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

2. 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)

3. 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

4. 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

5. 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

6. 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?

7. 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

8. 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?

9. 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?

10. Recording Problems