Title Assurance Recording a recording act creates a system for placing conveyances in a public record, and then stipulates

s who has priority in the event of conflict - a deed is valid without recording, but an unrecorded deed will always lose out to a recorded deed if both deeds are from the same grantor for the same property Title insurance a method of obtaining assurance of good title - for a fee, a title insurer agrees to defend title and to compensate for the loss of the insured title to the claim of a paramount owner - a title insurer will not insure title unless the purchasers deed is recorded and the insurer is satisfied that no rival claimant can have a better title Recording acts and chain of title problems - the recording system a public official in each county (country recorder) maintains a record of the transactions affecting real estate in that county - deeds and mortgages are most common things recorded - recorders job is to accept instruments for filing by stamping the date and time of filing on them, then photocopy them and place the copy in an official record; the original is returned to the person who is filing; then the recorder indexes the instrument by noting a description of the instrument in an index maintained to facilitate location of the instrument - Two types of indexes: o Grantor-grantee index most common; alphabetical record of all grantors and all grantees, by surname; typical entry will contain the date, name of the grantor, the other party to the transaction, a brief description of the property and instrument, and a citation to the precise location in the public records of a complete copy of the instrument o Tract index a few jurisdictions use this; every transaction pertaining to a particular parcel is entered in one location, instead of chronologically by grantor and grantee; most common where property has been plotted by map into various blocks and lots within blocks. What a title searcher does: - objective is to identify all the past title transactions pertinent to a particular parcel in order to determine the present state of title - in a grantor-grantee index, the searcher begins by looking back in time through the grantee index to find the transaction by which the present owner acquired title, then searches the grantee index further back to find the transaction by which the present owners grantor acquired title; this continues until an adequate root of title has been found; then the searcher looks in the grantor index and search forward in time, beginning with the initial grantor to see if any owner ever conveyed her interest prior to the grant that appears to make up the chain of title traced backward in time - any title searcher is obligated to exercise reasonable diligence in performing the search; a searcher is liable for a negligent search that results in damage to the buyer if the search results are provided to the buyer

Race acts provides that, as between 2 grantees to the same property, the earliest to record prevails, hence there is a race to record first Notice acts a subsequent bona fide purchaser without notice of a prior unrecorded transfer prevails over the prior purchaser who has failed to record; this is true even if the subsequent purchaser has not recorded - IE A conveys to B who fails to record the deed. On the same day, A conveys to C for $100,000. C is ignorant of As conveyance to B. C prevails over B regardless of who records first because at the moment A conveyed to C for value, C lacked notice of the prior conveyance to B, and B had not recorded his deed (which would have given constructive notice to C) Race-notice acts protects only those subsequent bona fide purchasers who lack notice and who record before the prior purchaser - used because they 1) encourage recording and 2) eliminate disputes over which of the 2 conveyances was first delivered - IE June 1, A conveys to B, who does not record. July 1, A conveys to C for $100,000. C is ignorant of the prior conveyance to B. July 15, B records her deed. B prevails over C because even though C lacked notice of the conveyance to B, B recorded before C Consequences of recording: - recording provides constructive notice to the world of a conveyance - even if a later purchaser fails to consult the record, he is charged with knowledge of its contents - in a race or race-notice jurisdiction recordation cuts off the possibility that either a prior unrecorded purchaser or a later purchaser could prevail - in a notice jurisdiction recordation provides constructive notice, thus preventing later purchasers from prevailing Consequences of NOT recording: - if nobody records, then the common law principle of first in time applies, except in a notice jurisdiction when the subsequent bona fide purchaser lacks notice - without recordation, the grantor is left with the power to convey good title to a later purchaser When is an instrument recorded? - virtually anything that affects title to or an interest in real property may be recorded - most jurisdictions require a notorial acknowledgment where a grantor must prove his identity y to a notary and sign the document with the notary as witness - if the recorder fails to index the instrument or the index is done so improperly that it cannot be found by a diligent searcher, jurisdictions are split on what the proper solutions is

