1)

The Land Transaction a) Step 1 i) Form Contract (1) Sets forth the legal description of the property, its price, provision for the earnest money deposit, and the date for the closing or settlement ii) Real Estate/Executory Contract (1) Title is not transferred immediately upon signing the agreement, because both buyers and seller must do certain things during the time between the contract and closing (2) Essential in bringing to light any problems pertaining to the sale/purchase of the property (a) Mortgage contingency (i) Where the purchaser cannot obtain a mortgage loan within a given time, he can rescind the contract and get back deposit (b) Inspection clause (i) Allows buyer to obtain an inspection of the property and rescind the contract if the cost of remedying the problem exceeds some threshold (c) Title Search (i) Abstract of title lists: 1. Existing mortgages 2. Liens 3. Rights of way b) Step 2 i) Closing c) The inspection clause is one of the most hotly negotiated clauses in a real estate contract. d) The seller understands that the buyer needs to inspect the property before being bound. At the same time, the seller doesnt want to allow the buyer to tie up the property and then get out of the contract upon discovering that there is something minor wrong with it, which frequently happens. e) Marital Status in terms of the seller i) If the seller is married, the spouse may have an interest in the property which cannot be transferred without her consent: dower, homestead, community property. ii) If the buyer's broker has not identified the seller's marital status on the face of the contract, the broker might be liable to the buyer if there is a spouse who does not sign. Joint Tenants and entering into a land transaction and one person backs out or dies f) i) If the buyers were joint tenants or tenants by the entirety, the surviving buyer alone could enforce the contract. ii) If they were tenants in common, the dead tenants interest might be in someone else, complicating the lawsuit. g) Good and merchantable title i) The usual contract of sale requires the seller to furnish marketable title ii) The seller is required to furnish only a good title, subject to permitted exceptions such as covenants and easements of record. iii) These restrictions of record may bind the buyer unless the restrictions are examined by the buyer and waived before signing the contract. iv) A specific contract that does not explicitly require the seller to disclose encumbrances to which the buyer's title will be subjected can still be good title Brokers a) Brokers Generally i) R3A 8.01 (1) Brokers owe their principals a fiduciary duty to act loyally for the principals benefit in all matters connected with the ag ency relationship (a) Brokers actions cannot diverge from their clients interests or expectations (b) The duty is to follow the principals directives (i) The duty of loyalty in good faith include an obligation to maximize the sale price. b) Real Estate Brokers i) Represent the sellers to attract prospective buyers and facilitate real estate transactions (1) Listing Agreement (a) The seller authorizes the broker to locate a buyer on the seller's behalf c) Listing Brokers i) Contract with the seller to sell the property (1) Listing contract empowers the broker to serve as the seller's agent in selling the property (2) Sole duties owed to the seller d) Selling Brokers i) Introduce the buyer to the seller's property (1) Indirect relationship with the seller and receive their compensation by splitting the listing broker's commission ii) Their legal relationship is that of a subagent (The subagency relationship) (1) The duty to report to the seller any information that the buyer shares with the selling broker. e) Buyers Brokers i) They owe fiduciary duties to prospective purchasers ii) Services (1) Narrowing property searches to particular areas and price ranges, (2) Reviewing past sales records and current property on the market (3) Showing buyers property that conforms to their search criteria (4) Helping arrange physical inspection of the property (5) Preparing offers and counteroffers (6) Facilitating buyer consoltations with other experts (7) Assisting buyers in the escrow process iii) Typically share commission earned by the listing agent in properties purchased Dual Agents f) i) Broker for both the buyer and the seller in a transaction ii) Owes both the buyer and the seller the same loyalty and dealing in good faith iii) R3A 8.06 (2) (b) (i) (1) Many states permit dual agency on the conditions that the dual agent reveals his dual agency to both the buyer and the seller early on and that both parties approve of the arrangements g) Disclosure requirements i) Some states require brokers to disclose to buyers in writing that they are the sellers agent and not the buyers (1) Purpose (a) To make sure the buyers understand whether their broker represents them or represents the seller (i) Encourages buyers to use buyers brokers ii) Many states brokers must also disclose to the buyer any material defects known by the broker and unknown by the buyer h) Licari v. Blackwelder i) Real estate broker as a fiduciary

2)

3)

