OUTLINE_Real Estate Transactions

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Real Estate TransactionsOutline

Fall 2012

IV. INTRODUCTION

1. Ethics

a. Abuse of process by lawyers who are in the know b. Rules regulating the Florida Bar

i. Korte v. US Bank Natls Assoc. – frivolous defenses ii. JP Morgan v. Hernandez – fraudulent documents iii. The Florida Bar v. Adormo – class action $7 million settlement

2. History a. Treaty between Spain and US that made Florida part of US was concluded in 1819

and proclaimed in 1821.

3. MISC: a. I% rule: every buyer should be willing to pay 1% of the purchase price to hire a

lawyer to deal with buying/selling real estate

IV. CONTRACTS FOR THE SALE OF LAND1. Real Estate Brokers

a. Broker is the agent of the seller b. If broker is successful in securing buyer, then she gets % of sale as commission

i. Because of the relationship of commission to selling price, agents may have anincentive to sell at the highest price, but that is not necessarily how it works inreality)

c. Broker’s Authority i. Traditionally brokers

market home (MLS, etc), review contract, negotiate with buyer/seller, locate property for potential buyer, arrange showings, provide information like relative property values, most recent selling prices, property taxes, give information onfinancial options, assist in formatting offers/counters/acceptances

Power to consummate a sale, sometimes (broker contract could give broker ―power of attorney‖)

ii. Realtor represents the seller unless you do something differently in your REBcontract

Single-agent relationship with seller No brokerage relationship (almost disinterested) Transactional broker (good for the deal)

iii. BROKER HAS A DUTY TO INVESTIGATE SELLER’S PROPERTY iv. Unbundle Broker services

Broker can unbundle his/her services, but 9 states have minimum service lawsthat dictate the services that a consumer must purchase when entering into arelationship with a real estate broker. 8 states have min, service laws, but allowconsumers to waive (including Florida)

These laws may harm consumers (1) reduce choice; (2) brokers who would offer less can’t (3) don’t ensure quality

d. Drake v. Hosley (AL) 1986



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i. Facts: REB, Hosely found willing, ready and able buyer, but seller sold tosomeone else and didn’t want to give H commission.

ii. Trial Court: real estate broker was granted commission on summary judgment; ctconcluded broker fulfilled the terms of the sale

iii. ALSC: affirms: the Agreement provided that broker would receive 10%

commission if he (1) located a buyer willing and able to purchase at the termsset by seller or (2) the seller entered into a binding sale during term of agreement.

iv. Traditional Rule: Broker entitled to commission when he produces a buyer ready, willing and able to purchase the property on the seller’s terms, even if the sale is not completed. (protects marketplace)

v. Dobbs Rule: In the absence of default by the seller, the broker’s right tocommission comes into existence only when his buyer performs in accordancewith the contract of sale. (broker gets paid only at closing unless seller defaults

vi. TAKEWAY: Hosely found a group of buyers willing and able to perform inaccord with the terms set by the seller, but they were prevented from doing so

by the seller’s frustrating conduct. The buyers tried to perform by tenderingchecks for the down payment ―within 10 days of clear title‖ as required by theearnest money agreement. The sale did not take place because the seller,Drake, sold the property to a third party during the 10 day closing period.Thus, even under Dobbs rule, Hosley is entitled to his commission.

e. Listing Agreementsi. All listing agreements must be in writing (Statute of Frauds — every agreement

that might take more than one year must be in writing)f. Material Defects and Compensation DUTY TO DISCLOSE

i. ―seller must tell real estate professional of all material defects and will indemnifyRE professional if seller does not disclose

tree fell on roof (repaired) — did that materially effect the value of the property? Peacocks in neighborhood Dairy in neighborhood Slash: house not big enough and not enough parking Toxic Chinese drywall Flooding, may need to disclose bc prone to flooding or mold That previous resident diagnosed with HIV/AIDS, death, murder, suicide n

property, not material Gilchrist v. Rayonier (1997): FlaSC held (1) one who negligently supplies false

information for guidance of others in a transaction in which he has pecuniary interest is subject to liability under a theory of negligentmisrepresentation for pecuniary loss caused to others by their justifiablereliance on information, and (2) statutory comparative fault provisionsapply to actions involving negligent misrepresentation

M/I Schottenstein Homes v. Azam (2002): FLaSC held the purchasers stated acause of action for fraudulent misrepresentation when developer toldhomeowners that a nearby parcel of land was a permanent natural preserve when he knew there were plans for a school to be built on it.

ii. DISCLOSURE



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Std: RESIDENTIAL: have to disclose anything that materially affects the property value (from seller’s POV). Buyer has no duty to inspect inFlorida.

How to tell if materially affects: Threat of litigation; so materially dangerousthat you might get sued; access (access goes with status of title)

Limitations of Actions: Actions for fraud: 4yr SOL from time you knew or should have known — after 12yrs from date of lie lost right to sue)

iii. In California, Brokers have an affirmative duty to inspect and can be held liablefor not investigating. Most states hold broker liable for affirmative statementsthat turn out to be false and silence when the broker knew something waswrong. Outside of CA, if brokers have no actual knowledge, but could have been found with inspection, probably won’t be held liable

g. Confidential Informationi. Broker can’t disclose confidential information, unless disclosure is required by

statute, or failure to disclose the information would constitute fraudulentmisrepresentation

ii. but broker is required to disclose adverse material facts to a prospective buyer h. Integration Clause: this listing contract constitutes the entire agreement

i. Is everything in the contract for sale that you thought you were getting?

2. The Statute of Frauds and Part Performancea. First, the seller/buyer make a contract for sale that gives a 30-90 day executory

period. Then, the contract is performed at the closing. b. What happens during the executory period?

i. Check that seller really owns property (good, clear, marketable title); maybeBuyer needs to get a loan, sell previous house, arrange for move, maybe seller needs time to find a new home, maybe buyer is concerned about physicalcondition of house and wants an inspection.

c. Statute of Frauds: sale of land to be in IN WRITING. i. Doesn’t have to be in a single instrument (email exchange) ii. Has to be signed (usually by person you want to hold accountable to contract) iii. Have to have a ―meeting of the minds‖: parties’ names, description of property,

price (definitely an essential term). d. Types of Contracts:

i. Short-term contract (45-60 days then sale is over: sales contract) ii. Long term contract = installment sale contract (combination of deed, mortgage,

promissory note all in one) e. Part Performance Doctrine — takes contract out of the SOF — still have to prove the

contract by clear and convincing evidence

i. 3 most often mentioned acts that constitute part performance (most of the timeneed 2-3 of these factors) payment of part (or all) of the purchase price — partial payment alone is almost

always not sufficient going into possession of the property making substantial improvements



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ii. PP is usually said to be recognized only in equity, typically in a suit for specific performance. It is an AFFIRMATIVE DEFENSE and doesn’t prevent a suitfrom being filed.

f. Johnston v. Curtis (ARK 2000): C is to sell house to J for 114k (there is no realestate agent). The contract stipulates that the sale is subject to J obtaining a

home loan for 90% of purchase price ($102,600). J told C they had been pre-approved, so C bought another home. House only appraised for 110k, somortgage company denied loan. Then, they came to an oral agreement — J will buy house for 110k. J paid $500 and took possession of house. Closing dateset. But, J refused to close bc interest rate unacceptable and could only getmortgage in his name and not in his and his wife’s.

i. Trial Court: C sues for breach of contract because J won’t buy house bc can’thave wife on loan. TC found: (1)parties had orally agreed to modify their original sales contract from 114 to 110, but subject to all other terms (2) oralmodification not subject to SOF (3) J breached by failure to close. Damages toC in 10k.