o the older rule is that a purchaser is charged with constructive notice of a record even though there is no official index which will direct him to the particular instrument; newer rule is that the unindexed or improperly indexed instrument ought not provide constructive notice Mother Hubbard clauses an instrument that describes Blackacre and also includes all other land owned by the grantor in the county; the recorder can only recorder this instrument by reference to Blackacre because it is an unreasonable burden on the recorder to search the records to identify all the other property owned by the grantor; these clauses are void as against later purchasers of the grantors property (other than Blackacre) because a diligent searcher of the index (with respect to a parcel other than Blackacre) will never locate any reference to the Mother Hubbard clause o IE A owned interests in 8 oil and gas leases in Coffey County. A assigned B her interest in those leases under an assignment that specifically described each of the 7 different parcels and included a Mother Hubbard clause that assigned to B As interest in all oil and gas leases in Coffey County owned by A, whether or not such leases are specifically enumerated in the assignment. The Kufahl lease, in which A had an interest, was not specifically described. Four years after B recorded the assignment A assigned her intrest in the Kufahl lease to C who had checked the public records and had obtained an abstract of title from a professional title searcher. Neither search revealed the existence of the Mother Hubbard clause in the A to B assignment. C prevailed, taking the Kufahl lease free of Bs interest because it was not reasonable to expect a title searcher to locate and read every other conveyance ever made to A at any time conferring an interst in an oil and gas lease in Coffey County. misspelled names all jurisdictions agree that if a name is misspelled so badly that it doesnt even sound like the correct name, there is no constructive notice o the doctrine of idem sonans holds that a misspelling that sounds identical to the correct name gives constructive notice ineligible instrument

Scope of protection afforded by recording acts: - invalid conveyance recordation does not make an invalid conveyance valid (ie if the instrument was forged or never delivered) - interests in land created by operation of law recording acts only apply to conveyances (deeds, mortgages, grants, contracts) and liens created by operation of law (judgments); they do not apply to interests created by operation of law, such as adverse possession, prescriptive easements, or implied easements - Bona fide purchasers one who gives valuable consideration to purchase the property and is without notice of a prior unrecorded; race acts protect bona fide purchasers only to the extent they are the first to record o Shelter rule protection given to a bona fide purchaser under a recording act extends to all takers from the bona fide purchaser, even if such a taker knows of a prior unrecorded conveyance

IE A conveys to B, who does not record. A then conveys to C, a bona fide purchaser who DOES record. C then conveys to D, who knows all about the A-to-B deed. C will prevail over B in all 3 types of jurisdictions. In a notice or race-notice jurisdiction, Ds knowledge of Bs deed is irrelevant only because he is a taker from C, a bona fide purchaser. D is sheltered by his vendors status as a bona fide purchaser Mortgagees generally treated as bona fide purchasers, either because the stature specifically includes them or because courts have intereprted the phrase bona fide purchasers to include them; this only applies to a mortgagee who actually gives value (ie the loan proceeds) in return for the mortgage o In most states, a mortgagee who receives a mortgage to secure a pre existing debt without some detrimental change in its position (ie a reduction in the interest rate) has not acquired the mortgage for value and so is not a bona fide purchaser Private Land Use Controls

Easements a landowner grants another person the right to use his land for some specific purpose or in some manner - 4 types: o Affirmative in gross o Affirmative appurtenant o or negative in gross o Negative appurtenant - an easement appurtenant is one that benefits the owner of another parcel of land o the benefited parcel is called the dominant estate o the burdened parcel is called the servient estate - an easement in gross is designed to deliver a personal benefit rather than to benefit a landowner o not attached to or appurtenant to any parcel of land o creates a PERSONAL right but that right may be assigned if the parties intend - created by express grant, by equitable estoppel, implication from prior use of an owner, by necessity, and by prescription (adverse use) - terminated by abandonment, merger (easement holder buys land that easement was on), release, actions inconsistent with the granted right and prejudicial to the burdened landowner, accidental destruction, prescription, or markedly changed circumstances Real covenants - a promise concerning the use of land. Real covenants are classified as either affirmative, a promise to do something (e.g. build a fence) or negative, a promise to not do something (e.g. not use the land for commercial activity). - vertical privity must exist for a real covenant to be enforced by or against subsequent owners of the land