Required to exercise fidelity and good faith, and cannot put himself in a position antagonistic to his principle's interest by fraudulent conduct, acting adversely to his client's interests, or by failing to communicate information he may possess or acquire which is or may be material to his principle's advantage. ii) Real estate broker acting as a subagent (1) Subagent with express permission of another broker who has the listing of the property to be sold is under the same duty as the primary broker to act in the utmost good faith. iii) General Rule: Statutory (1) Revocation/Suspension of License as well as the levy of a find (a) Where a broker or salesperson has violated the code of conduct generally set out in the statute (i) Proscribed conduct 1. Making a material misrepresentation 2. Making any false promise of character likely to influence, persuade, or induce 3. Acting for more than one party in a transaction without the knowledge of all parties for whom he acts 4. Any act or conduct which constitutes dishonest, fraudulent, or improper dealings iv) Black Letter Rule: As fiduciaries, real estate brokers must place their clients interests above their own, act in good faith, and disclose all information that is or may be material to their clients rights and interests Statute of Frauds a) A statute, based on the English Statute of Frauds, designed to prevent fraud and perjury by requiring certain contracts to be: i) in writing, and ii) signed by the party to be charged. b) Minority view: Emails by their quick and informal nature, tend to lack in many instances that a traditional signed writing would supply under the Statute of Frauds c) Traditionally applies to contracts: i) for the sale or transfer of an interest in land, ii) that cannot be performed within one year of its making, iii) for the sale of goods valued at $500 or more, iv) of an executor or administrator to answer for a decedent's debt, v) to guarantee the debt or duty of another, and vi) made in consideration of marriage d) Part Performance i) Allows the specific performance of oral agreements when particular acts have been performed by one of the parties to the agreement (1) 1 theory (a) The acts of the parties substantially satisfy the evidentiary requirements of the Statute (i) Buyer's taking possession i. And (ii) Paying all or part of the purchase i. Or (iii) Making valuable improvements (2) 2 theory (a) Where a P shows that he would suffer irreparable injury if the contract were not enforced, then the buyer's taking of possession alone is sufficient to set the court in motion e) Estoppel i) When unconscionable injury would result from denying enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the contract (i) Also, ii) When unjust enrichment would result if a party who has received the benefit of the other's performance were allowed to rely upon the Statute. f) Hickey v. Green i) Contemporary application of the doctrine of part performance (1) A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the SOF if it is established that the party seeking enforcement, in a reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement. ii) Green made a promise to sell the home, which the Hickeys promptly relied on, Green not so promptly repudiated it because she had a better opportunity iii) Black Letter Rule: When there is a clear oral promise, partial payment, plus an act made in reliance, a land transfer is sufficient to overcome the Statute of Frauds requirement that contracts for the sale of land must be in writing. g) NC does not recognize Part-Performance whether monetary or non-monetary performance, in connection with real estate transactions to take the written contract requirement out of the SOF i) NC does recognize Estoppel

(1)

4)

Marketable Title a) Marketable title is a title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent and intelligent person, one which such persons, guided by competent legal advice, would be willing to take and for which they would be willing to pay fair value. i) ii) Not a piece of paper A legal conclusion as to how the interests in a piece of real property are arranged and who owns them (1) Not subject to such a reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent, and intelligent person, one which such persons, guided by competent legal advice, would be willing to take and for which they would be willing to pay fair value Interests in real property can be divided along a number of dimensions (1) Time (2) Space (3) Numerous persons (a) Each of these interests can be transferred individually, but in most real estate transactions, the buyer intends to get all of them

iii)

b)

Title i) NC follows equitable estoppel but not partial performance ii) Contract (1) Seller will deliver marketable title iii) Title is not a piece of paper iv) Title is a legal conclusion as to how the interests in a v) Interests in real property can be divided along a number of dimensions: (1) Time (a) Future interests, present possessory, reversionary interest (especially in the landlord) (2) Space

c)

d) e)

f)

g)

(a) Interests in land can be divided in terms of the layout of land Numerous persons (a) The number of persons who can occupy or have an interest in land at one time vi) Each of these interests can be transferred individually, but in most real estate transactions, the buyer intends to get all of them Marketable Title i) Title that a reasonable buyer would accept because it appears to lack any defect and to cover the entire property that the seller has purported to sell ii) Title that enables a purchaser to hold property in peace during the period of ownership and to have it accepted by a later purchaser who employs the same standards of acceptability iii) Marketable title which is reasonably free that there are other claimants on the title Defects in title i) Must be substantial and limit the buyers ownership Encumbrances i) Make title unmarketable unless: (1) A beneficial easement known to the buyer (2) A restricted use covenant that does not limit the use specified in the contract (use for residential purposes) ii) Any time a borrower borrows money and uses property as collateral could be an encumbrance iii) Mortgage or deed of trust (NC) (1) Used to secure funds as collateral iv) Liens (1) May be filed against the property if the original owner does not pay v) Judgment liens (1) If the owner has a judgment against them Zoning Restrictions i) Not encumbrances necessarily ii) But property that is in violation of zoning at the time of contract for sale has unmarketable title Lohmeyer v. Bower i) Black Letter Rule: Marketable title to real estate is title that does not expose the buyer to litigation (3) ii) iii) iv) v)

5)

6)

