property 2 lecture

American Property Law

Introduction to the Transfer of Property&

Problem Areas: Concurrent Ownership

Definitions

Collateral – property pledged to secure loan

Deed – written document that transfers title (ownership)

Escrow Agent a person or entity holding documents and funds in a transfer of real property, acting for both parties pursuant to instructions.

Statute of Frauds – law requiring certain contracts to be in writing.

Title – ownership of property that stands against other claims

Title Insurance – insurance against bad title

Attorney's Traditional Role

Traditional Role of the Attorney:

Negotiate deal

Draft sales contract

Evaluate title documents

Issue a title opinion

Advised client about zoning, tax and other issues

Negotiate the terms of financing

Help client fulfill contract conditions

Negotiate or litigate disputes

Real Estate Purchase Stages

Locating the Buyer

Done by broker

Negotiating the Contract

Assisted by broker

Preparing the Closing

Assisted by broker. Title Insurance Company

Closing the Transaction

Overseen by attorney or escrow agent.

Real Estate Purchase

The Purchase Contract Financing Title Assurance Transfer Taxes on the Sale of Property Income Tax on Gains Realized from the Sale

The Purchase Contract

Offer must be in writing (proposed agreement)

Statute of Frauds requires this

Rules are governed by general contract rules Closing (transfer of deed) takes place after

purchaser had opportunity to:

Investigate condition of property

Research title status

Obtain financing

Financing

Mortgage

Usually requires down payment of 1020%

Property is used as security for loan

Default can result in foreclosureJudicial

Power of Sale

Land Contract

Buyers pays seller in installments

Title Assurance

Seller must deliver “merchantable” or “marketable” title.

Determining quality of title requires records check

Deeds (title) recorded at “register of deeds”

Title chain search determines quality

Recording is not required but strongly advisable

Notice states and the Good Faith Purchaser for Value

RaceNotice states – see next slides for examples

Search normally done by Title Insurance Co.

Recording Act: MD

§ 3203. Subsequent deed; priority of deed first recorded

Every recorded deed or other instrument takes effect from its effective date as against the grantee of any deed executed and delivered subsequent to the effective date, unless the grantee of the subsequent deed has:

(1) Accepted delivery of the deed or other instrument: (i) In good faith; (ii) Without constructive notice under § 3202; and (iii) For a good and valuable consideration; and

(2) Recorded the deed first.

Recording Act: MD

§ 3202. Possession under an unrecorded deed

If a grantee under an unrecorded deed is in possession of the land and his possession is inconsistent with the record title, his possession constitutes constructive notice of what an inquiry of the possessor would disclose as to the existence of the unrecorded deed.

Recording Act: MI

565.29 Unrecorded conveyance; validity against subsequent purchaser; relation of quit claim deed to good faith.

Every conveyance of real estate within the state hereafter made, which shall not be recorded as provided in this chapter, shall be void as against any subsequent purchaser in good faith and for a valuable consideration, of the same real estate or any portion thereof, whose conveyance shall be first duly recorded. The fact that such first recorded conveyance is in the form or contains the terms of a deed of quitclaim and release shall not affect the question of good faith of such subsequent purchaser, or be of itself notice to him of any unrecorded conveyance of the same real estate or any part thereof.

Taxing the Purchase

Transfer Tax

Levied by states, similar to sales tax

May set sum or % of sale

Income Tax on Gains

Profits from sale of home is generally taxable with exceptions:

Only profits over certain sum are taxed

Primary resident owned for X number of years not taxed

Reinvesting into investment property avoids tax

Other Transfer Methods

Personal and Real Property

Gifts

Judicial Sale – common to satisfy civil judgments

Trusts

Personal Only

Finders

Bailments

Adverse Possession generally does NOT applyOpen and notorious hard to prove (movable)

Gifts

Donor = person giving the gift Donee = person receiving the gift Takes effect upon delivery of possession

Gifts of Real Property must be writing, usually in the form of a deed.

NOTE – statement of intent to make gift is generally not a contract.

Lack of consideration.

Trusts

Purpose

Transfer Title – title of property is transferred to “trustee” for benefit of “beneficiary”.

Avoid Probate – because title has already been transferred before death, there is nothing for the court to transfer upon death.

Avoid TaxesIncome Taxes – paid by beneficiary

Estate Taxes – transfer of property trust results in gift tax that is lower.

Finders

Finder takes title to found property above all others except original owner.

Abandonment – if property is deemed abandoned, then finder has title over all others.

Mislaid – if property was set in specific place and then forgotten, owner of place where property was laid has title, not finder, subject to original owner.

Bailment

Circumstances when property is left in the care of another.

Car in parking lot

Jewelry brought to Jeweler for repair.

Issues arise when “bailee” (person in possession) loses, conveys or damages the property.

Question normally centers on standard of care.

Joint Tenancy

Joint Tenancy – joint owners

Owners own an undivided equal portion of the property.

All owners have right to possess and enjoy the entire property.

Right of Survivorship

Partition

Introduction to Property

Problem Areas: Concurrent Ownership

&Transfers of Interest

Tenancy in Common

Most common form of concurrent ownership Generally, each tenant owns undivided share of

entire property.

Thus, each also have equal right to possess, share rents, and share appreciated value

NOTE – parties can agree to have “shares” in the property that generally impact how rents and appreciated value are shared.

Interest is transferable and inheritable

Joint Tenancy

Same principles as tenants in common EXCEPT, upon death, tenant's share passes to other tenants and is NOT deviseable (cannot be inherited).

At Common Law, to create must have:

Unity of Time, Unity of Title, Unity of Interest, and Unity of Possession

NOTE – this Common Law rule has been modified in most states.

This can be destroyed by severance.

Severance: Multiple Parties

A, B and C are joint tenants. A conveys interest to D.

B and C remain joint tenants, but their relationship to D is a tenancy in common.

If B dies, his interest passes to C and we are left with C and D as tenants in common.

If B then conveys his interest to E, we no longer have a joint tenancy because only one of the original joint tenants remain. Thus, C, D, and E are now all tenants in common.

Riddle v. Harmon

What is the court being asked to decide in this case? What did the wife in this case do to give rise to this

action? How was it argued that this conveyance resulted in a

new tenancy in common? California changed the old common law rule

regarding unities. How so?

Riddle v. Harmon

What did the court in Clark v. Carter say about the question before the court in the Riddle case?

Why did the Clark court rule in such a manner?

Why does the Riddle court say that the old rule of Livery of Seisin is dead?

In the end, the Court says it is not granting any new rights here. How so?

livery of seisin?

a valid conveyance of a fee interest in land required the physical transfer by the transferor to the transferee, in the presence of witnesses, of a piece of the ground.

Dates back to 12th century.

Delaware historical marker commemorating William Penn taking possession of his American property with the turf and twig ceremony

Tenancy by the Entirety

Note about ½ of the states have something called Tenancy by the Entirety.

This requires the same four unities as joint tenancy, but also a fifth: Marriage

Unlike joint tenancy, there is no ability to unilaterally terminate the tenancy.

Can only be terminated by divorce

property 2 lecture

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