o vertical privity privity of estate between promisor and his assignee and between the promisee and his assignee o privity of estate - a legal relationship between a landlord and a tenant, with shared rights and responsibilities. Equitable servitudes - a promise concerning the use of land that (1) benefits and burdens the original parties to the promise and their successors and (2) is enforceable by injunction. - privity not required - promise must be intended to bind succeessors, successor must have notice of the promise, the nature of the promise must touch and concern use of the burdened land, and the promise must benefit neighboring land License permission to enter licensors land (dinner guests, workers, shoppers, etc) - revocable TRANSFERS OF REAL PROPERTY Two exceptions to the Statute of Frauds: 1.) Part Performance elements = oral contract and reasonable reliance on the contract a. Enough reliance that it would be inequitable to deny specific performance b. Example: A orally agrees to sell B a building lot for $15,000. B then sold his house, expecting to build a new house on the lot. A then refused to complete the sale. Bs reliance was reasonable and specific performance is required. 2.) Equitable Estoppel seller causes buyer to suffer a detriment in reliance on an oral contract a. A orally agreed to sell B two building lots and to convey title when construction was well under way. A reaffirmed this promise to Bs construction lender, inducing a $5,000 loan to B. After the foundation was constructed, B ran out of money and assigned his contract to C. A refused to convey and the court ruled that A was equitably estopped from asserting the Statute of Frauds as a defense. Implied obligations in EVERY contract - good faith - time of closing adding in a time is of the essence agreement can make a party that prevents a sale from closing on the set date liable - marketable title a seller can deliver marketable title by either producing good record title or proving title by adverse possession Defective title makes title unmarketable - defective chain of title deed describes wrong land; non-existant link in title - encumbrances a burden on the title (mortgage, lien, easement, covenant) - zoning restrictions

Equitable conversion purchaser of real property becomes the equitable owner of title to the property at the time he/she signs a contract binding him/her to purchase the land at a later date. - The seller retains legal title of the property prior to the date of conveyance, but this land interest is considered personal property (a right to the payment of money, rather than a right to the property). - The risk of loss is then transferred to the buyer Quitclaim deed - a document by which a person (the "grantor") disclaims any interest the grantor may have in a piece of real property and passes that claim to another person (the grantee) Sales contract identifies parties, sets sales price, describes the property, sets the closing date, delineates the payment method, records the deposit amount, and explains what happens to the deposit at closing if buyer defaults or repudiates the contract. - if the property is mortgaged, the buyer should state that he will either assume the debt or take the property subject to the debt, or that the seller will pay off the debt at or before closing Closing after signing the sales contract, the purchaser or his broker may inspect the property, review title documents, survey the property, and secure loan commitments - at the closing, the seller transfers the property to the purchaser by deed (general warranty deed, special warranty deed, or quitclaim deed). o General warranty deed and special warranty deed say that seller owns the property and has the right to convey the property, the property is not burdened with undisclosed encumbrances, the purchaser can enjoy the property in quiet enjoyment, and other matters o The purchaser may pay the seller cash or execute a notice to the seller (or both) Remedies for Breach if one of the parties breaches or repudiates the sales contract or fails to close, remedies include specific performance of the sale and purchase, nominal damages (out of pocket expenses), actual damages (the difference between the propertys fair market value at the time of the breach and the contract sales price), or liquidated damages (seller keeps deposit) -

Brokers Duty to Diclose Latent Defects to Purchasers caveat emptor is the default rule in many states even with caveat emptor prevails, a broker can still be liable for intentional misrepresentation or for concealing facts or misleading purchasers o most states hold brokers liable for negligent misrepresentation as well

latent defects those not discoverable by a buyer upon a reasonable inspection o a broker can be liable if the defect is latent, and the condition or defect is a material defect (one significantly effecting the value or use of the property)

Statute of Frauds deeds and real estate contracts MUST be in writing and signed applies to easements, real covenants, mineral rights, water rights, long term leases, life estates, remainders, and liens

Part Performance and Other Exceptions Part performance - many courts limit the part performance theory to cases where the purchaser does some combination of the following: o pays the contract price o takes possession of the property o improves the property Equitable Estoppel a few states will excuse and oral contracts noncompliance with the SOF if a party seeking performance, in justifiable reliance on an oral contract and the contuing assurances of the other party, so substantially changes his position that injustice would result unless the contract is enforced o elements: A certain and definite oral contract Acts that refer to, result from, or are made in pursuance of the agreement, an d A refusal to fully execute the oral contract would operate as a fraud on, and place the moving party in, a situation not remediable by damages

Marketable Title marketable title is titled that is solid enough that a reasonable person knowing all the facts would accept and pay for the title o if buyer discovers that title is unmarketable before closing, he can rescind encumbrances only make property unmarketable when the buyer is not made aware of the encumbrances typical encumbrances/defects include undisclosed co-owners, liens or mortgages, easements, real covenants or equitable servitudes, leases, mineral rights, options, erroneous acreage, flaws in the deed records, and ownership based on adverse possession real covenants and equitable servitudes are contractual restrictions and duties included in prior deeds or other documents that affect the use of the property

o ie restriction of use for residential purposes only, prohibitions of animals, mobile homes, or alcohol sales, minimum lot sizes, etc failure to disclose zoning laws and building codes does not make title unmarketable because reasonable buyers would know the laws before purchasing a violation of a restrictive covenant makes title unmarketable if the property is landlocked, meaning no access to it, it is unmarketable unless the seller discloses the lack of access in the sales contract