Mere existence of a covenant creates an encumbrance which makes the title unmarketable Easement that benefits the property regarded by some courts as not an encumbrance as long as the buyer is aware Covenants restricting use are encumbrances, but some courts do not consider them so if there is a specified benefit to the buyer Declarations of restrictions (1) Has to be recorded vi) Private covenant (1) Makes it unmarketable simply by being there, whether or not they are violated vii) Zoning (1) Make title unmarketable only if they are violated viii) Title is thought to be a private title to land ix) Government restriction on use does not give them an interest in land (1) Unlike a mortgage lender (2) In the case of default, they can take an interest in the land x) Private v. Public restrictions (1) Practical in terms of a title search (2) Private can be much more xi) Expectations h) Real Property Marketable Title Act i) Under NCs Real Property Marketable Title Act, all contracts for the sale of real property contain, unless the contract expressly provides otherwise, an implied promise by the seller that he will deliver to the buyer a marketable title at the date of closing. ii) Of course, the seller may use the proceeds of the sale to eliminate title defects (e.g., to pay off sellers own mortgage or other liens on the property) See NC GS Ch. 47(b) (1) 47 (b) 2 (a) Title examiners only have to go back 30 years in chain of title and dont see any serious defects, they hav e a good marketable title Equitable Conversion i) Equitable conversion is based on the maxim that equity regards as done that which ought to be done ii) What does that mean? (1) A change in the nature of property so that real property is treated as personal property , or vice versa, in certain circumstances b) Doctrine Of Equitable Conversion i) Equitable conversion typically involves transferring real property as the parties to a contract intended before the seller experienced a change in circumstances that could affect the propertys ownership ii) When a contract is made, the buyer acquires equitable title to the property, and the seller retains legal title iii) But the sellers interest is treated as one in personal property rather than in real property because the sellers true interest is in the proceeds (i.e., cash); the legal title is security for the buyers payment iv) To what interest would a buyer have in an equitable claim land v) To what interest would a seller have? Money c) The Duty to Disclose Defects i) Obligated to disclose known defects ii) Modern law d) Not easily discovered by the buyer must be disclosed as long as the buyer knows The Duty to Disclose Defects a) Stambovsky v. Ackley i) Doctrine of caveat emptor let the buyer beware (1) Was the buyers duty to discover the defects before contract ii) Damage that P may have suffered is an adverse effect on the property iii) Black Letter Rule: Where a seller has created a condition that materially alters the value of the contract for sale of real property, and the condition is uniquely within the knowledge of the seller and unlikely to be discovered by a careful buyer, failure to disclose that condition creates a basis for rescission as a matter of equality Johnson v. Davis i) Black Letter Rule: Sellers of real property have a duty to disclose to prospective buyers material facts affecting the value of the property, when those facts are not known or readily observable to the buyer ii) Represents the modern trend

b)

7)

Merger i) The Doctrine of Merger provides that at the closing of the transaction, the promises contained in the contract merge into the deed. (1) Any unfulfilled obligations between the parties contained in the contract lose their separate identity and are deemed to have been satisfied as part of the delivery of the deed. The Implied Warranty of Quality a) Suits on the warranty can arise only after the closing has taken place and the plaintiff has accepted the deed. b) Lempke v. Dagenais i) The defective garage case found breach of implied warranty ii) Black Letter Rule: Privity of contract is not necessary to maintain a cause of action for the implied warranty of workmanship and good quality against a builder for latent defects c) Remedies for Breach of the Sales Contract a) Breach or default occurs when one party to the contract fails to or refuses to perform its obligations under the contract i) 3 Remedies (1) Damages (a) Measure is the benefit of the bargain (i) The difference between the K price and the fair market value at the time of breach (b) May be limited to out of pocket expenses (c) Liquidated damages (i) Party negotiated and stipulated damages to be paid on breach (2) Rescission (a) Retention of Deposit (i) Sellers (b) Restitution of the deposit (i) Buyers (3) Specific Performance of the Contract (a) The court orders the defaulting party to perform (i) Buyer wants to be deeded title to the property (ii) Seller wants the sales price 1. Modern trend is going away from granting specific performance to the seller b) Jones v. Lee i) Black Letter Rule: Under the loss of the bargain rule, a sellers damages are measured by the difference between the purchase price and the market value of the property at the time the contract was breached c) Kutzin v. Pirnie i) Black Letter Rule: IF a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by other partys breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he caused by his own breach ii) Facts (1) K for sale of Kutzin's home for $365k deposit of $36k required and given by Pirnies. Pirnies back out and the Kutzins sold the home for $352k and sued for the difference and other monetary damages resulting from the breach. iii) The Kutzin holding does not represent the majority rule in the United States for a buyers breach. In many cases, even in the absence of a forfeiture clause, a court will allow the seller to retain the buyers deposit upon breach even when actual damages are less than the deposit. iv) The rule of thumb is that a 10 percent forfeiture is reasonable. Courts will also typically enforce liqui dated damages provisions provided that they meet the standard tests of reasonableness.

8)

9)

Retention of Deposit i) Minority Rule (1) When a buyer breaches the K to purchase land, the seller may elect to retain the down payment because of the difficulty of estimating actual damages and the general acceptance of the traditional 10% down payment a reasonable amount even if the sales contract has no liquidated damages provision. (2) For buyers, the parallel remedy for a seller's breach is to seek restitution of the deposit e) Efficient Breach Theory i) When the cost of the breach is less than the potential gain from the breach, due to changing market conditions, breach of the K is the economically efficient result (1) Factors are that damages must be: (a) Reasonably certain 1. And (b) Foreseeable Specific Performance f) i) An aggrieved seller or buyer of land is broadly entitled to this remedy ii) General Rule (1) Each piece of real estate is unique, making damages an inadequate remedy (a) Not an absolute right, rather at the court's discretion (2) Parties seeking specific performance have to prove that money damages would be an inadequate remedy g) Time-of-the-Essence Clauses i) Unless this provision is expressly provided, a court will give the parties reasonable time for performance, and either party can fix the time for performance by giving notice to the other, provided that the notice leaves a reasonable time for rendering performance. The Deed a) Requirements for Deeds, Generally i) Instrument must be in writing and include a present grant: (1) Words making the grant (2) Description of the grantee (3) Consideration (a) Raises the presumption that the grantee is a bona fide purchaser entitled to the protection of the recording acts against prior unrecorded instruments (4) Description of the land (a) Reference to natural or artificial monuments and reference to directions and distances [Metes and Bounds] (b) Reference to a government survey, recorded plat, etc. (c) Reference to the street and number or the name of the property b) Warranties of Title i) General Warranty Deed (1) Warrants title against all defects in title, whether defects arose before or after the grantor took title d)

c)

d)

e)

