Warranties, Recording PDF

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3/22/2021 Notebook:

Property

Created:

3/22/2021 7:59 AM

Author:

Olivia Dean

Updated:

3/22/2021 9:58 AM

Delaying midterm conferences until after April 1 Final exam: 140 minutes, 50-54 points available Better opportunity to get more points

Chapter 7 (cont.) Contract warranties (present warranties) merge with title warranties unless they are collateral agreements. The default deed is a marketable title (or "general warranty deed:" deed that says transferor is warranting no defects in title whatsoever for entire life of property) - gives transferee greater protections, favors transferability/marketability of property Quitclaim deed: exception; norm in gratuitous transfer, what buyer gets when lender forecloses and sells Modern standard is buyer also expects title insurance The beneficiary of title insurance is the transferee (or the lender from whom the transferee borrows), which explains who pays for it. Seller pays for title insurance (424/448) but cost is passed thru to the buyer (441/466) who is actually protected by the title insurance A general warranty deed, coupled with title insurance, protects the transferee against all defects in title for the entire chain of title and therefore constitutes the “gold standard.” Title insurance not necessary (unless lender requires) but provides the best protection to the transferee Special warranty: durational protection; quitclaim: no warranties Special warranties differs from general warranties because the special only guarantees against defects that arose while the transferor held title, not for the full chain of title. Warranty: covenants or promises, 2 categories Present ("contract") warranty

Future ("deed") warranty

Promises made in contract to purchase -- to deliver deed that is marketable

Transferor will defend title they represented themselves as conveying

End at the date of closing, do not run with the land

Run with the land (for as long as statute of limitations), may be asserted in the future

Warranty against encumbrances: "no other person has an interest in this property superior to yours" or "I have disclosed all that exist" Right to convey: promise that grantor has legal right to convey estate described in deed

Further assurances: if need arises, seller will produce documentation that proves you got the title that a general warranty represented you were getting General warranty: seller will perform litigation necessary to

Warranty of seisin: warrants grantor is seized (holds both title and possession) of estate deed purports to convey in both quality and quantity

establish they gave good title Quiet enjoyment: covenant that you are getting good title

Lohmeyer v. Bower Are there restrictions/violations that have messed up the title? Zoning restriction that has been violated Zoning restrictions do not make title unmarketable; zoning violations would make title unmarketable; restrictions alone only affect value Title acquired by adverse possession is marketable - that's the whole point of adverse possession: to give adverse possessor good title May have to go to court to quiet title (prove that you've acquired title through adverse possession), which gives you good/marketable title

True for present/contract covenants The statute of limitation begins to run when title is delivered Do not run with the land Damage is measured by what the transferee did not receive Cannot be breached in a gratuitous conveyance, because there is no contract Of necessity, then, any issues that exist must trigger breach of a deed covenant, which will impact the applicable statute of limitation. Note also that the typical deed in a gratuitous transfer is a quitclaim deed -- because there is no demand/expectation for warranties of title.

True for future/deed warranties The state of limitation begins to run when covenant is breached These run with the land, until statute of limitation expires Damage is measured by cost to remedy or remove defect Because future/deed covenants only arise when title is questioned in the future, they must run with the land and can support an action against a transferor several conveyances earlier in the chain of title. Breach of a present covenant can only be asserted against the immediate transferor, who is unable to convey marketable/merchantable title. Future covenants may not be discovered until sometime in the future and must run with the land to be of any significance. As such, until expiration of the statute of limitation, they can be asserted against anyone in the chain of title who is responsible for the breach of warranty.

Brown v. Lober Present covenant breached only if significant risk of litigation; future covenant breached only if recipient of title gets affirmatively bad title Case really about statute of limitations Statute of limitations on breach of present/contract warranty began at time of closing (1957) meaning action involved in case was outside SoL

How would you cure? Go out and buy the other 2/3 of minerals or keep mining the coal and try to acquire adverse possession

Title Insurance Gold standard, smart investment Only protects against restrictions on title that are on the record Unrecorded restrictions are outside of this protection Title insurer will likely make you aware of anything they're not covering Riordan v. Lawyers Title Insurance Corp: Policy exclusions Title insurance compensates for monetary loss due to defects in marketable title; the coverage may only pay to rectify the defect (or the diminution in market value if it cannot be cured). Not necessarily physical defects This explains why the gold standard is both a general warranty deed and title insurance. Together they best protect a transferee and they each accomplish different things.

Chapter 8 The most important rule about priority of title is that the law promotes commerce: A Bona Fide Purchaser (BFP) for Value who purchased title in good faith, without knowledge of any prior claim, takes better title than any prior transferee. First-in-time priority is a presumption -- a default rule -- but that holder of prior title is inferior to a subsequent BFP for Value, which can trump the first-in-time holder. Regarding Bona Fide Purchaser for Value: Gratuitous transferees could be protected by shelter Consideration may include taking property subject to a debt Consideration may include partial payment Issue: how much consideration is enough? Most important element is "BF" - bona fide - component, meaning without notice Shelter rule: "I get whatever you had." If I receive title from you, I get all of your good title even if I know when you convey title that there is someone else claiming title If you had better title than someone between us, there could be a Bona Fide Purchaser for Value who does not trump me even though I knew about them "Notice" comes in several flavors Actual Notice: Constructive-Record Notice: recording interest in property (best to establish!) Constructive-Inquiry Notice: would make a reasonable person think there's a problem they should investigate Implied notice — NOT considered notice, might refer to constructive notice The priority rules operate to give a transferee title that is good as against everyone in the world. The exception is a BFP, who might acquire better title. If, however, an interest is properly recorded, a subsequent transferee cannot be without notice and thus cannot be a BFP. key here is "properly" recorded, which constitutes notice, which is what precludes being a BFP If the priority rules fail to establish title that is good as against another claimant, then the transferee whose title is trumped by another claimant has NO recourse against their transferor. Depends on what transferee got from transferor A claim against the transferor is only as good as the deed obtained – a quitclaim gives the transferee no cause of action (other than, perhaps, restitution of any consideration given). A general or special warranty deed may, however, give the transferee rights against the transferor.

Marketable title acts: requires owner to re-register their property periodically (every ~30 years), eliminates any title defects, ends SoL for claims

Recording errors Common Wild deed: a transfer made by thetransferee, following a “missing link” transfer (missing link meaning that a prior transfer was not recorded) Not the one that was not recorded but the one transferred after that Late recording: title is not recorded until after the original transferor makes another, subsequent conveyance May occur Early recording; not as likely, individual recording title they don't yet have Common grantor: not very common

Read to 482/508 for Wednesday, possibly may cover Monday too!...