Caveat Emptor and the Duty to Disclose Defects caveat emptor is still the majority rule sellers can not misrepresent, hide, or mislead states are moving to require sellers to disclose material latent defects to buyers but does NOT have to disclose patent (visible) defects or defects that are not material o only applies to residential property, not commercial

Time for Performance a purchaser cannot rescind a contract as soon as a title defect or physical defect is discovered. The seller has time to rectify or remove the defect

Equitable Conversion and Risk of Loss equitable conversion the purchaser suffers or benefits from any change in the propertys fair market value before closing. Purchaser has real property interest. o Majority places risk of loss of property on the purchaser o Courts may order specific performance but abate (reduce) the purchase price for the loss of value attributable to the damages or destroyed building in most states, both the buyer and seller have insurance in the property during the executory period (between the sales contract and closing) o if the seller has insurance and the purchaser doesnt, and the purchaser has the risk of loss, most courts require the seller to apply the insurance proceeds against the sales price on the theory that the seller holds the insurance in constructive trust for the purchaser

Delivery a deed transfers title only when: o the grantor intends to presently convey an interest in property o the grantor delivers a deed to the grantee o the grantee accepts the deed

a grantors giving of a deed to a grantors agent is NOT delivery until the agent delivers the deed to the grantee, but when a grantor delivers the deed to the grantees agent, that is delivery o a grantor delivering deed to the escrow agent is delivery if a grantor hands a deed to the grantee, and the grantor reserves a life estate, the deed is delivered because some interest in the property shifts to the grantee immediately

Mortgages the borrower has title and possession of the property title theory lender has legal title to the property until the debt is repaid o the lender goes into possession of the property as soon as there is a default and remain in possession until the foreclosure proceedings lien theory the mortgage is a security device giving the mortgagee (lender) rights to the property when the mortgagor (borrower) breaches some term of the mortgage o in lien theory states, the lender has legal title and the borrower has equitable title in the property o the lender must wait until foreclosure proceedings are complete to go into possession installment sales contract seller retains legal title and does not deed the property to the purchaser until the purchaser pays the full purchase price o meanwhile, the purchaser takes possession and the parties act pursuant to the sales contract o purchaser has an equitable interest in the property bunt unless the purchaser records the installment sales contract or a memorandum of contract in the local deeds records, the purchaser risks losing the property to the sellers creditors or to a bona fide purchaser for value once a borrower has paid off the mortgage, the lender releases the mortgage, and this release should be recorded in the local deed records if the debtor defaults, a lender has various options: o judicial foreclosure is most common today lender files a complaint, borrower answers, and a trial is conducted should the borrower allege a foreclosure sale is inappropriate

Merger Doctrine the sales contract merges into the deed and thus the provisions of the sales contract are no longer enforceable after closing

Types of Deeds general warranty deed - the seller warrants against all defects and encumbrances in title except those specifically excepted in the deed itself, no

matter whether the seller or some predecessor created the defect or whether the seller even know of the defect - special warranty deed the seller warrants against defects in title, but the seller limits his warranty to those defects or encumbrances that are attributable to some act by the seller. o The seller makes no warranties about defects or encumbrances created before the seller took title. The seller may include each preexisting exception and encumbrance in the deed, but these representations will not open the seller to liability for unknown, unspecified preexisting defects or encumbrances - quitclaim deed contains no warranties o seller conveys what ever interest he owns, but the seller does not even warrant he has title o usually used between family members, short term ownership situations, and boundary dispute resolutions - EXAMPLE: o A grants Corporation, Inc. a pipeline easement over Blackacre in 1990. A conveys Blackacre to B, the deed mentioning the easement. B conveys to C without mentioning the easement. C conveys to D, D conveys to E, all without mention of the easement. Finally E conveys to F by warranty deed. One year later, Corporation, Inc. notifies F of its plans to dig up the land to place pipes in the easement. If deed was a GENERAL warranty deed = E liable to F If deed was a SPECIFIC warranty deed = E not liable to F bc E did not create or grant the easement If deed was a QUITCLAIM deed = E not liable to F Deed Covenants Six types of deed covenants: o Seisen present covenant grantor owns what he is conveying o Right to convey present covenant grantor has right to convey what he is conveying o Covenant against encumbrances present covenant grantor warrants that no encumbrances burden the title except for those mentioned in the deed o Warranty future covenant grantor covenants to defend against and compensate the grantee for any lawful claims made against title o Quiet enjoyment future covenant grantor covenants that no one with superior title will interfere with the grantees possession o Further assurances future covenant requires grantor to defend the grantees title in any ensuing litigation and to execute any document needed to cure a defect or possible defect in the conveyancing document