Contains 6 covenants (i) Present Covenants 1. Covenant is breached, if at all, at the time of delivery 2. Statute of Limitations begins to run at the date of the delivery of the deed (ii) Covenant of Seisin [Covenant of Title] 1. The grantor warrants that he owns the estate that he purports to convey, both in quantity and quality. (iii) Covenant of Right to Convey 1. The grantor warrants that he has the right to convey the property 2. i.e. trustee may have legal title but be forbidden by the trust instrument to convey it. 3. i.e. people adjudicated as incompetent (iv) Covenant against Encumbrances 1. The grantor warrants that there are no encumbrances on the property 2. No mortgages, liens, easements, and covenants (v) Future Covenants 1. Promises that the grantor will do some future act and is breached when the grantee or his successor is either actually or constructively evicted from the property at some time in the future, or buys up the paramount claim, or is otherwise damaged. 2. Statute of Limitations begins to run at the time of eviction or when the covenant is broken (vi) Covenant of General Warranty 1. The grantor warrants that he will defend against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title 2. Grantor is not liable for legal fees incurred by the grantee in successfully defending title, because the 3rd party's losing claim is not lawful 3. The grantor is liable for the grantee's legal fees only if the grantee loses to a superior lawful claim (vii) Covenant of Quiet Enjoyment 1. The grantor warrants that the grantee will not be disturbed in possession and enjoyment of the property by assertion of superior title (viii) Covenant of Further Assurances 1. The grantor promises that he will execute any other documents required to perfect the title conveyed ii) Special Warranty Deed (1) Warrants only against the grantor's own acts but not the acts of others. (a) "Claims and demands of the grantor and those claiming by, under, or through the grantor" (i) Contains same 6 Covenants as General Warranty Deed 1. If the defect is a mortgage on the land executed by the grantor's predecessor in ownership, the grantor is not liable. iii) Quitclaim Deed (1) Conveys a grantor's complete interest or claim in certain real property but that neither warrants nor professes that the title is valid (2) No warranties or covenants (a) Conveys whatever title the grantor has, if any, and if the grantee of a quitclaim deed takes nothing by the deed, the grantee cannot sue the grantor. (i) Its use excludes any implication that the grantor has good title, or any title at all. 1. No interest, no conveyance. Brown v. Lober i) Black Letter Rule: A covenant of quiet enjoyment can be breached by constructive eviction, but unless the covenantees right of possession is interfered with, there is no constructive action, and, therefore, no breach of the covenant. ii) Grantors conveyed 80 acre tract of land to the Bosts and reserved 2/3 interest in the mineral rights. The Bosts then conveyed this tract to the Browns by General Warranty Deed. The Browns sought to sell mineral rights to a Coal Company for $6k but had to renegotiate after discovering the Grantor's reversionary interest to $2k. iii) Rule (1) Possession of the surface does not carry possession of the subsurface minerals. To possess the mineral estate, one must undertake the actual removal thereof from the ground or do such other acts as will apprise the community that such interest is in the exclusive use and enjoyment of the claiming party. iv) Holding (1) The Covenant of Seisin was breached when the Bosts delivered the deed to the browns. The browns however failed to bring justified cause of action within the 10 year statute of limitations. (2) Discovery of paramount title is not sufficient to constitute the constructive eviction necessary to breach the Covenant of Quiet Enjoyment. Frimberger v. Anzellotti i) Black Letter Rule: A latent violation of a restrictive land use statute does not constitute a violation of the warranty against encumbrances. ii) The court reversed the trial courts decision, holding that the warranty against encumbrances has not been breached and the Plaintiff failed to prove innocent misrepresentation since the Defendant had made no representation to the Plaintiff regarding the tidal wetlands. iii) Rule (1) An encumbrance is defined as every right to or interest in the land, which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee for conveyance. (a) Encumbrances are classified as: (i) A pecuniary charge against the premises 1. Mortgages, judgment liens, tax liens, or assessments (ii) Estates or interests in the property less than the fee 1. Leases, life estates, or dower rights (iii) Easements or Servitudes on the land 1. Rights of way, restrictive covenants, or profits (2) The covenant against encumbrances operates "in praesenti" [Lt. Currently, at present] and cannot be breached unless the encumbrance existed at the time of the conveyance. (a) Latent violations of land use regulations not on land records, are unknown to the seller and to which the state enforcement agency has taken no action to compel compliance at the time the deed was executed, do not constitute an encumbrance for the purpose of this warranty. Rockafellor v. Gray i) Black Letter Rule: The covenant of seisen does run with the land, and is broken the moment the conveyance is delivered, becoming a chose in action held by the covenantee ii) Facts: Rockafellor (P) purchases land and agrees to assume mortgage to Gray (D). Gray (D) forecloses on the mortgage. iii) Rule(s) in regards to a remote grantee (1) The rights of the remote grantee are acquired by conveyance (assignment) and not by virtue of actual possession of the premises (a) The remote grantee, in purchasing the premises, has a right to rely on the fact that the original grantor in a prior deed was bound by the covenants of warranty and of seisin therein, and had a right to take into account the consideration recited in such prior deed in purchasing the premises (i) As between original parties parol proof of the actual consideration is admissible to contract the recitals of the deed, but that such evidence is not admissible in a suit by a remote grantee against the original grantor (2) The covenant of seisin is a covenant for the title that runs with the land to a remote grantee because the rights of the remote grantee are acquired by conveyance and not by virtue of actual possession of the land. (a) If at the time of conveyance, the grantor does not own the land, the covenant of seisin is broken immediately and it is not necessary to allege or prove ouster or eviction

