Land Conveyancing

Conveying land is a complex process involving contracts, deeds, the recording system, and mortgages.

 

The Land Contract

1. Requirements

   1. The land contract must satisfy the Statute of Frauds by being in writing.

   2. The land contract should also describe the land, identify the parties, demonstrate an intent to sell, and specify the price.

   3. One exception to the Statute of Frauds is part performance. If there is an oral contract, and the buyer does at least two of the following, a court will find a valid contract:

      1. The buyer takes possession of the land;

      2. The buyer pays all or part of the purchase price; and/or

      3. The buyer makes improvements on the property.

2. Marketable title

   1. Marketable title is implied if the contract is silent as to the quality of title.

   2. Marketable title is free from reasonable doubt, lawsuits, or the threat of lawsuits.

   3. Title is unmarketable if part of the land is subject to adverse possession, there are encumbrances like servitudes or a mortgage, or there is a violation of a zoning ordinance.

 

The Mortgage

A mortgage conveys the security interest in land as collateral for repayment of an obligation. The lender is the mortgagee; the borrower is the mortgagor.

1. Creation

   1. Material information (parties, description of land) must be contained in the mortgage and delivered to the mortgagee.

   2. A mortgage does not have to be recorded, but it is customary to do so.

2. Foreclosure

   1. Upon receiving written notice of foreclosure, the mortgagor may either pay off the mortgage or contest the foreclosure.

   2. The mortgagor has the right to redeem the property up until the end of the foreclosure process.

   3. The property is sold at a public auction, and any surplus is paid first to the junior lienholders and then to the borrower.

   4. The mortgagor may be liable if the proceeds of the sale do not satisfy the debt.

 

The Deed

1. Types of deeds

   1. General warranty deed: Offers the most protection and contains six covenants that warrant against all defects.The grantor is liable if a covenant is breached.

   2. Special warranty deed: Also contains six covenants but applies only to defects caused by the grantor.

   3. Quitclaim deed: The grantor makes no covenants or promises.

2. Requirements

   1. Execution: The deed must be in writing, identify the parties, describe the property, and be signed by the grantor.

   2. Delivery: The grantor must demonstrate the intent to transfer an interest in land immediately. Words or actions may demonstrate intent; physical delivery of the deed is not required.

   3. Acceptance: The grantee must accept the deed or disclaim within a reasonable period.

 

Conflicting Title

1. First in time rule

   1. The first in time rule applies to situations in which an owner conveys title to one buyer and then coveys the same title to another buyer.

   2. The rule states that the person whose interest is delivered first prevails.

   3. The exception to the rule is the subsequent bona fide purchaser, discussed below.

2. Bona fide purchaser

   1. A bona fide purchaser is a person who purchases land for value without notice that another party has also purchased the same land.

   2. Whether a subsequent bona fide purchaser prevails depends on the jurisdiction.

3. Notice: A purchaser may have notice in one of the following ways:

   1. Actual: Literal knowledge

   2. Inquiry: Facts that a reasonable investigation would reveal

   3. Record: Facts that a search of public records would reveal

   4. Imputed: Knowledge of one that is considered knowledge of the other (valid only in certain relationships)

4. Jurisdictions: There are two main types of jurisdictions:

   1. Notice: A subsequent purchaser for value without notice of the previous interest prevails, no matter who records first.

   2. Race-notice: A subsequent purchaser for value without notice of the previous interest to record first prevails.