences are

- most jx: treat patent and latent as if it hasn't been recorded, so they do not get protection under the RA and doesn't show for record notice but does for actual notice

- some jx: treat a latent defect as proper recording and is notice

-- if patent, then it is not treated as proper and isn't notice
Patent Defect
Recorder should have never recorded

Visibly apparent from the 4 corners of the document
Latent Defect
Can't blame the recorder

On the face of the document does not indicate a problem
Apparent Title
Having the physical deed, but is not recorded

Not reflected in the indexes
SoF
A writing signed by the party to be charged with material provisions (parties, property, price)

The writing does not have to be standard K form, just need a writing that evidences a K
Material Provisions (SoF)
Parties: identifiable w/ rx certainty

Property: identifiable w/ rx certainty

Price: if parties have agreed on price, most jx say price must be included in writing but if not agreed then the price does not need to be included unless they stipulated how the price should be calculated
Party to be Charged (SoF)
the person trying to get out of the deal, typically the D
Part Performance
Asa general rule, requires:

1. taking possession

2. paying all or part of the purchase price OR making valuable improvements
Equitable Estoppel
(X) has made a representation by (Y) and changed their position in reasonable reliance. Before (Y) can change their position in reasonable reliance, (X) should have known or should have known that the other would change their position in reasonable reliance. As a result of that change in position it would be unfair to let the (X) out of their representation.
Marketable Title
Free from rx doubt, wouldn't expose the buyer to unrx litigation

An implied default standard imposed on a seller
Title Defects
Recorded Encumbrances

Unrecorded Encumbrances

Chain of Title Defects

Covenants

Easements

Mortgages

Per se grounds for getting out of the K
Unrecorded Encumbrances
Present Violation of Public (or Private) Regulation

- cts analyze

1) likelihood of the litigation and

2) the likelihood of the litigation prevailing

- if together they aren't bad, the ct will force a buyer to accept something w/ a low level of litigation

- if unrecorded encumbrance is a present violation that is subject to a risk of litigation - it's fact sensitive as to whether they will get out of the K

Same Nature of the Recorded Encumbrance

- if unrecorded encumbrances is of the same nature of the recorded encumbrance then it will be per se grounds of getting out of the K

Other
- some things are unrecorded encumbrances but might not fit into our two, like AP's
Zoning
Parties are charged with knowledge of zoning

- zoning is not a defect to get out of a K (but can be added to a K)

- If both parties share a misunderstanding of zoning it can undermine the K
Chain of Title Defects
Fact Sensitive

Refers to the recording system (what is and what should be in the recording system)
Qualities of Title
Insurable Title

Marketable Title

Insurable Title

Title with Good Record

Title Subject to All Encumbrances

Perfect Title
Title Insurance
in the event there is a defect, they are covered
Marketable Title (QoT)
default quality of title

Free from rx doubt, wouldn't expose the buyer to unrx litigation
Insurable Title
As long as reputable insurance company can insure the title, then it is insurable
Title with Good Record
Good chain of title (all links connect up in the recorder's office)

Knocks out the AP
Title Subject to All Encumbrances
Waive rights to claim on encumbrance grounds
Open & Obvious Beneficial Easement or Covenant
CL (general rule): open and obvious easement/covenant of beneficial nature, is per se grounds to get out of contract

MT: open and obvious easement/ covenant of beneficial nature, we presume that the buyer knew or should have known of it and when they signed the contract they accepted it and cannot use that to get out of the contract
Equitable Conversion
The buyer assumes the risk of loss or change with respect to the property during the escrow period between executing the contract and closing.

Inasmuch as the contract to purchase is to purchase title to the property, changes to structures on the property or zoning changes which do not affect title per se are not seen as grounds for permitting the buyer to rescind the contract

Equity regards as done that which ought to be done

The buyer has the real property interest, the seller only has personal property interest
Risk of Loss
During escrow, seller has risk of loss

- if buyer finds something pre-closing, or during escrow, the buyer will leave so the seller has risk of loss

After escrow, buyer has risk of loss

- if buyer finds something here, then the buyer can't get out, so they bear the risk of loss
If Improvement Damaged Post Contract
CL (maj): If seller has insurance and the property was then destroyed, the seller has to give insurance proceeds to buyer and buyer has to buy with no reduction to price

CL (min): Buyer has to buy no matter what and doesn't get the benefit of the seller insurance

MT (some): risk of loss is on seller until closing

MT (other): risk of loss is on the party in possession

MT (other): risk of loss is on buyer unless improvement was substantial and a material part of the K
Seller Duty to Disclose
CL: no duty - buyer beware