(a)

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11)

12)

13)

14)

(i) The measure of damages for breach of this is the consideration money and interest, unless the grantee can be shown to have lost less. For a covenant to "run with the land" to a successor claimant, the conveyance must convey to the successor either title or possession , some "thing" to which the covenant can "attach" and with which it can "run." v) Future covenants of warranty and quiet enjoyment are intended to secure compensation to the purchaser when his quiet enjoyment is disturbed. (1) These covenants are not breached unless the covenantee or his assigns are prevented from taking complete possession or are actually or constructively evicted by a person having paramount title. Estoppel by Deed f) i) Example - Grantor conveys land to grantee that he does not own. Grantor subsequently acquires title to the land. (1) The grantor is estopped to deny that he had title at the time of the deed and that title passed to the grantee. (2) The after-acquired title is sent immediately and directly to that grantor's grantee (a) Eliminates the necessity of a lawsuit and automatically passes the subsequently acquired title to the grantor. (i) This has been extended by courts to quitclaim deeds if the deed represents that the grantor had title. Delivery a) An act that evinces an intent to be immediately bound by the transfer b) To be effective, a deed must be delivered with the intent that it be presently operative. i) The act can be: (1) Handing over the document to the grantee (2) Grantor's declaration, express or implied, that he is bound by his deed (a) A deed may be delivered to the party without words, so may a deed be delivered by words without any act of delivery. c) Sweeney v. Sweeney i) Black Letter Rule: Where a deed is handed to grantee, but evidence shows it is to take effect only upon the death of the grantor, the deed is considered properly delivered ii) Rules (1) Physical possession of a duly executed deed is not conclusive proof that it was legally delivered (a) This is true under some circumstances, even where there has been a manual delivery (2) Delivery must be made with the intent to pass title if it is to be effective. (3) Prima Facie proof of delivery: (a) There is a rebuttable presumption that the grantee assented since the deed was beneficial to him (b) Where deeds are formally executed and delivered, these presumptions can be overcome only by evidence that no delivery was in fact intended. (4) Conditional delivery (a) Can be made by placing the deed in the hands of a third person to be kept by him until the happening of the event upon the happening of which the deed is to be delivered over by the third person to the grantee. (b) Conditional delivery to a grantee vests absolute title in the latter d) Two possible solutions (Notes and Questions 608) i) No delivery: (1) When the deed is handed over to the grantee but the extrinsic evidence shows that the deed is to "take effect" at the death of the grantor, a few courts have held that there is no delivery and that the transfer is testamentary and void. ii) Delivery is good and condition is enforced (1) Conditional Delivery is purely a question of intention, and it is immaterial whether the instrument, pending satisfaction of the condition, is in the hands of the grantor, the grantee, or a third person. (a) After the condition is satisfied: (i) There is an operative conveyance which is considered as having been delivered at the time of the conditional delivery, for the reason that it was then that it was actually delivered, although the ownership does not pass until the satisfaction of the condition. e) Rosengrant v. Rosengrant i) Black Letter Rule: Where a grantor delivers a deed but retains a right of retrieval and states that the deed is operative only after the grantors death, the delivery is not legally sufficient. ii) Facts: Tried to deliver their deed to their nephew for taking care of them but said that the deed would be effective only upon their deaths. After their deaths, an interested relative challenged the delivery because it was not a valid present transfer. iii) Legal delivery (1) Not just a symbolic gesture (2) Necessarily carries all the force and consequence of absolute, outright ownership at the time of delivery or it is no delivery at all. Valid Praesenti Conveyance f) i) Requires: (1) Actual or constructive Delivery of the deed to the grantee or conveyed interest (2) An intention by the grantor to divest himself of the conveyed interest Revocable Trusts a) Grantors sign a declaration of trust providing that they hold the land in trust, retaining right of possession and to all rents and profits of the land for their lifetime(or for their joint lives and the life of the survivor) and on their death(s) the title to the land is to pass to the grantee. i) Retain the right to revoke the trust and reclaim legal title for the grantor (1) The trust instrument may also provide that the survivor can revoke the trust ii) Do not need to deliver the trust instrument to the grantee but should keep it in a safe place iii) Do not have to record, but recordation is convincing evidence that they intend the trust instrument to be effective b) In equity, to create a valid trust (irrevocable or revocable) i) The grantor need only manifest an intent to create a trust and, if land is involved, sign a written instrument to satisfy the Statute of Frauds. ii) Delivery of a declaration of trust is not required if the grantor is the trustee. c) Revocable trust function like a will, but avoids probate i) Probate is necessary only when the beneficiary is not entitled to property under some valid inter vivos instrument and must get legal title changed to the beneficiary at the owner's death. ii) Created for parties who want to pass property at death without cost, delay, and publicity of probate. Title Assurances a) Before buying land a purchaser could search the public records office to discover the evidence of a title.Under title registration, the state registers title and issue a title certificate to the owner, which is issued to each new purchaser of the property Recording System a) The land title records include copies of documents filed with the county recorder and indexes to these copied documents b) A deed is valid and good against the grantor upon delivery without recordation. Any kind of deed, mortgage, lease , option, or other instrument creating or affecting an interest in land can be recorded c) Recording the deed has the function of protecting the purchaser for value and lien creditors against prior unrecorded interests. Under the recording acts , a subsequent bona fide purchaser is protected against prior unrecorded interests Indexes a) There are two types of indexes i) Tract index (1) Public tract indexes, indexing documents by a parcel identification number assigned to the particular tract of land - not exist in most states iv)

ii)