ii. COA: statute of frauds not applicable because of J’s part performance ($500 andmoving in) (must prove making of oral agreement and part performance by

clear and convincing evidence); J’s did not fill in blanks on contract about whatinterest rate they were willing to pay, so can’t argue ―reasonable‖ interest rateand J’s didn’t know wife wouldn’t be on deed until day before trial and refusedto perform a year earlier. C’s tried to argue for more damages but ―the measurefor damages for a vendee’s breach of an executory contract is the difference between the contract price of the land and its market value at the time of the breach, less the portion of the purchase price already paid.‖

g. Rosenfeld v. Zerneck (NY 2004) i. Can you make a contract for sale of real property via email? ii. Defendant wants SJ dismissing the complaint that seeks specific performance of

the contract for sale of the Defendant’s home. D argues the email was preliminary and did not satisfy SOF. Email signature is valid for SOF, but theemails in the instant case did not create a binding agreement bc it lacked a vitalterm: did not set forth any understanding as to the amount of the contractdeposit and did not indicate how the parties intended to treat the commerciallease then encumbering the premises. Ct finds no meeting of the minds.

iii. RULE: essential contract terms: name of buyer/seller; price; good/accuratedescription; signature (need express authorization to sign for someone else)

Lawyer can’t get you into a contract (by signing for you) but may be able to getyou out.

3. Remedies and Real Estate Contractsa. Damages and Specific Performance i. Either buyer or seller can seek either remedy ii. Loss of bargain damages are traditionally measured as the difference between the

contract price and the market value of the land on the date of the breach b. Donovan v. Bachstadt (NJ 1982): B agreed to sell real estate to Don by way of

purchase money mortgage, but couldn’t get good title to property. Don sued



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for compensatory and punitive damages. Don wanted difference in interest between B’s mortgage and new mortgage he had to get.

i. TC: Don was entitled to recover costs for title search and survey; wouldn’t givedifference in interest rates reasoning that contract was for sale of property andfinancing was only incident.

ii. COA: REVERSED: ct concluded that statute intended that the general law of damages for breach of K applies. RULE: Buyer can recover benefit of the bargain damages when the seller breaches an executory contract to convey real property. Compensatory damages are designed to put injured party in as goodof a position as he would have been if performance had been rendered as promised. What position that would have been depends on the parties’reasonable expectations. B was not chargeable for loss that he did not havereason to foresee as a result of the breach. Loss must be a reasonably certainconsequence of the breach although the exact amount need not be certain.

c. BUYER’S DAMAGES i. usually entitled to amount paid on purchase + interest; costs and expenses

incurred in connection with proposed acquisition, improvements made (thedifference between market and contract price may not be suitable in allsituations). Buyer’s damages are limited to restitutionary recovery when theseller’s title is defective but the seller has acted in good faith, is followed inabout half the jurisdictions. But, does not apply if seller breaches contract

ii. loss-of- bargain damages only available to buyer if the property’s value is higher than the contract price

iii. What other damages might buyer be able to get? Expenses for title search, survey, atty fees Airfare to travel to negotiate and execute contract Rent at present location Loss of particularly favorable financing

OFFSET by still have $/or saved interest buyer would have paid on mortgage iv. Date of valuation for remedies: market value as of date bf breach (maybe resale

price) Good to use resale price bc appraisals can be imprecise

v. When contract makes purchaser’s sole remedy termination of K and refund of deposity (recission and restitution), it is disfavored in Florida courts; seller’sobligations are solely illusory

d. SELLER’S DAMAGES i. Carrying cost of property until resold ii. Interest on existing mortgage loans iii. Interest income seller expected to earn on purchase price iv. Cost of second brok er’s commission v. Increasing tax liability as a result in a change in tax laws vi. Even if you get specific performance, can still get damages

e. Schwinder v. Austin Bank of Chicago (Ill COA 2004) i. 7/2000 Defendants accepted offer from Plaintiffs to buy condo; D didn’t close bc

of divorce, but entered into a contract for possession with Ps for 1500/month;



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even after divorce D wouldn’t close; Ps sued for specific performance and wonand ct gave them back some of the rent they paid

f. SPECIFIC PERFORMANCE i. SP is a matter of sound judicial discretion. Factors to consider:

Parties entered contract freely/deliberately with no fraud or oppression by either

party (binding contract) Property has to be ―unique‖. Plaintiff has to be ―ready, willing and able‖

ii. Specific Performance may be denied when: It would produce unjust/unconscionable results If K is excessively vague If vendor has resold to another purchase who had no knowledge of the prior K.

(if purchaser had notice, ct will uphold prior K) If purchaser was buying the land for immediate resale at a profit, its supposed

uniqueness is of no real consequence, so damages are sometimesconsidered an adequate remedy

Both SP and other remedies may be denied if there are precedent or concurrentconditions which have not been fulfilled or if the plaintiff is in substantial

breach. If the K gives the vendor the right to forfeit the purchaser’s earnest money as

liquidated damages, the clause may be treated as the vendor’s soleremedy

iii. If the seller does not own all the property covered by the contract, the purchaser may desire, and can generally obtain, specific performance with an abatementof the price.

g. Mahoney v. Tingley (Earnest Money) (WA SC 1975) i. Plaintiff sues for damages arising out of breach of earnest money agreement bc

the damages are greater than the amount stipulated in the liquid damagesclause. Terms ―earnest money shall be forfeited as liquidated damages, unlessseller elects to enforce this agreement‖. Contract gives 2 remedies 1. Keepearnest money 2. Enforce agreement. Ct says can’t sue for damages because of this clause.

h. Other Cases: i. Contract says seller can either keep deposit, sue for actual damages, or get specific

performance. Ct doesn’t like bc when have both damages, then unjustenrichment one way or another, seller always gets better deal.

ii. When contract gives buyer only remedy of getting deposit back then, it is anillusory promise

i. Liquidated Damages Clause:i. 3 elements that must be validated to enforce damages clause

parties intended to agree in advance to the settlement of damages that mightarise from the breach

the amount of liquidated damages was reasonable, bearing some relation to thedamages which might be sustained

as of what date is reasonableness measured? Usually the time the K wasentered into, but sometimes date of breach or date of breach + date of K.



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Vendor may not be allowed to keep deposit if he suffered no damages at all

How much is reasonable? Most courts up to 10%, Fla up to 15%.

Many cts allow vendor to retain a breaching buyer’s deposit whether or notany clause in the K provides for it.

actual damages would be uncertain in amt and difficult to prove ii. If liquidated damages clause does not address the issue of other damages, the

usual rule is that the vendor may not seek actual damages, but may seek specific performance. If the clause does discuss other damages, some cts acceptand some courts see it as a penalty and reject.

