Agenda for 19th Class Admin stuff Name plates Handouts Slides Mortgages Review of last class Land Transactions (continued) Title Warranties Post-closing liabilities Recording

Assignment for Next Class Review any questions we did not discuss in class today Read Mortgages handout Questions to think about / Writing Assignments Problem on p. 5 (All WGs) Do you prefer Crystals or Mud? If you prefer Crystals, is there a way to prevent judges (and others) from creating mud? If you prefer mud, is there a way to prevent lenders (and others) from creating crystals? (All WGs)

Review of Last Class I Purchase & Sale Agreement In writing Contingencies Marketable title Buyer can cancel agreement and/or collect damages if seller does not deliver title “free from reasonable doubt” “Merges” into warranties in deed – cannot enforce after closing Equitable conversion Purchaser is equitable owner or real property interest during executory period Bears most losses and gains Duty to disclose None under common law – caveat emptor Most states have statutes that require disclosure of material, latent defects known to seller Damages, even after closing

Closing Closing is meeting in which documents are signed or exchanged Deed is delivered Money is transferred Buyer can force sale if seller refuses to close “specific performance,” because real property is “unique” Seller also may have a right to specific performance, but usually can only collect damages Deeds Formal instrument transferring title to real property 2 basic kinds Quitclaim deed – no covenants Seller/grantor conveys whatever she has Which may be little or nothing Warranty deed – 6 common covenants (next slide) Deeds can be used for gifts and other transfers Not just sales So will refer to grantor & grantee Not seller and buyer

Covenants in Warranty Deed I Seisin Grantor has title and possession at time of grant Violated, e.g., by adverse possession by 3rd party Right to convey Usually satisfied by title, but violated if restraint against alienation means grantor did not have right to sell Sometimes part of the same covenant as seisin See deed in materials Against encumbrances No undisclosed encroachments, mortgages, tax liens, easements, outstanding leases, restrictive covenants Quiet enjoyment -- No 3rd party has lawful claim of title Warranty Grantor will defend grantee against reasonable claims of title and compensate for losses against those with superior title Violated if building encroaches on neighbor’s property May be identical to Quiet Enjoyment Further assurances Grantor will take necessary steps to perfect title E.g. Sign documents to cure defects in deeds

Covenants in Warranty Deed II Present covenants Seisin, right to convey, against encumbrances Breached at closing Enforceable only by grantee Future covenants Other covenants – Quiet enjoyment, Warranty, Further Assurances Breached only when 3rd party asserts claim Run with land Remedies Damages, except covenant for future assurances can be enforced by injunction Estoppel by deed A grants Blackacre to B It turns out that A does not own Blackacre A later acquires Blackacre B automatically gets title to Blackacre Does not apply if grant from A to B was by quitclaim deed Why would anyone ever accept a quitclaim deed?

Post-Closing Purchaser can no longer sue seller for failure to deliver marketable title Purchaser can sue for damages for violations of disclosure statutes Purchase can sue for violation of all covenants in deeds Future grantees can sue for violations future covenants in deeds

Questions on Duty to Disclose 1. In Lucero v. Van Wie, 598 NW 2d 893 (S.D. 1999), the seller failed to provide the statutorily required disclosure statement, but the contract of sale contained the following clause: The buyer acknowledges that she has examined the premises and the same are in satisfactory condition and they accept the property in the “as-is” condition … . This time, the South Dakota Supreme Court held that the buyer could not recover for undisclosed defects in the property; she “entered into an enforceable contract and purchased the property ‘as is,’ the result of which was to waive disclosure requirements.” After Lucero, what do you expect happened to real estate sales contracts in South Dakota?

Questions on Duty to Disclose What do you expect the South Dakota courts will do in cases where the sales contract contains an “as-is” clause but the buyer alleges that the seller affirmatively lied about the condition of the property – e.g., “No, the roof has never leaked.” 2. Consider … a seller who doesn’t know whether her home’s attic walls contain asbestos insulation, and a buyer whose offer to buy the house is contingent on drilling into the walls to confirm that they do not contain asbestos. If you represented the seller, would you advise your client to accept this contingency? 3. What kinds of conditions must be disclosed? A leaky roof? A leaky faucet? The presence of lead paint on the walls? The fact that a previous inhabitant of the home was gruesomely murdered by a family member? That the homeowner regularly gave “ghost tours” on which she pretended to tourists that the house was haunted? The fact that a registered sex offender lives on the block? The fact that there is a municipal garbage dump half a mile away?

Recording Problems