Grantor/grantee index (1) Most common index is the grantor- grantee system- separates indexes are kept for grantor and grantees - grantor alphabetized and chronically under the grantor surname, grantee it is just under the grantee surname

b)

15)

16)

17)

18)

19)

Conveyances of real property interests must provide a specific legal definition of the interests being conveyed. The fact that a deed was not properly indexed by the register of deeds will not prevent constructive notice. c) According to the doctrine of idem sonans will not operate as constructive notice when recording a judgment lien, the proper identification of the judgment debtor is critical to future efforts to enforce the judgment. It does not apply where the written name is material, and error would prejudicially mislead a third party. Types of Recording Acts a) Race statue NC FOLLOWS i) The person who wins the race to record prevails, whether the subsequent purchaser has actual knowledge of the prior purchasers claim is irrelevant. Race statue protects a subsequent purchaser only id the subsequent purchaser records first. (1) EX- O, owner of BA, conveys to A, who does not record the deed. O subsequently conveys BA to B for valuable consideration. B actually knows of deed to A. B records the deed from O to B. under the race statue, B prevails over A, and B owns BA. b) Notice statute i) if the subsequent purchaser had notice of a prior unrecorded instrument, the purchaser could not prevail over the prior grantee. Notice statute protects a subsequent purchaser against prior unrecorded instruments even though the subsequent purchaser fails to record (1) Ex - O, owner of BA, conveys to A, who does not record the deed. O subsequently conveys BA to B for valuable consideration. B has no knowledge of A deed. under the notice statue, B prevails over A even though B does not record the deed from O to B. (2) O, owner of BA, conveys to A, who does not record the deed. O subsequently conveys BA to B for valuable consideration. Before B records, A records the deed. C desires to purchase B. C, searching title, would find A deed on record, and C then would have to ascertain from facts off the record whether B had notice of As deed. If B did not have notice, B prevails over A, and C can buy from B c) Race-notice statue i) a subsequent purchaser is protected against prior unrecorded instruments only id the subsequent purchaser is WO notice of the prior instrument AND records before the prior is recorded ii) EX. O, owner of BA, conveys to A, who does not record the deed. O subsequently conveys BA to B for valuable consideration, who has B no knowledge of A deed. A records deed. Then B records. A prevails over B because, even though B had no notice of A deed, B did not record before A. (1) Tends to eliminate lawsuits turning on extrinsic evidence about which deed was delivered first d) The lawyer or agent in charge of closing a transaction is liable in negligence to the grantee for failure to record a deed promptly if the grantee suffers as result. Some statues requires that in order for an instrument to enter the records, it must be acknowledged before a notary or other official e) The recording of an instrument that does not meet all of the statutory requirements of recordation does not provide constructive notice Chain of Title Problems a) The chain of title refers to the recorded sequence of transactions by which title has passed from a sovereign to the present claimant.It is the period of time for which records must be searched and the documents that must be examined within the time period - varies by jurisdiction b) One who records his valid title first is the record owner of real property, regardless of whether another party has earlier received the same property. A deed from a grantor outside the chain of title, even if recorded, is treated as though it were unrecorded and gives no constructive notice. A deed that does not name a grantee is a nullity, and wholly inoperative as a conveyance, until the name of the grantee is legally inserted. Grantees should insert names and record immediately. c) A subsequent purchaser from a common grantor in a subdivision has constructive notice of the restrictions on the subject to those restrictions. Subsequent purchaser from a common grantor acquires title subject to the restrictions in the deed to the earlier purchaser. i) A conveys BA to B by general warranty deed, who does record the deed. A subsequently acquires title to BA from O. A records deed from O to A. A then convey BA to C, who pays valuable consideration who has no actual knowledge of B deed. C records. ii) Courts held that B prevails because of estoppel by deed where A received title by O and since B recorded, unlike a wild deed, she is connected to the chain of title because B deed could have been discovered by subsequent purchaser by searching the record under A name prior to date that the title came to him from O iii) More recent cases are not following this logic, instead these cases emphasize the cost of searching title under the name of every owner for many years prior to the date the owner received title - this look at this has a cost-benefit analysis saying the cost is too high to justify People Protected by the Recording System a) A recording statue for a particular state must be read carefully to see who is protected under the statute. Most states do not protect donees and devisees , even in race jurisdictions - therefore it is necessary for a court to determine if the person is a purchaser or a donee b) A seller need not be paid in full before the buyer can be considered a Bona Fide Purchaser. c) A number of recording statutes protect creditors against unrecorded deeds and mortgages - they protect creditors who have established a lien - not all creditors are afforded protection. Merely lending money does not five priority over unrecorded instruments. A creditor in many states is not protected until the creditor prosecutes a lawsuit for judgment and forecloses a lien or holds an execution sale d) In a few jurisdictions a purchaser of a quitclaim deed cannot claim the position of a BFP without notice - refusal of the grantor to warrant title creates a strong suspicion that the title is defective. It is even held that a quitclaim deed in a chain of title puts all subsequent purchasers on inquiry notice. A quitclaim deed is treated the same as a warranty deed for notice purposes Inquiry Notice a) Three kinds of notice i) Actual (1) when one is personally aware of a conflicting interest in real property, often due to anthers possession of the property ii) Record - constructive notice (1) consists of notice one has based on properly recorded instruments iii) Inquiry - constructive notice (1) based on facts that would cause a reasonable person to make inquiry into the possible existence of an interest in real property b) Where a person acquires land rights without knowledge of existing prior conveyances and records his deed, his rights receive priority over previous conveyances from the same owner which were not recorded. c) Actual possession gives constructive notice to all who may claim an adverse interest. d) A contract to convey legal title to real property on payment of the purchase creates an equitable interest in the purchaser. Beneficial ownership passes to the purchaser while the seller retains the mere naked legal title. Subsequent successors to the legal title take such title burdened with the equitable interests of which they have either actual or constructive notice. e) Marketable title acts have the purpose of limiting title searches to a reasonable period of time within the last 30-40 years. All claimants of interest in land, to be safe must file a notice of claim every 30 to 40 yrs after the recording of the instruments of acquisitions Easements a) Easements are land use arrangements arising out of private agreements i) usually involve 2 parcels of land with the purpose to increase the total value of all the parcels involved, burdening one while benefiting another ii) These agreements creates an interest in land, binding and benefiting not only the parties to the agreement but successors these are called servitudes b) There are two major types