4. Time of Performance and Tender a. When is lateness a material breach of the contract? b. Did the original contract make “time of the essence”? c. If not, has one of the parties made ―time of the essence‖ unilaterally? d. If time is not of the essence how far beyond the agreed-to closing date is the late

party? e. Miller v. Almquist (NYSC 1998)

i. Neighbor offers to buy coop unit next to theirs so that they can renovate for morespace. Parties entered into a contract for 545k cash with 10% down. Closingdate set, but day before, buyers asked for more time (no time of the essenceclause in contract). Sellers said ok, but now time is of the essence. Moveddate. On new closing, buyers weren’t ready and sellers sent a letter ―you breached, we keep 10%. Buyers brought suit seeking to enjoin sellers fromterminating K; from implementing forfeiture of down payment and fromcontracting to sell apt to anyone else.

ii. TC dismissed; COA ―cannot conclude that the time allotted in the time of theessence letter in response to a short adjourned closing date chosen by the buyerswas reasonable so as to inflexibly bind the buyers to an April 16th closing date.

f. Factors to consider when deciding what constitutes a reasonable time to close i. Nature and object of the contract; previous conduct of the parties; presence or

absence of good faith; the experience of the parties and the possibility of hardship or prejudice to either one; specific number of days provided for performance

g. CLASS REVIEW: i. Time is of the essence: is a material breach; breaching party may not be able to

enforce in equity; non-breaching party has to be ready, willing and able to perform; how do we know if party has performed within time frame?

ii. Financing and the contract: what if you don’t have the number of years or the% rate in the contract? Is this a material part of the contract? Whose

responsibility is it to make sure blanks in contract are filled in? Seller becauseshe is going to be the one wanting to enforce them. What happens if the blank is left blank? Buyer should be responsible for getting this blank filled n(mutual mistake or unilateral mistake)

5. Title to be Conveyeda. Fla. Stat. 689.01, .02, .03 and 695 (read) b. Marketable Title: ability to freely sell your title to property whether buyer is free of

doubt of what she is buying



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i. Definition (77): a marketable title is one which is free from liens or encumbrances; one which discloses no serious defects and is dependent for itsvalidity upon no doubtful questions of law or fact; one which will not exposethe purchaser to hazard of litigation or embarrass him in the peaceful enjoymentof the land; one which a reasonably well-informed person, acting upon business

principles and with full knowledge of the facts and their legal significance,would be willing to accept with the assurance that he, in turn, could sell or mortgage the property at its fair value.

ii. Assurance of marketable title: Lawyer’s opinion letter Title insurance (most common) title search, then binder that goes through chain

of title with encumbrances Warranty within deed (Fla. Stat. 589.02(1)) Buyer looks at record herself

iii. Title insurance: Hires layer to protect your property so you can keep property in event of dispute

Compensate for loss in value When title insurance issued, they call it insurable title/not martketable title bccould have title defect that title insurer still insures

c. Issue: Whether a buyer of real estate may be justified in refusing to complete the purchase bc she is dissatisfied with the quality of the title the seller proposes toconvey.

d. Haisfield v. Lapei. Lapes (seller); Haisfeld (buyer): sellers divide parcel in 2; sell first plot with sight

easement. Second buyers, Haisfeld’s can’t build what they want bc of easment;they claim no marketable title and want their $ back —gave 60 days’ notice tocure. Lapes say defect not materially adverse, so they want to keep $. TCfound for sellers, buyers breached by not closing; sellers got deposite, buyersappeal.

ii. Issue: whether a line of sight or view easement renders title to the property atissue unmarketable, thereby justifying the buyer’s refusal to close thetransaction.

iii. Contract: title must be ―free from all encumbrances, but subject to restrictivecovenants of record which do not materially and adversely affect the use of the property for residential purposes or render the title unmarketable‖

iv. COA: title is unmarketable bc: Restrictive covenant is material; title is unmarketable Amount of encumbrance is not definite Acts as a building restriction Not an open, visible, physical encumbrance But subject to such restrictive covenants ―which do not materially and adversely

affect the use of the property for residential purposes or render the titleunmarketable‖ (pg. 75) buyer’s use, so it is buyer’s perspective of materially and adversely affecting

―The line of sight easement in this case it clearly an encumbrance upon the property restricting its use in such a manner as to render the title



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unmarketable. The existence of the easement is not an open, visible, physical encumbrance of the property that might have been considered inthe establishment of the purchase price. The existence of a restrictivecovenant that renders title to the property unmarketable is not exceptedunder the provisions of P 14 of the purchase agreement.

e. Implied Covenant of Marketable Titlei. Even when it doesn’t expressly provide for marketable title in the contract, every

K has a implied covenant of marketable titleii. Some Ks ask for ―insurable title‖ iii. Some Ks for ―marketable and insurable‖

f. Defects that Make Title Unmarketablei. Encumbrances: something that impacts use, possession of property — not the same

as a general covenant (leases, covenants, mineral reservations, mortgages,easements and liens) are usually considered to be title matters. If K doesn'texpressly provide that the buyer will take the property subject to them, theyviolate marketable title. If buyer is aware of the encumbrance and K doesn’t

expressly provide that the buyer will take the property with the encumbrance,then some court may still allow buyer to get out of K bc of unmarketable title.ii. Visible or Beneficial Encumbrances: some cts hold that an easement does not

make the title unmarketable if it is obviously visible and is beneficial to theland; a power line easement along the back of a property line is a typicalexample.

iii. Access: A complete lack of access to a public road has usually been held tomake the title unmarketable

iv. Encroachments: something built by neighbor on property is usually held toaffect mkt of title (or if building is on neighbor’s property) bc of threat of litigation

v. Adverse Possession: if seller’s title is based exclusively on adverse possession,then usually thought nor to be marketable bc may need lawsuit to determineownership

vi. Ordinance violations: regulatory prohibition on construction of bldg was a titleencumbrance. Sometimes existing structures which violate zooming or other ordinances would be sufficient to make title unmarketable

vii. Hazardous waste: physical conditions by themselves have no title implications, but some states require disclosure and some states have lien/superlien that can be imposed on the property to reimburse govt for cleanup

viii. Existing adverse possessorsix. Risk of litigation: HOA, CDDs — does lawsuit threaten to impact marketability of

title?x. General Factors of Defects making title unmarketable:

Violation of covenants Title links not of record Unreasonable risk of litigation

xi. Notice to Vendor or title defects: buyer must examine title before closing. If defect, she must notify the seller and give fair opportunity to cure, unlessincurable.



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xii. Title has to be marketable at closingxiii. Merger of title covenants: if the purchaser has some objection to the title on the

basis of the implied covenant of marketable title, she must raise it prior toaccepting delivery of the deed (only remedy for breach of most of the deedcovenants is damages).

g. In FLORIDA, we don’t have to guess what marketable title is, we have UniformTitle Standards: Standard 00: the attorney should construe questions in favor of

marketability.(also 30 year rule)h. Adams-Onis Treaty of 1819 (1821): When Florida was given to the US, except

Spanish Land grants and English land grants: to determine marketable title, wedo back to this treaty and find all the deeds since then (if you want to cross allof your ts, otherwise, use the 30 year presumption in UTS)

i. Type of Deed to be Delivered: ―no good deed goes unrecorded‖ i. General warranty deed: Fla Stat 689 ―granted, bargained and sold‖ this propery to

buyer ii. Special warranty deed: warrants everything except a few special things or may

limit warranty to thing that happened during ownershipiii. Quitclaim deed ―I remise, release, and quitclaim my deed to this property‖

6. Equitable Conversiona. Doctrine holds that ―equitable‖ title passes to the purchaser as soon as an

enforceable contract to sell land is formed, even though it is clear that the―legal‖ title will remain with the seller until the closing and delivery of a deed.

b. Questions which EC is used to resolve: i. Characterization issues: during the executory period should we characterize a

given party as owning a REAL property or a PERSONAL property interest. Ex:a party to the K dies, leaving a will that gives her real estate to A, but personal property to B.

ii. Risk issues: during the executory period, something occurs that jeopardizes the property’s value or usefulness.

c. Fulton v. Duroi. Seller has legal title, buyer has equitable title. Fulton and Duro had prior

squabble; Fulton has judgment against Duro; Duro living on property, hadequitable title; Fulton said I have lien on property and sheriff sold property;Samuelson bought it from Duro before sheriff sale and said Duro sold meequitable title before sheriff sale. COA says sheriff sole under judgment lien — important that judgment lien recorded before, when Sam goe equitable title hadFulton lien on it.

