Prelim Property 2 Outline

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Transcript of Prelim Property 2 Outline

Statute of FraudsAs a general rule, on oral agreement for the sale of an interest in real property is NOT enforceable Statute of Frauds requires that a K must meet the following requirements: 1. Essential terms: essential terms, (usually the identity of the parties, the price, and the property description,) must be set forth in writing 2. Writing: the writing can be a formal contract or an informal memorandum 3. Signature: writing must be signed by the party sought to be bound a. Failure to comply w/ Statute of Frauds does NOT make the K void; it simply prevents the K from being enforced UNLESS the exceptions apply Why have statute of frauds? To make sure there is a contract, and to prevent inequity Exceptions to the Statute of Frauds Part performance o oral contract for the sale of real property may be enforced if the buyer: Takes possession; and Pays at least part of the purchase price, OR Makes improvements to the property o Courts reason that a buyer would perform these actions only if a K existed; so this conduct serves as a substitute for the writing Equitable Estoppel o Oral contract may be enforced if: 1 party acts to his detriment in reasonable reliance on another's oral promise; AND Serious injury would result if contract is not enforced Hickey v. Green Facts: orally agreed to $15000 for purchase of lot and accepted deposit check didnt fill in check. Then, repudiated and sold to another for higher price. Rule: K that does not comply w/ SoF can seek enforcement if they changed their position based on reasonable reliance on the K and continuing assent of other party Reas: did not deny the oral K, she could have enforced against , but they wouldnt have been able to enforce against her.

Marketable Title

Marketable Title: (merchantable title) a title reasonably free from doubt to its validity Basic idea is that a buyer should be able to purchase property without fear of litigations about her title o Title is unmarketable if: 1. The sellers property interest is less than the one she purports to sell 2. The sellers title is subject to an encumbrance, or; 3. There is reasonable doubt about either (1) or (2) Example: seller promises to convey a fee simple when he only has a life estate Question of marketability does not concern physical conditions on the title Most courts hold seller is not required to produce a marketable title until closing allows seller reasonable time to cure defects Generally, the existence of a private encumbrance (like an easement) clouds the title o exception: private encumbrances that are open & known to buyer at the time of contract--> ex: power lines When seller is basing ownership on adverse possession, they don't have record title. Most jx say this isn't marketable title

Lohmeyer v. Bower Facts: brought suit to rescind K to buy land after he discovered house on land violated a City Ordinance Rule: A title is doubtful and unmarketable if it exposes the party holding it to the hazard of litigation; RECORDED zoning restrictions, easements or covenants dont make title unmarketable, but if they arent recorded, they arent valid. Reas: Public ordinances and zoning are not restrictions that make a title unmarketable, They only do so when the property in question is already in violation of them. Our seller still wants a chance to comply-->sellers will generally have a reasonable amount time to fix errors Notes Insurable Title: a title which a title insurance company would be willing to insure at normal rates Record Title: the title that appears in the public land records

Equitable Conversion

Executory Period: the period between the contract signing and the closing

Equitable Conversion

1. Buyer bears the risk as the equitable owner; 2. Seller bears the risk as the legal owner; and 3. Party entitled to possession bears the risk *** The Modern trend is the 3rd one: The person who has the right to possession bears the risk of loss Difficulty is that people contract based on traditional lawIs it unfair to expect LL to purchase insurance when they look at existing law & see they aren't responsible? Brush Grocery Kart Inc. v. Sure Fine Market Facts: leased a building from , property was damaged in hail storm Rule: Party entitled to possession of property bears the risk Reas: was not in possession of property held the right of use and occupancy and gave notice it would consider a holdover tenant if it continued to occupy the premises other than by continuing to lease the property.