Covenants (1) An encumbrance consisting of a private arrangement concerning the limited use of a piece of land (or other immovable property) without the possession of it (2) Another way of thinking of it as a charge or burden on an estate for anothers benefit (3) Servitudes include: (a) Easements; (b) Irrevocable licenses; (c) Profits; and (d) Real covenants ii) Easements (1) A servitude that gives a person the right to use another persons land in a specific and limited manner. An easement is the right to use another persons land, not to possess it to the exclusion of the world. An easement can be created in favor of a third party. Both types of easements give easement owners the right to make some specific use of land they do not own (2) Types (a) Easement appurtenant (i) Gives the right to whomever owns a parcel of land that easement benefits of another parcel of land, rather than conferring a personal benefit on an individual. An easement appurtenant requires both a dominant tenement - estate - and a servient tenement the easement attaches to and benefits the dominant tenement - they are transferrable to successive owners (ii) The benefit parcel is the dominant estate, and the burdened parcel is the servient estate (b) Easement in gross (i) gives the right to some persons without regard to ownership of land , benefits its owner personally, and not as an owner of land. Easement in gross does not benefit any land and has no dominant estate only servient estate - can be alienable or inalienable (c) Affirmative (i) an affirmative easement permits a person to use the servient estate in a specific manner , it can be appurtenant or in gross (ii) almost all easements are affirmative (d) Negative easements (i) Easements which forbid one land owner from doing something on his land that might harm a neighbor. A negative easement confers only the right to prevent specified uses on the servient estate, it confers no right to use the servient estate. (ii) At common law, there were only 4 recognized appurtenant negative easements 1. for light 2. for air 3. for support 4. and for the continuing flow of an artificial stream (3) Profit a prendre or profit, is the right to take a natural resource or crop from the land of another - profits are always in gross and are freely transferable 20) Creation of Easements a) An easement is within the SOF it requires a written instrument signed by the party to be bounded but an easement can be created by implication or by prescription b) A reservation is a provision in a deed creating some new servitude which did not exist before as an independent interest c) An exception is a provision in a deed that excluded from the grant some preexisting servitude on the land d) License i) A license is an oral or written permission given by the occupant of land allowing the licensee to do some act that otherwise would be trespass it is revocable. ii) A license is simply permission to enter the licensors land . License can be irrevocable, either expressly or by conduct. The same promise may be seen as a license or an easement in gross. e) Two exceptions that would make a licensee irrevocable i) if the license is coupled with an interest its irrevocable. ii) Under the rules of estoppel - it is treated like an easement unless the parties intended or reasonably expected that it would remain irrevocable. (1) Where the owner of land has granted a license to another to use and make improvements upon the land, and the licensee, relying on this permission, does use and make improvements to the land at considerable cost, that license is irrevocable. f) Creation of an easement can be by i) Grant ii) Estoppel iii) Implication (1) implication from prior use (2) implied from necessity iv) prescription - an easement version of adverse possession (1) the use must NOT be permissive v) An easement by implication is created when one portion of land, burdened for the necessary benefit of another portion of land, is conveyed to a third party. vi) Where one grants a parcel of land to another, by a deed containing full covenants of warranty and without any express reservation, there can be no reservation by implication, unless the easement claimed is one of strict necessity. The standard for discovery under this rule is a "known or should have reasonably known with reasonably prudent investigation." g) Easements by implication i) Two varieties (1) Easement implied from prior use (a) 6 elements (i) Common owner of land and that common owner must use some part of the land for the benefit of the remaining party and then divides ownership of the serviant estate 1. someone that has a 10 acre, use 5 acres for farming and use a road on the other 5 acres to transport his farm equipment 2. serviant estate is the one where the road is (ii) Prior use must be reasonably necessary for the use and enjoyment of the so called dominant estate 1. necessary over the serviant estate easement must be necessary (iii) Prior use must be continuous (iv) At the time the division of the two parcels occurs, there must be an intention to continue the use (v) At the division of the estates the use must be in existence (vi) At the division the use must be apparent, doesnt necessarily mean visible, but definitely apparent that the serviant estate has an easement that is notoriously being used for a specific purpose 1. when the common owner conveys the serviant land (2) Easements implied by necessity (a) When the court finds claimed easement is necessary to the enjoyment of the climants land and that the necessity arose when the claimed dominant parcel was severed from the claimed servient parcel. (b) Only when an owner divides his property in such a way in where one of the landowners are land locked and does not have access to a public road

i)