ii. Whether recording a judgment imposes a lien on a judgment debtor’s interest in

land which he is purchasing under an executory contract. iii. Facts: Fulton had a judgment against Duro.iv. Hold: a judgment debtor cannot divest his land of a judgment lien or lien made

by sheriff’s sale by transferring the title to another person. BC Hulton has avalid judgment lien against Duro’s interest in the real property before Duroassigned that interest to Samuelson, Sam took Duro’s interest subject toFulton’s judgment lien.

d. Equitable conversion usually applied to:



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i. K for sale in Fulton was a long-term installment sale contract and Earnest moneycontract (short K)

ii. Conversion on allies if there is a contract that equity would specifically enforce iii. Sometimes no conversion if the title is unmarketable as of the date at issue. A

few courts have held there is no conversion until all conditions precedent in to

the transfer of legal title have been fulfilled. e. It is widely accepted that the purchaser’s equitable interest is in real property andtherefore subject to judgment liens.

f. Death of contracting party: If a court concludes that conversion has occurred at thetime of the vendor’s death, the vendor’s interest descends as personal property.If it is the purchaser who dies, her interest descends as realty.

g. Rick of losses: losses equitable conversion imposes on purchaser: i. Physical: Fire, flood, wind, or other physical damage ii. Legal Changes:

zoning change (contract will not be enforced if zoning change has made propertyunusable for purchaser’s intended purpose).

Building code change:

Eminent domain action h. EXAM REVIEW:

i. Marketable title: objective in definition but when it comes to buyer subjective (byapplication)

ii. Note 2 pg 79 important! iii. Uniform Title Standards iv. Contract requires seller to convey marketable title v. 689.02 warranty deed form vi. title insurance vii. Example Contract E: Ingress and Regress – have to be able to get to property viii. Example Contract A: Title Insurace

ix. Deed has to be in English x. Equitable Conversion: Fulton v. Duro: seller had personal property interest; buyer

had real property interest 7. Introduction to Mortgage Financing

a. fixed rate; ARM; reverse mortgage; balloon mortgage; wrap-around mortgage b. borrowers sign note; buyer who owns property sign mortgage (can be different

people, but most likely same c. Shrader v. Benton (Due-on-Sale Clause)

i. Benton gives Shrader mortgage as wraparound contingent on bank’s approval.Bank didn’t approve wrap around, but did offer alternative. TC gives

alternative: 1. Buyer pay price in case; 2. Buyer assume seller’s mortgage, So, buyer gets deposit back. COA held TC abused its discretion when is gave the buyers the second alternative bc sellers are entitles to full benefit of their bargain.

d. Foreclosurei. Borrower has to own propertyii. Buyer needs to sign mortgage/noteiii. Borrower doesn’t pay (default, whatever it may be)



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iv. Mortgagee sends demand letter (advises of default)v. Mortgagee sends acceleration letter (request all $)vi. Mortgagee files foreclosure lawsuit

Last day to pay before we sell your property on courthouse steps; no right of redemption after that date (rt of redemption = pay what’s owed and save

property from foreclosure)vii. Final judgment of foreclosureviii. Notice of foreclosure saleix. Foreclosure salex. Purchasing at salexi. Certificate of titlexii. Distribution of cash sale proceedsxiii. Termination of right of redemption

8. Conditions in Contractsa. Covenant = promise one who enters into it is obligated to perform nad one who doe

not do so may be subject to a suit for breach, with such remedies as damages,

specific performance, and rescission potentially available to the non-breaching party b. Condition is not a promise, it is merely a statement that a party’s obligation to

perform some covenant is dependent upon the happening of some event or occurrence. Conditions may involve events which no one promises will occur,and which are entirely outside the control of the parties. (most commonarrangement of financing to permit the purchase)(also purchaser’s sale of other real estate, the successful procurement of a zoning change, satisfactorycompleting of certain physical tests, obtaining of an easement to benefit theland

c. Barber v. Jacobs

i. B wanted to move in before school starts; made offer, requested inspection bcwanted to put in tennis cts; K had financing contingency clause — B had r make

prompt application and pursue with diligence; Bank approved the loan, butdidn’t give interest rate and hadn’t sent approval letter; B had wetlandimspection-discrepancy between maps/wetland; B’s attorney also representedthe bank; buyers atty tells bank and bank withdraws from loan; buyer doesn’tgo to another bank bc of wetlands issue. COA holds buyers efforts reasonableand should get deposit back.

ii. If conditions not met, then K void, buyer gets deposit back. III. DEEDS AND TITLES

1. Deeds

a. Deed transfers legal title. While deeds are most common way to transfer title, canalso transfer by wills, intestate succession, and by court decrees and legislativeacts. Adverse possession and death of joint tenant have same effect as transferringdeed, although not transferred by deed specifically.

b. Deed uses some or all of the verbs: grant, bargain, sell, convey. Deed must be inwriting, signed by the party bound thereby, and acknowledged by the party beforetwo people and notarized.

c. Elements of a deed:



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i. Grantor’s name and signature ii. Grantee’s name and an indication of the manner in which they are taking title

iii. Recitation of consideration (not necessary, but still found in almost every USdeed

iv. Description of the real estate

v.

Statement of exclusions vi. Language envincing an intent ot make a conveyance ―words of grant‖ vii. The date

viii. Notary public’s cer tificate of acknowledgment ix. Stamp of recorder, indicating that deed has been recorded (doesn’t have to be

recorded, but can lead to problems if not) x. SOMETIMES you have exceptions and reservations in deed:

1. Exception: is a holding back of some previously existing interest (except thesouth 50 feet)

2. Reservation creates and leaves the grantor with a newly formed interest in theland (life estate)

xi. Warranties can be either present or future: 1. present warranties are the vendor’s representations about the title at the time

of the closing — there are 3 of them: a. warranty of seisin: a warranty that the vendor owns the estate conveyed b. warranty of the right to convey: a warranty that the vendor has the right to

sell or convey the estate c. warranty against encumbrances: a warranty that no interest held by a third

party limits or qualifies the estate being conveyed. Examples of encumbrances are easements, running covenants, profits, divestingconditions, concurrent tenancy rights, marital interests, leases, mortgages,or other liens. Violation of zoning or land use ordinance is not anencumbrance.

d. Warranty deed or general warranty deed: vendor warrants that neither she nor anyof her predecessors have encumbered the estate.

e. Special warranty deed: contains a statement by the vendor that the estatetransferred is not otherwise than as stated in the granting clause and the premises because she herself has not encumbered the estate.

f. Quitclaim deed: transfers ―as is‖ in which the transferor in effect says ―I’m notsure what I have, but whatever it is, I give it to the transferee.‖

g. Chase Federal Savings and Loan Association v. Schreiber (131) i. Deed is not a contract, so don’t need consideration for transfer of a deed. BUT,

if there is consideration, it should be GOOD and VALUABLE. There can becontractual terms in a deed.

ii. Ross (old lady) conveys land to Peter C uses standard form, pays $10 inconsideration, main consideration is love. PC not related to Ross; PC then sellsto Perez for 50k. Ross sues PC on theory of no consideration. TC says noconsideration is necessary, do deed is good, can’t give title back, but does giveRoss 50k as ill-gotten gain.

iii. 689.09: statute of uses: right to receive money is not interest in real property(legal title)



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2. Land Descriptionsa. How do we know which property is being conveyed by a deed? Suveyors

and legal descriptions b. Test in Florida: can surveyor locate piece of property with certainty c. Free survey system (old): no predetermined monumentation is used (post,

tree, creek) d. Modern system: use base line and meridian lines; mark each of the corners(with trees or rocks) didn’t have iron stake in ground like they do today.Some lines jag because of curvature of the earth, mountains, etc)

i. Township should be 36 sq miles, contains 36 1 sq mile sections of 640 acres each. Area of township = 23040 acres.

ii. Spanish land grants are removed from this type of survey iii. Land Act of 1805 gave rules of survey, how boundaries and contents

of public lands ascertained; doesn’t matter if survey is off, whatsurvey says is what is right. ―It is what it is‖

iv. Adams-Onis treaty — US buys Florida from Spain 1819-1821

(Spanish land grants existed before 1818) v. All surveys start in Tallahassee on meridian —that is 0’0’. vi. For legal description start at corner of a section and measure from

there 3. Delivery and Escrows

a. Delivery makes the deed operative and it is often litigated. A deed whichhas not been delivered is said to be entirely void.

b. A Valid delivery requires the coincident presence of two facts: an INTENT by the grantor to pass title immediately, and some act or behavior on thegrantor’s part to evidence that intent. Occasionally a count may say that noact at all is necessary if the intent is sufficiently clear. Can be recording.