- Misfeasance (affirmative representation) v Nonfeasance (not doing anything)

- buyer must walk the property and check the chain of title

MT: seller knows or should have known of a latent material defect, the seller has duty to disclose
Material Defect (duty to disclose)
Anything that goes to the value or desirability, includes the neighborhood

- Objective: rx person standard

- Subjective: if the seller knows or should have known buyer had a particular interest

Latent: not discoverable upon rx inspection

Patent: if can be seen by walking the property, no duty to disclose it

- if defect is disclosed, then it can be sold "as is"

primarily w/ respect to improvement
Mortgage
Gives the mortgagee the right to sell the title that the mortgagor has on the date of the mortgage, and if the mortgagor defaults the mortgagee can sell the quality of title that the mortgagor had
Deed
Deed must be made compliant to SoF, effective on delivery there must be delivery of the paper albeit symbolic (signed, sealed, and delivered) - the earliest date is effective is the date was executed (not necessarily the date it was recorded, but the day it was signed in compliance with the SoF)
Deed Delivery
If underlying K you can force delivery by suing for specific px

Only an issue in gift setting - Delivery is determined by grantor's intent

Oral conditions ineffective w/ 2 parties (SoF)

Oral conditions effective w/ 3 parties bc they are instructions to an escrow agent

- must be a true escrow agent beyond grantor's control

To transfer property interest at death it must be a will, a deed is not a will

If there is an independent agent the second delivery from escrow agent to donee relates back to the first donee even if they are dead
Merger
CL: at closing K rights merge into the deed

MT: shrink the merger doctrine or abolish it

- any contractual positions that are collateral to the deed like (meaning NOT quality of title or quantity of land because these two do merge) don't get merged and can be sued post closing

- warranties show the quality of title
Mother Hubbard Clause
Clause that transfers the real property interest in a jx

Valid way of transferring property
Recorder Misrecords
Then the person has done everything they could have to record it, so even though it has been misrecorded it will be treated as if it has been properly recorded
Estoppel by Deed
Majority: Someone conveys title to land before they get it, then they get title. They then purported to have title and the other party relied in detrimental reliance. The original party then is estopped from telling the secondary party that they do not have title. A relation back doctrine is applied and by operation of law the original deed is valid and the secondary party is treated as having been the owner the moment the defective deed was given to them

Minority: Duty to start searching before the date of execution of the deed (expand scope of search on the front end) by a minimum of 50 years
Types of Deed
General Warranty

Quitclaim

Special Warranty
General Warranty
Seller warranting the whole chain of title, back until the state owned it

- must include all warranties
Quitclaim
Grant gives quality of title they have, if any , but do not warrant that they have title
Special Warranty
Bargained for and grantor is warranting against their acts (can only be sued for defects while they own it) but not any act of anyone before them or after them

- includes less than all 6 warranties
Senior in Interest, Junior in Recording
Senior in interest, but junior in recording and the other party records prior to them recording

Minority: duty to continue searching after the execution of the deed until the proposed transaction for everyone in the chain of title
Present Covenants
To determine whether something is superior we must go through the RA analysis

The mere existence of a competing superior property interest at closing, will immediately constitute a breach

- Covenants of Seisin

- Covenant of Right to Convey

- Covenant Against Encumbrances

Regarding Running to future grantees

the SoL begins at closing

-- CL: CoA for present C is not assignable (to future grantees)

-- MT: can assign a CoA (to future grantees)
Covenant of Seisin (warranties)
Warrants they own the estate they puport to convey
Covenant of Right to Convey (warranties)
Warranting they have the right to convey it
Covenant Against Encumbrances (warranties)
Grantor warrants that there are no encumbrances on the property
Warranties in Special & General Warranty Deeds (future covenants)
Breached upon the assertion of the competing superior property interest

- covenant of general warranty

- covenant of quiet enjoyment

- covenant of further assurances

runs for future grantees
Covenant of General Warranty (warranties)
grantor warrants and defends against any superior claims
Covenant of Quiet Enjoyment (warranties)
grantee will not be disturbed in possession in enjoyment of the property by assertion of superior title
Covenant of Further Assurances (warranties)
grantor promises that he will execute any other documents required to perfect the title conveyed
Suing on Warranties
Start on the bottom and work up (sue your immediate grantor, if possible, if not sue the next closest person)

Depending on their type of warrant you could, if not then go up - also don't forget to check the SoL
Present Violation of Government Regulation
Pre-closing is ground for getting out

Post-closing is not grounds for getting out of the K