(c) Affects the inention of the parties as to whether the existing use is to continue 21) Assignable Easements a) Appurtenant easements i) The benefits and burdens of appurtenant easements pass automatically to assignees of the land to which they are appurtenant, if the parties so intend and the burdened party has notice of the easement ii) The burden on the servient tenement is limited by the needs of the dominant tenement. b) Easements in Gross (assignability) i) Early cases did not allow transfer of an easement in gross ii) R3P (1) All easements in gross are assignable regardless of their commercial character iii) In general, commercially, are freely transferable, but non commercial easements in gross need to go to the intentions of the parties when the easement was created and if the transferability was not intended, it is not transferable 22) Scope of Easements a) Two issues typically raised i) How extensively and intensively can the easement holder use the easement ii) Is the servient estate owner allowed to use or interfere with that easement? b) Egress and digress LOOK this UP i) Egress to go out emerge ii) Digress to retreat c) Largely depends on how the easement was created i) If it is a grant, look at the language of the granting instrument (1) Has to be acknowledged by a notary (2) May have to be witnessed Parties intentions control the scope of any easement i) Sometimes not easy to identify ii) Express language of the agreement will control Scope of Easement by Prescription i) Court would look at how the person was using the pathway (easement) during the time of the prescriptive timeframe Easements by Estoppel i) Come from a license that the court deems to be irrevocable which would go to easement by estoppel ii) Scope of use while it was a mere revocable license Holbrook v. Taylor i) Facts (1) Holbrook tried to block off a road on his property after Taylor used it extensively while building a tenant house for himself. ii) Rule (1) A license cannot be revoked after the licensee has erected improvements on the land at considerable expense while relying on the license.

d)

e) f)

g)

Scope of Easement by Prior use i) In the case of Bailey (1) Using the pathway for sewer line (2) The court would look at what the use was when the easement was created ii) R3P (1) The holder of an easement or profit is entitled to use the servient estate in a manner that is reasonably necessary for the convenient enjoyment of the servitude. The manner, frequency, and intensity of the use may change over time to take advantage of developments in technology and to accommodate normal development of the dominant estate or enterprise benefited by the servitude. Unless authorized by the terms of the servitude, the holder is not entitled to cause unreasonable damage to the servient estate or interfere unreasonably with its enjoyment iii) If there had been cable TV back in 1904 when the sewer line would it be reasonably foreseeable that they would have run the line in the same manner when they lined the sewer i) Scope of Easement by Necessity i) Only within the scope of the necessity at the time of severance of the land j) Changes in the location of the easement i) Easement with a specified location are permanently fixed unless both parties agree to a change ii) Typically an estate that is burdened has to get permission from the dominant estate (1) Who would have an interest in the land? (a) Remaindermen (b) The buyer (c) A mortgage lender (i) Have to get the owner and the lender to sign off on it k) Brown v. Voss i) "a 'ruly' decision is unreasonable, a reasonable decision is unruly." - Professor Mark Heekin quoting his civil procedure professor ii) Facts (1) Voss (D) blocked off a private road easement for parcel B, created by express grant, after Brown (P) started building a house that would sit on both parcels B and C. iii) Rule (1) An easement appurtenant to one parcel of land may not be extended by the owner of the dominant estate to other parcels owned by him, whether adjoining or distinct tracts, to which the easement is not appurtenant. (2) If an easement benefits its owner in the use of a particular parcel of land, any extension of the easement to benefit a non-dominant estate [parcel] is a misuse of the easement. l) Misuse is an easement is a trespass 23) Termination of Easements a) 5 ways i) By expiration of its terms (1) typically easement by grant (2) most easements that are created by grant will run in perpetuity, but sometimes there is durational language ii) Merger of ownership of servient and dominant estates (1) when title to the benefited title and the servient title is under the same owner, owner cannot have an easement for himself iii) By some act of the easement holder

h)

b)

release of an easement where the party that is benefitted will release that easement usually is voluntary if it is an easement of appurtenant and the fee simple owner of the benefitted estate says to release, have to get affirmation by everyone who has interest in the easement going forward iv) By complete secession of the purpose (1) if their purpose is completely distinguished, the easement ceases (2) when the necessity ceases, the easement ceases (3) easement by estoppel when the reliance on the easement ceases v) By some act of the servient estate holder (1) if the servient estate holder uses the easement adversely for the prescription period, the easement can be terminated Preseault v. United States i) Facts (1) Property owners sued the Government for an unauthorized taking after the Government authorized the conversion of an abandoned railroad easement into a nature trail across the owners property. ii) Rule (1) An easement is terminated by abandonment when nonuse is coupled with an act manifesting either a present intent to relinquish the easement or a purpose inconsistent with its future existence.

(1) (2) (3)