Acceptance is good proof of delivery. c. Martinez v. Martinez: Issue: intent of parties to make delivery: Mom andDad own, want to give to son and DIL, give deed to kids to take to bank tohold, but instead the kids record the deed. But, court says no valid delivery bc no intent on parents part to pass title immediately.

i. Recording is rebuttable presumption of delivery, but protect BFP.But, even if deed is never recorded, delivery can still be complete.

ii. Void=didn’t happen. Voidable=could be undone. Things are voidwhen fraud in inducement (forgery)=didn’t happen. Things arevoidable when fraud in the factum (like Martinez)=undo.

iii. Rule: If deed signed, then you find out there were shenanigans,

voidable; if grantor never signed deed (fraudulent signing), thenvoid.

d. Wiggill v. Cheney: Mom signed deed over to daughter; put in safe deposit box that was in Mom’s and Wiggle’s name, but only she had key. Mominstructed Wiggles to hand envelope with deed in it over to daughter whenshe died. He did it, but court says no delivery. Ct says she had intent, butdidn’t have the act—didn’t dispose herself of the title before she died.



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e. Can put deed in ―death escrow‖. Give deed to someone else before die withinstructions that when I die, give to x. This works because grantor relinquished control. Grantor can’t reserve right to revoke deed.

f. If make changes to deed after signed, the alteration is void, not the deeditself.

4. Warranties of Qualitya. Now, we are back to disclosure: b. There are latent (Less obvious) and patent (pretty obvious) defects in the

property c. Latent: dairy water contamination d. Patent: peacocks (and may be particular to one person, so may not be a

defect) e. Slash: f. Madonna: defect to building; Madonna dancing wouldn’t be defect in

building if you can’t hear her (affects habitability) — old construction — whenever someone makes a noise I hear it. Is problem a neighbor (so

temporary) or inherent in design g. Are you misrepresenting? Hiding defects? Not disclosing? h. House on landfill — latent defect in property (sometimes personal

knowledge may cure defect) i. Hurricane tree on house — may not be a latent defect if fixed properly. Look

at amount of time passed since fixed — any problems like mold j. But, if your property floods every time there is a big storm, then defect you

may need to disclose, especially bc of mold. k. Superfund site — close to contamination — need to disclose, but at what point

does it become public knowledge (when it’s on national news?)— what if buyer is local/not local?

l.

Chinese drywall — defect is latent, depending on the phase — if it smells ismay be patent m. LACK OF ACCESS is NOT defect on land, it may be defect of marketable

title n. Stambovsky v. Ackley: NY slicker buys ―haunted‖ house. The seller

facilitated that reputation, but buyer had no idea. When buyer finds out, hewants to rescind contract. Haunted is latent defect, patent if buyer hearsghosts. ―As a matter of law the house is haunted‖. In this case, bc of prior representations, the house is haunted and you need to disclose.

i. Seller must disclose: 1. Not readily observable

2.

Seller knows about o. Questions to ask i. Is there a defect? (something that materially affects the value)

ii. Is it latent (can be sued for)/patent (can’t be sued for bc subject toinspection)?

iii. Did the seller know or not? iv. What did the buyer know?

1. Should the buyer be estopped (seller defense)?



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v. Seller/Builder? p. Speight v. Walters Development Co, Ltd. Speight (3rd owner) sued

builders — implied warranty of workmanlike construction. No contractual privity. Issue: whether the Speight’s, as remote purchasers, could pursue aclaim for implied warranty of workmanlike construction. Hold: IWOWC

can be brought by subsequent purchaser q. Implied Warranty of Worklmanlike Construction is a judicially createddoctrine implemented to protect an innocent homebuyer by holding theexperienced builder accountable for the quality of construction.

r. Statute of Limitations on IWOWC: 4 years; statue of repose 12 years s. Implied warranty of habitability in tort sue the seller t. BUT economic loss rule: If there is contract breach, can't sue in tort. If you

have a contract, you have the ability to negotiate a remedy, so can’t sue intort unless there is a statute. For instance, bc of Florida stat 95.11(4) cansue in negligence and breach of contract against contractor

u. *****Bessett v. Basnett***** (What is the seller’s duty to disclose?):

sellers misrepresented size, amt of revenue lodge brings in, rook,availability of additional land. A person guilty of intentional fraudulentmisrepresentation should not be permitted to hide behind the doctrine of caveat emptor (buyer beware).

i. The recipient of a fraudulent misrepresentation of fact is justified inrelying on its truth, although he might have ascertained the falsity of the representation had he made an investigation. However, if a merecursory glance would have disclosed the falsity of therepresentation, its falsity is regarded as obvious, then buyer can’twin

ii. A person guilty of fraud should not be permitted to use the law ashis shield. Nor should the law encourage negligence. However,when the choice is between the two — fraud and negligence,negligence is less objectionable than fraud.

iii. We hold a recipient may rely on the truth of a representation, eventhough its falsity could have been ascertained had he made aninvestigation, unless he knows the representation to be false or itsfalsity is obvious to him.

v. *****Johnson v. Davis***** Seller knew of problems with roof and didnot disclose to buyer. When buyer asked, seller fraudulentlymisrepresented. Sellers knew of and failed to disclose that there had been problems with the roof. The seller’s fraudulent concealment entitles the buyer to return of its deposit. Seller now has obligation to disclose materialfacts. Hold: where the seller knows of facts materially affecting the valueof the property, which are not readily observable and are not known to the buyer, the seller is under a duty to disclose. Duty is equally applicable tonew/used property. Relief from fraudulent misrepresentation may begranted only when the following elements are present:

i. false statement of material fact ii. represents knowledge that the representation is false



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iii. intention that the representation induce another to act iv. consequent injury

w. *****Gilchrist Timber Co. v. Rayonier****** NEGLIGENTMISREPRESENTATION and NOT RESIDENTIAL. Purchaser of tract of timberland brought action against vendor, alleging that vendor had made

negligent misrepresentation regarding zoning restrictions on tract. FlaSCtheld: (1) one who negligently supplies false information for guidance of others in transaction in which he has pecuniary interest is subject to liabilityunder theory of negligent misrepresentation for loss caused by the other party’s justifiable reliance on the information and (2) statutory comparativefault apply to actions involving negligent misrepresentation. (notresidential, so Johnson doesn't apply). The party who negligentlytransmitted the false information may be held liable when the recipient isable to establish a negligent misrepresentation cause of action as set forthin the Rstmt. We also conclude the doctrine of comparative negligenceapplies to an action for negligent misrepresentation.

x.