Duty to DiscloseCaveat Emptor: "buyer beware"The seller of real property had no duty to disclose defects to the buyer. o The buyer had the complete responsibility to assess the condition of the premises Unless the Seller: 1. Affirmatively misrepresented the condition of the property (lies!) 2. Actively concealed its defects or; 3. Owed a fiduciary duty to buyer (relationship b/t buyer & seller that's not at arms length Lawyer selling to client Family members Banker/lender Purposes of Caveat emptor o Gives us a brightline rule o Encourages buyers to do their homework o Provides more certainty to seller, they shouldn't have the onus to guess buyer's preferences makes it up to buyer to ask/find out if something is important to them/necessary to the transaction In most jx: seller of residential real property is obligated to disclose defects he knows about that: o Materially affect the value of the property and; o Are not known to or readily discoverable by a buyer Stambovsky v. Ackley Facts: Buyer discovered house he purchased was known to have been possessed by ghosts Rule: Where a condition which has been created by seller materially impairs value of K, and is peculiarly w/in knowledge of seller or unlikely to be discovered by a prudent purchaser exercising due care w/ respect to subject transaction, nondisclosure constitutes a basis for rescission as a matter of equity Reas: Meticulous inspection/search by buyer would not have revealed presence of ghosts. There is no policy reason to deny relief for failing to discover something most people wouldnt contemplate. fostered public belief that her home was possessed she told public of this, so she could have told buyer of the condition Why isn't caveat emptor enough to protect the buyer here? We might assume that the presence of ghosts is a latent defect Dissent mentions that precedent is being upset in likely the wrong case o Arguments against caveat emptor For reasons of fairness and equity, this could be irresponsible of the seller o Majority approach--Objective standard Seller is obligated to disclose defects that:1. 2. 3.

Are known, and;

Materially affect the value of the property, and; Are Latent (not known or readily discoverable by the buyer) Rationales: Anti-predatory practices What buyers expect Cleaner to operate--brightline rule ("reasonable" buyer)

PATENT defects, that ARE readily discoverable by buyers don't necessitate disclosure from seller Giving buyer information, puts decision in the hands of the buyer 1. Broker wants you to disclose EVERYTHING, because liability for non-disclosure extends to them 2. We want to put some pressure on the buyer Is it prudent for seller to talk about, a water heater, and assert "it looks good to me!" or should you enlist help of an expert? The onus is on the buyer to hire and expert/inspector Implied Warranty of Quality: developer of newly constructed residential property impliedly warrants that the property is fit for its intended use.

Strawn v. CanusoFacts: 150 families sought damages because developer knew of landfill nearby but didnt disclose Rule: professional sellers have a duty to disclose negative off-site conditions Reas: Pro sellers have superior access to info; info about dump is material to the transaction Normally, don't have to disclose off-site conditions Limited to builder/developers (people in the business of selling), not to private seller After the case, the lx passes a statute that reins this in, "seller has to tell buyer that there is a list of things you might want to know about"

Delivery:

Delivery requires: 1. an act manifesting an intent to make a present transfer of real estate; OR 2. donor manifests that document is to be legally operative while the donor is alive.-->deeds are present transactions! o Delivery is also presumed if the deed is recorded. o DEED is only effective if it is delivered &accepted. Acceptance is usually presumed even when the grantee is unaware of the gift. o In most states, manual transfer of the deed to grantee creates a presumption that deed has been delivered When grantor has the ability to revoke, the courts will likely say they meant they wanted to revoke Rosengrant v. Rosengrantno delivery Facts: old man and woman signed deed for farm to nephew, but when woman died, man retained the right of retrieval. Rule: When grantor delivers a deed under which he reserves a right of retrieval and attaches to that delivery the condition that deed is operative only upon death and further continues to use the property, these actions are really grantor attempting to make deed a will, which is unallowable. Reas: Writing on envelope showed that deed was retrievable at any time by Haroldcould have been retrieved by Harold OR nephew Vasquez v. Vasquezdelivery Facts: Woman granted property to one person in her will, and another in a deed. Deed was left with atty, woman had no power to recall deed. Rule: When grantor delivers a deed to a 3rd person w/out a reservation to recall it and instructs them to deliver it upon their death- the delivery is effective as a matter of law. Indications of immediate delivery Statements Actions--does grantor retain a right to revoke? (Rosengrant) Escrow given to a 3rd party and there are no "take-backs" (Vasquez)/given to 3rd party w/ instructions Revocable deeds Not p