present covenants the grantee can bring suit for breach of the covenants immediately even though no person has stepped forward to assert a superior right to the property o statute of limitations begins running on the delivery date future covenants obligate the grantor to perform some act, such as defending against a third party asserting a higher claim to the property, upon some future event o grantee cannot bring suit against the grantor unless and until the future covenant is actually breached o the statute of limitations does not begin to run until a third party asserts a superior title or the grantor refuses to execute a needed document

Damages Two rules apply: o The maximum the grantee can receive on the breach of a covenant is the original amount the grantee paid his grantor for the property o The maximum the grantee can receive from a remote grantor will be the amount the remote grantor received fro ma bona fide purchaser

Easements Implied from Prior Use courts imply easements from prior use when the use was in place at a time a single parcel of land was divided into two parcels. Elements: o The unity of ownership is severed o The use was in place before the parcel was severed o The use must have been visible or apparent at the time of the severance; and o The easement is necessary for the enjoyment of the dominant estate

Prescriptive Easements easement gained by long continued adverse use Elements: (same as adverse possession) o Actual o Open and notorious o Hostile without permission o Continuous o Exclusive most states omit

Assignability of Easements most easements are assignable (sold, gifted, devised, inherited, etc) Easement appurtenant runs with the land

o Whoever owns the dominant estate has the right to continue the easement over the servient estate o A person selling the dominant estate loses her easement rights to the person buying the dominant estate o The servient estate remains burdened o Divisible Easement in gross benefits a person whether or not he owns a particular parcel of land o Commercial easements in gross pipelines, railroads assignable o Personal easement in gross granted for the owners personal enjoyment or pleasure Majority says not assignable Not divisible o Exclusive easements in gross the easement holder has the sole power to authorize other to use the easement o divisable o Non-exclusive easement in gross the easement holder can not prevent the servient estate owner from granting the right to use an easement to other persons o Not divisible

Scope of Easements location easements must be located on an identifiable part of the servient estate o if the easement owner strays from outside the boundries of the easement, he is a trespasser intensity of use an easement holder can use the easement as long as the use does not overburden the servient estate o can only use the easement for the authorized purpose of the easement benefit an easement appurtenant may benefit the dominant estate only improvements, maintenance, repair easement holder has the right to make improvements to promote the use of the easement within the scope of the easement

Termination of Easements by the terms of the grant deed might have an expiration date purpose for easement ends merger forfeiture for misuse release transfer all or part of the property to the servient land owner abandonment estoppel

prescription recording acts a bona fide purchaser purchases the property eminent domain

Real Covenants and Equitable Servitudes Real covenants run with the land o An agreement or promise or deed provision that relates to the property and that binds or benefits subsequent owners of the respective properties solely because they own the property o Elements Intent to bind successors (not just original parties) Touch and concern relate to the use of the land Privity of estate Horizontal or vertical o Affirmative and negative covenants (negative = restrictive) Equitable servitudes o Elements: Intent to bind successors Touch and concern Notice successor must have notice of the promise

Termination of Covenants and Servitudes Can be terminated by: o Terms of the covenant expiration or until some event o Merger o Release o Rescission o Unclean hands o Acquiescense passively endures pattern of violations by landowners o Abandonment o Laches unreasonable long delay to bring suit o Changed conditions conditions change so that covenant no longer serves its purpose o Relative hardship balancing benefits vs hardship to community o Recording acts bona fide purchaser takes without notice o Eminent domain

Zoning if a state enacts a zoning law must do so to promote a legitimate state interest or else its unconstitutional

nonconforming uses those legal uses in place when an ordinance takes effect and that would not be permitted in that district under the newly enacting zoning ordinance under the Takings Clause the govt can take or force the landowner to sell the property to the govt for public purposes but the govt must pay just compensation amortization variance allows a landowner to build on land or use the land in a manner otherwise not permitted by the local zoning ordinance o used to keep the ordinance from denying a landowner all reasonable use of his property o special exceptions usually serve the people living or working in the district; permitted conditionally, usually because of their size and the potential harmful effects associated with traffic, pollution, or other safety or health concern floating zone a zoning district authorized in a zoning ordinance but not located on the zoning map so that it does not yet encompass any land