Schottenstein v. Azam Homeowners sued for fraud in the inducement,rescission and negligence alleging that developer falsely represented that anewarby parcel of land was permanent ―natural preserve‖ when developer knew that county had plans to build a school. Question of whether a causeof action for fraudulent misrepresentation exists where the putativelymisrepresented info is contained in public record is one of fact and shouldnot be resolved through a motion to dismiss. FlSCt held that purchasersstated a cause of action for fraudulent misrepresentation. (Johnson v. Davisapplies)

5. Title Covenants in Deedsa. Title assurance: the set of mechanisms which buyers of land use to (1) learn

whether their sellers have and can convey the quality of title they claim and(2) obtain recovery f the title, after the transfer, turns out not to be asrepresented.

i. The first of the mechanisms is the deed covenant/warranty in deed: astatement in (or a legal inference from) the deed itself which givesthe grantee rights against the grantor if the title is not as promised.

ii. There are tother mechanisms discussed in the next sections: therecording system, the Torrens or title registration system, checking public records yourself, lawyer’s opinion, and title insurance.

b. Warranty in Deed: Covenants start running on date of closing or when youshould have known. If use warranty deed, has full common law covenants:

i.

Present: 1. Seisin: owner of property is only one that can transfer ownership

2. right to convey: grantor has right to convey (can’t whenowner is crazy and can’t formulate intent to deliver)

3. covenant against encumbrances: nothing encumbering exceptwhat buyer has agreed to assume (mortgages, tax liens, HOAliens, etc...)



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ii. Future Covenants1. Covenant of Warranty: seller will defend title2. Covenant of Quiet Enjoyment: right to possess and use as

your own promise by the grantor to compensate the granteefor the loss if the title turns out to be defective or subject to

an encumbrance and the grantee thereby suffers eviction3. Covenant of Further Assurances: promise by grantor toexecute such further documents as may be necessary to perfect the grantee’s title.

c. Brown v. Lober: Plaintiff buys house in 57, 15 years later tried to sellmineral right, but found out then that only owned 1/3 mineral rights bcoriginal seller kept 2/3 mineral rights. Misrepresentation about status of title. Buyer thought they had 100%. Seller didn’t tell about 2/3 interest.2/3 interest was a matter of public record. Plaintiff tried to sue seller on

i. covenant of seisin, but loss bc of SOL. SOL: buyer buys withoutseller lawyer-didn't find the public record reservation — did seller

breach seisin when had already recorded the reservation? Probablynot.ii. breach of covenant of quiet enjoyment, but lost bc not yet an

eviction.iii. Things to think about? Do we really have a loss? Yes; Can we

apply the affirmative defense of comparative negligence? Maybe if follow Gilchrist Timber and find that it was negligentmisrepresentation instead of intentional. If intentional, then Basnettholds, when intentional and negligent, then intentional wind. Whatabout damages? Dimunition in value measured the date of contractor the date of deed?; pay costs to cure; pay to litigate issue or buythe right back from cola company.

6. Title Assurance Methodsa. Proof of title b. Recording

i. 3 systems of public recorder index 1. tract: for each tract of land, all conveyances on one page,

problem — what happens to large tract that gets smaller andsmaller

2. grantor-grantee index: to/from alpha by year —doesn’t matter property or value

3. Torrens (doesn’t really exist for us)

ii.

695.01(1): Conveyances to be recorded: no conveyance shall begood against creditors or subsequent purchasers for a valuableconsideration without notice, unless it is recorded.

1. Notice: actual notice; implied actual notice (doesn’t allowwillful blindness; constructive notice, it’s recorded, so youare deemed to know)

iii. 695.01 buyer takes priority when: 1. didn't know of competing interest



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2. pd valuable consideration 3. didn’t have notice (BFP)

iv. Florida is a Notice statute state: if you have notice, you won’t win.In order to have superior title, you can’t have notice.

v. Don't forget matters that aren't of record that might affect title:

1.

Ecretion, wholesale land grant under Swamp and OverfillAct, water boundaries) 2. Adverse possession: have lawful right to be in possession

and have been in possession for last 7 years (can’t have in asubdivision)

3. Boundary by agreement: agree where fence goes up; realizeit’s not right, fence stays for 7 years, now one lotreduced/one lot bigger

4. Boundary by acquiescence: uncertain of common boundary,don’t reach an agreement; one neighbor puts up fence onother’s property. Other says get fence off, but other says no.

Goes on for 7 years 5. Recorded even if clerk makes a mistake — when clerk screwsit up, as long as it's ―recorded‖, it is recorded, even if it is not properly indexed. Sue clerk for negligence.

c. Marketable Record Title Act: statute that tells you have far back you needto search the records – cuts off certain old rights in land after the passage of a certain period of time (in Florida 30 years)

d. Wild deed: deed is not in grantor chain ex: if you make a deal with neighbor about pence and you get quitclaim deed from neighbor to show no interest, but it’s wild bc neighbor never owned that part.

7. Different Forms of Property Ownership

a.

Tenants in Commoni. Two or more people, each person has undivided interest in part of property (owns % of property); presumed 50/50, but can be prescribed. Has tight to use 100% of property, but only has a percentage ownership. When one jt dies, goes to her estate.

b. Joint Tenants with Right of Survivorshipi. 2 people acquire property together; creates a single interest; when

first person dies, other person gets it. If one joint tenant sells, seversright of survivorship and owners become TIC.

c. Tenants by the Entiretyi. Husband and wife — married people acquire title at same time. Like

JTROS as fas as survivorship. Pre-divorce, wife can convey to huband vice versa, then no longer TBE. If get divorce, becomes TIC50/50. These are non-record transfers!

8. Title Insurancea. Title Insurance company takes risk that there will not be a claim on property

insuring buyer has insurable title. b. Three types of forms

i. Title insurance commitment



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ii. Owner’s title insurance policy (issued in amt of purchase price or byappraisal)

iii. Lenders title insurance policy: paid for by buyer, tend to be morecomprehensive, assignable

c. Title insurer can pay or litigate when there is a claim. If title defect

becomes known, they must ―diligently pursue the claim‖ i. Title insurance company pays lawyer — lawyer really represents theinsured, lawyer can’t tell title ins co what’s going on.

ii. If title insurance co doesn’t win, then ins co pays insured thediminution in value,

iii. Owner/lender must cooperate with insurance co and insured needs tofess up with actual knowledge at the time of purchase.

9. Settlementa. RESPA: supposed to standardize closings across the country) consumer

protection statute, first passed in 1974. Regulates mortgagesi. Purpose:

1. To help consumers become better shoppers for settlementservices2. To eliminate kickbacks and referrals that unnecessarily

increase the costs of certain settlement services.ii. Applies to:

1. 1-4 residential property2. certain disclosures

a. prohibit anyone from referring services to closing b. prohibits people from requiring buyers to have to buy

title insurance and says can buy title insurance fromwhomever buyer pleases.

3.

Certain info about time of loan appa. Info booklet b. Lender has to tell you the charges for closing before

the closingc. Mortgage services disclosure statement — have to

disclose if they are going to sell it or keep it4. Affiliated business arrangement AFBA5. HUD1 Settlement Statement: closing statement has to be

standardized. b. What happens at closing?

i. Ownership changes

ii.

Mortgage obligation is finalizediii. Sellers and 3rd parties get paid (realtor, lender, surveyor, lawyer)iv. Title insurance requirements are met

c. Post-closingi. Overnight loan package to lender

ii. Record docs (deed, mortgage, affidavits, trust docs, poa, satisfactionof judgment)

iii. Pay 3rd party expenses (pay off seller’s mortgage)



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iv. Update title search to include recorded deed and mortgage (andcheck it’s recorded) and then issue title insurance policies

v. Verify satisfaction of mortgages paid at closingvi. Send seller’s 1099-S form to IRS

IV. THE USE OF MORTGAGE SUBSTITUTES

1. The Use of Mortgage Substitutes a. Right of Redemption: The debtor or mortgagor cannot, in the inceptin of the

instrument, as a part of or collateral to its execution, in any way deprivehimself of his equitable right to come in after a default in paying the money atthe stipulated time, and to pay the debt and interest and thereby to redeem theland from the encumbrance of the mortgage; the equitable right of redemption,after a default is preserved, remains in full force, and will be protected andenforced by a court of equity, no matter what stipulations the parties may havemade in the original transaction purporting to cut off this right.

b. By a parity of reasoning, an agreement allowing the mortgagee to keep any part of the mortgaged property, redemption being limited to the balance, fails. Nor is

the mortgagee allowed at the time of the loan to enter into an option or contractfor the purchase of the mortgaged property.

c. In Florida, we have judicial foreclosure (strict foreclosure) and the right of redemption stops at foreclosure sale unless judgment gives a different date(usually before sale). It is a statutory right of redemption — the equitable rightis limited by statute.

d. Perry v. Queen: the plaintiff was the owner of a property with a 2nd mortgage. Te2nd mortgage was delinquent and a foreclosure was imminent. P got letter inthe mail, saying, call us, we’ll save you. P got 11k, D got deed/title. P wasthen renting house with option to ―repurchase‖ after a year f or $. P still livingin the house. Value of the house is 94k/68k equity. P doesn’t repurchase, D

tries to kick out. P argues mortgage loan agreement and acting as security for loan. Court recharacterizes deed as mortgage. Uses factors to get to thatcharcterization. (parol evidence it admissible in these cases): Factors:

i. P was not well-educated;ii. there was a relatively low amt of consideration pd for the warranty deed;iii. P retained physical possession;iv. P did not have access to legal advice at the time the deal was executed.

e. The absolute deed intended as security: i. Parol evidence is admissible to estb that a deed purporting to be an absolute

conveyance of real estate was intended to serve as security for an obligation,and should therefore be deemed a mortgage.

ii. Intent must be proven by clear and convincing evidence. Such intent may beinferred from the totality of the circumstances, including the following factors:

Statements of the parties Presence of a substantial disparity between the value received by the grantor and

the fair market value of the property The fact that grantor continued to pay real estate taxes The fact that grantor made post-conveyance improvements to the real estate The nature of the parties and their relationship prior to and after the conveyance.



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f. Downs v. Ziegler P wants to foreclose. D is a construction guy with 30k debt andcan’t pay. Banker calles his brother (a Dr) and gets 3 doctors to help guy out.He gives drs title, they give him 30k. P can repay 30k with a fee (conditionalrepurchase agreement). D didn’t repay— bank foreclosed, but not enough to pay mortgage. Bank wants deficiency payment against owner. Drs are owners

of property as per deed, but drs say no, we aren’t ―real‖ owners the deed wasreally a mortgage. Drs show that even though there is a deed, it’s really amortgage. Drs won, banker/bro lost. D lost property to foreclosure, but bank couldn’t pursue deficiency against drs bc deed really a mortgage.

2. The Installment Land Contract a. When a vendee under an installment land contract defaults, the vendor, under

traditional remedies, amy sue (1) for the installments which are due withinterest thereon (2) for specific performance of the contract (3) for damages (4)to foreclose his vendee’s rights (5) to quiet title (6) or he may rescind thecontract.

b. Most vendors rely on the forfeiture clause which is contained in virtually every

installment land contract. The clause typically will provide that ―time is of theessence‖ adnd that when a vendee defaults under the contract, the vendor hasthe option to declare the contract terminated, to retake possession of the premises, and to retain all payments nder the contract as liquidated damages.

Vendors view as pro-vendor c. Russell v. Richards: long term land contract. Buyer didn't make required

payments; right of lender in New Mexico to repossess, terminate instantly, no process. Buyer raises defenses: exceptions to statute, look at all the goodthings I’ve done; CT held buyer responsible for term of K and forfeit rights at point of default. Russell’s loss of her interest under the contract did not resultfrom a wrong committed by the Richardses, but from her default under the real

estate contract for failure to make a timely payment. The usual consequence of default, as clearly stated in the contract assumed by Russell, is forfeiture of allinterests; only unusual equitable circumstances create an exception to that rule.

d. Peterson v. Hartell: Grandma has 160 acres, sells granddaughter 6 acres at$50/month, when finished paying, get deed. GD made 58of first 65 payments.GD stopped paying, GM collected payments after past default and never went back, but for 21/2 years totally stopped paying; GD sent GM $250 to restart payments. GM sent back and said no thank you, K terminated. No remediesin K. GM does nothing to terminate K. Ct says GD can give full performanceor GD can get restitution for value seller got for payments and property.

i. Issue: If buyer intentionally defaults, does buyer still get remedy? GM has

security interest (like mortgage); GD should be given opp to pay (reas amt of time) or if can’t pay, should get restitution of excess. e. Sebastien v. Floyd: (most like Florida): issue: whether a clause in an installment

land sale contract providing for forfeiture of the buyer’s payments upon the buyer’s default may be enforced by the seller. Buyer had installment K of 11k at 8.5%; paid $5,400 (40% of purchase price). Ct holds forfeiture cannot beenforced. When a typical installment contract is used as the means of financing the purchase of property, legal title to the property remains in the



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seller until the buyer has paid the entire contract price or some agreed-upon portion thereof, at which time, the seller tenders a deed to the buyer. However,equitable title passes to the buyer when the contract is entered. The seller holds nothing but bare legal title as security for the payment of the purchase prce. Land sales contracts are treated just like conventional mortgages.

IV. Other stuff 1. Riparian Rights and Water Front Property

a. Who owns what? What rights do I have to use the water? What are the regulatoryrestrictions? What are the non-record transactions that affect the water on my property?

b. Not all Waterbodies are Public. We generally think in terms of all waterbodies

being publicly owned. While that is generally the case, it is not always so.

You get privately owned waterbodies in three ways: i. Because the state has already sold them or somehow relinquished its

interest.

ii. Because the waterbody is too small to be “navigable” which unfortunat ely is

a standard that changes depending on the political moods in Tallahassee,or

iii. Because the waterbody was created after Statehood. These are generallyartificial, but could also include waterbodies created by sinkholes.

If a waterbody is privately owned, we must be able to explain to our clients, what rights (if any) they may have to use that waterbody.

c. The Boundary is Legally Defined. The Boundary between public and privateownership on a waterbody is legally defined as either the Ordinary High

Water Line (if non-tidal) or the Mean High Water Line (if Tidal). Those aredefined as

i. The Ordinary High Water Line (OHWL) “as a line between a riparian owner

and the public is to be determined by examining the bed and the banks andascertaining where the presence and action of the water are so common

and usual and so long continued in all ordinary years as to mark upon thesoil of the bed a character distinct from that of the banks in respect to

vegetation, as well as to the nature of the soil itself. High water mark means what its language imports, -- a water mark. It is coordinate with the

limit of the bed of the water, and that only is to be considered the bedwhich the water occupies sufficiently long and continuously to wrest it

from vegetation and to dest roy its value for agricultural purposes.” Tilden

v. Smith , 94 Fla. 502, 113 So. 708, 712 (1927).

ii. Mean High Water is generally the boundary between public and privateownership on tidally influenced waters. It is computed very differently asthe average a height of the high waters over a 19 year period. Fla. Stat.

§177.27 (14).

d. Waterfront Boundaries Move. The boundary along water frontage is

ambulatory. It Moves from time to time and therefore can never bepinned down to a specific point in a survey. This becomes a key point

later in our discussions because it affects the way in which a waterfront



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property must be described. Each move the boundary between public andprivate ownership EXCEPT AVULSIVE!

i. Accretion -- the gradual building up of the land;

ii. Erosion -- the gradual washing away of the land;

iii. Reliction – the gradual lowering of the water to expose the land and other

gradual and imperceptible changesiv. Avulsive – sudden, perceptible changes or artificial changes -- do not change

the boundary between public and private ownership. Examples of thiswould be a hurricane cutting a new pass, or changing the route of a river,

or any change in the waterfront involving heavy equipment.

e. Owner Has Certain Rights in the Waterbody. There are two types of rights to

waterfront property, and although technically different, they are so similar

that they are referred to almost interchangeably -- Riparian And Littoral

Rights. They only apply when the state owns the waterbody, althoughsimilar rights have been found in shared private waterbodies.

f. Riparian vs. Littoral. Riparian rights attach to lands fronting on a river or

stream; littoral rights are those appurtenant to lands fronting on an ocean,sea, or lake.

g. Vested Common Law Rights. Riparian and littoral rights are common lawrights and, for constitutional purposes, they constitute “property.”

h. Include Use Rights. Riparian and littoral property rights consist not only of theright to use the water shared by the public, but include the following

vested rights: (1) the right of access to the water, including the right tohave the property's contact with the water remain intact; (2) the right to

use the water for navigational purposes; (3) the right to an unobstructedview of the water; and (4) the right to receive accretions and relictions tothe property. (but see Stop the Beach Renourishment)

i. Can’t be Statutorily Modified. Because riparian and littoral rights are commonlaw creations that vested in the upland owner long before the adoption of

the statutory definition in 1953, the statutory definition cannot constitutionally modify, limit, or restrict those rights granted at common

law. State v. Florida National Properties, Inc., 338 So.2d 13 (Fla. 1976).

Nonetheless, the statutory definition is likely to be casually followed and isnot a bad restatement of the common law.

j. Governing Legal Doctrines after Coastal : After Coastal there are basically fivelegal doctrines relevant to a Sovereignty Lands determination: They are:

i. If a given waterbody was navigable on March 3, 1845 (the date of statehood),the lands under that waterbody are Sovereignty Lands and ownership

passed to the State by virtue of it becoming a state (the Equal FootingDoctrine). Note that the test is navigability when Florida became a state,

not current navigability.

ii. The dividing line between public and private ownership of lands adjacent to

state-owned waterbodies is the OHWL. The main body of Florida case lawaddressing the issue, states "[t]he ordinary high water line (OHWL) is de-

scribed as 'the point up to which the presence and action of the water is so



25

continuous as to destroy the value of the land for agricultural purposes bypreventing the growth of vegetation.'"

iii. Changes in the OHWL resulting from slow, natural processes (accretion,

reliction and erosion) change the dividing line between public and privateownership. Avulsive changes resulting from sudden or artificial changes

affecting the OHWL do not affect the boundary between state and privateownership. Thus, as the natural movement of waters build up or erode

lands along one side of a waterbody, the line of demarcation betweenpublic and private ownership adjusts to correspond to the then existing

OHWL. On the other hand, avulsive changes do not change this line of demarcation and, over time, a significant gap may develop between the

water-line and the public-private boundary.

iv. There is a rebuttable presumption that waterbodies which were meandered

in the original U.S. government surveys were "navigable" and, conversely,that unmeandered waterbodies were not. This, however, is not an absolute

rule, but may be challenged in court. The courts have not, to my

knowledge, clearly established the strength of these presumptions.v. The state does not lose title to any Sovereignty Lands through the applica-

tion of the Marketable Record Title Act, the doctrine of contemporaneousdetermination or the doctrine of legal estoppel. This was the express hold-

ing of Coastal. k. Tidal and navigable waters

i. 1845 when Florida became a state, it automatically received title to navigablewater and all tidally influenced water ―sovereign lands = lands that are under water‖ passed under ―equal footing doctrine‖— the test is where was the water in 1845. (non record transfer)

ii. Swamp and Overflow land Act: over 20 million acres of swamp and overflow

land conveyed to Florida by US Patent iii. When surveying ―meander‖ bodies of water that are navigable, i.e. draw lines

that approximate shoreline. iv. Gradual, imperceptible, natural change moves the boundary line (erosion,

accretion, reliction) v. Manmade or sudden changes don’t change boundary lines (avulsion)

l. Fresh water have different boundary tests i. Freshwater: ordinary high water line (OHWL); Tilden v. Smith ii. Mean high water boundary is mathematically certain and 177.27(14) defined as

the average height of the high waters over 19 year period m. Waterfront owner has riparian (river or stream) rights or littoral (lakes)

i. Access ii. Use iii. Unobstructed view iv. Receive accretions and relictions

n. Beach restoration: classic avulsion change (doesn't change boundary line if avulsive); establish erosion control line before restoration; fixes boundary between upland and sovereign owner



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o. Marketable Record Title Act is inapplicable to sovereign lands (have to go back to1845).

p. Review of case: farmer owns SE ¼ of a section with a lake — deed says farmer owns out into lake. Farmer farming muck from lake and selling it. State saysthey own lake and ask farmer to stop. Farmer says his land is from the Spanish

land grant, so no sovereign land. TC so the land was never deeded to the state,it’s the farmers. COA by magic of law, says Spanish govt owns navigablewaters and didn’t convey them away, so COA read in gratn and said his property always didn’t include lake.

IV. Potential exam questions: 1. If you are on Destin’s beach, are you on government or private property?

a. A: is it restored beach or non-restored beach?i. If non-restored, then on private property up to high tide line; if on restored beach,

then on public property up to the line deemed private.

RemediesLoss of Bargain Damages



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Difference between the K price and the mkt value on the date of the breachCompensatory Damages

Put injured party in as good of a position as he would have been if performancehad been rendered. Loss must be reasonably certain consequence of the breach,although the exact amount need not be certain.

Liquidated Damages Seller may retain deposit as liquidated damages

Specific Performance Even if party gets specific performance, can still get compensatory damages SP is a matter of sound judicial discretion. Cts consider if parties entered into K

freely; property has to be unique; buyer had to be ready, willing and able SP may be denied when:

It would produce unjust results; K is excessively vague; If vendor hasresold to another purchaser who had no knowledge of the prior K; If purchaser was buying land for immediate resale at a profit, thenuniqueness doesn’t fly; Both SP and other remedies may be denied if there

are K conditions which have not been fulfilled or if the P is in substantial breach; If the seller does not own all the property covered by the K, the buyer may obtain SP with an abatement of the price.

BUYER Is usually entitled to refund of dep + interest on dep + costs and expenses

incurred in connection with proposed sale + any improvements made on prop Expenses for title search, survey, attorneys’ fees, airfare to negotiate, rent

at present location, loss of particularly favorable financing (offset by anymoney saved on interest/taxes, etc buyer would have paid and any interest buyer made on money still had that would have used to buy house)

Buyer’s damages are limited to restitutionary recovery when the seller’s title isdefective but the seller has acted in good faith

Loss of bargain damages only available to the buyer when the property’s valueis higher than the contract price

When contract makes buyer’s sole remedy termination and refund of deposit,then seller’s obligations are illusory and Florida courts won’t have it.

SELLER Compensatory: carrying cost of property until resold, interest on existing

mortgage, interest income seller expected to earn on purchase price, cost of second broker’s commission, increasing tax liability as a result in law change

Liquidated damages: seller may retain the dep, Fla cts enforce up to 15% 3 elements that must be validated to enforce damages clause:

parties intended to agree in advance to the settlement of damagesthat might arise from breach

amount of liquidated damages was reasonable, bearing somerelationship to the damage which might have been sustained

actual damages may be uncertain and difficult to prove



If liquidated damages clause does not address the issue of other damages,the usual rule is that seller may seek specific performance, but not actualdamages. If the clause does discuss other damages, some cts see this as a penalty and reject.

OUTLINE_Real Estate Transactions

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