MBE Property Session 3

An owner entered into a contract to sell her house to a buyer. The contract's only provision concerning the closing date provided that the closing would occur on July 1. On July 1, the buyer informed the owner that she was unable to close at that time because of an unavoidable overseas obligation required by her job. The buyer stated that she would be able to close on July 8. The owner, having recently found another buyer willing to pay more for the house, has filed an action to rescind the contract. Is the owner likely to succeed in his action to rescind the contract?

Correct Answer: No, because strict adherence to the closing date set in the contract is not required. You Selected: No, because the buyer has not breached the contract. Yes, because the buyer has breached the contract. Yes, because the owner was ready to perform her duties under the contract by the closing date. Answer choice A is correct. A court will assume that time is not of the essence in a real estate contract, unless the contract specifically states that time is of the essence, circumstances indicate that this was the intention of the parties, or one party gives the other party notice that time is of the essence. If time is not of the essence, strict adherence to the closing date set in the contract will not be required in equity. Thus, a failure to perform on the closing date will generally not be grounds for rescission of the contract.

A buyer and seller entered into a contract for the sale of a business including the building in which the business was conducted and the land on which the building was situated. In the contract, the seller agreed to convey marketable title subject to any restrictions of record, such as easement and covenants, and all applicable zoning laws and ordinances. Before closing, the buyer learned that the operation of the business violated the zoning laws, but nevertheless was confident that it could obtain a variance for the operation of the business at that location. If the seller refused to transfer title to the building and land, can the buyer seek specific performance of the contract?

No, because the covenant of marketable title has been violated. No, because the contract specifically provides that property is being sold subject to the zoning ordinances. Yes, because the seller breached the covenant of marketable title. Yes, because the buyer is confident that it can obtain a variance for the operation of the business at that location. Answer choice C is correct. A buyer is entitled to specific performance when a seller breaches a contract to sell a real property interest because the buyer's remedy at law (i.e., damages) is considered inadequate due to the unique nature of land. In addition, when the buyer seeks specific performance with respect to property for which there is a title defect (e.g., an encumbrance), the buyer may also obtain an abatement in the purchase price to compensate the buyer for the defect.

A childless widow died. By the terms of her will, she left her residence to her favorite niece for life, and then to such of her niece's children who reach the age of 21. At the time of the widow's death, the niece had two children, a son who was 25 and a daughter who was 13. Before her death, the niece had a second daughter. At the time of the niece's death, her son was 40, her older daughter was 28, and her younger daughter was 15. The applicable jurisdiction continues to follow the common-law Rule Against Perpetuities. Immediately before the niece's death, who held a vested remainder in the residence?

Only the son The son and the older daughter All three children None of the children, due to the "bad as to one, bad as to all" rule. Answer choice B is correct. Immediately prior to the death of the widow's niece, two of her children had reached the age of 21. Consequently, both the niece's son and the niece's older daughter have a vested remainder in the widow's residence. Each of these vested remainders is subject to open, because the niece's younger daughter is not yet 21 years old. The younger daughter has a remainder, but this remainder is not vested, because it is contingent on her reaching the age of 21.

A buyer entered into a contract to purchase a 20-year-old residence from its current owner and occupant. Among the terms of the contract was a warranty that the residence was free from termite infestation and damage and a requirement that the seller obtain a termite inspection and provide the buyer with a report of the inspection. The seller timely complied with this requirement. In the report, the inspector indicated that no evidence of termites was found, but noted that there were certain areas of the house that the inspector was unable to access due to existing structures, such as interior walls and ceilings. At closing, the seller provided the buyer with a deed that the buyer promptly and properly recorded. A few weeks later, the buyer, in the process of remodeling the residence, uncovered live termites and extensive damage in the wooden beams that supported the walls and floor of the house. The seller had not been aware of the presence of the termites in the house or the damage that they had done to its structure. The buyer sued the seller for breach of the warranty relating to termites. Who will prevail?

The buyer, because the seller breached the warranty of fitness or suitability. The buyer, because the buyer could not have learned about the existence of the termites or their damage to the residence through a reasonable pre-sale inspection. The seller, because promises in the contract merged into the deed. The seller, because the seller complied with the terms of the contractual warranty. Answer choice C is correct. Under the doctrine of merger, a buyer of property generally cannot sue on promises contained in the contract, such as a termite warranty, once closing has taken place.

A couple entered into a contract to purchase a house from the owner. The couple did not record the contract of sale. Prior to the execution of the contract, the owner incurred a debt to a creditor. Subsequent to the execution of the contract, the creditor obtained a judgment against the owner. Unaware of the contract of sale, the creditor recorded her judgment in the land records for the county in which the house was located, thereby giving the creditor a lien against property owned by the owner in the county. After the owner deeded the house to the couple and they recorded the deed, the creditor sought to execute the lien and levy on the house. The couple filed an action to enjoin the creditor from executing the lien. The applicable recording act reads: No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice unless the same be recorded according to law. Who will prevail?

The creditor, because she recorded her judgment prior the couple's recording of their deed and without notice of their purchase of the house. The creditor, because she had reduced her claim to judgment. The couple, because they were protected by the recording act as purchasers for value of the house. The couple, because the doctrine of equitable conversion protected their interest in the house from the judgment creditor. Answer choice D is correct. Upon execution of the land sales contract, the couple became the equitable owners of the house; the owner merely held legal title which he was required to convey at closing to the couple. Consequently, the creditor's judgment lien, which was obtained after the contract was executed, was not enforceable against the house because the house no longer belonged to the owner.

A fitness company entered into a ten-year lease with the landlord of a gym facility. The lease required the fitness company to maintain the gym equipment in proper, working condition, and to upgrade or replace any of the equipment as required by the safety guidelines for gymnasiums issued by a national organization of gymnasiums. In addition, the lease specified that all of the fitness company's clients must sign a valid waiver releasing the current landlord from liability for any injury arising from their improper use of the gym equipment. One year into the lease, the landlord transferred the remaining term of the fitness company's lease to a large fitness conglomerate. The transfer occurred without the fitness company's consent. The fitness company paid rent to the conglomerate, but they stopped making their clients sign the liability waiver because the conglomerate did not require any of their gym members to sign one. The conglomerate has brought an action against the fitness company to enforce this covenant in the lease. Who will prevail?

The fitness company, because the conglomerate does not require liability waivers from its members. The fitness company, because they did not consent to the assignment of the gym facility. The conglomerate, because the liability waiver requirement touches and concerns the land. The conglomerate, because the fitness company had required its clients to sign the waiver in the past. Answer choice C is correct. Under the doctrine of attornment, the tenant is bound to honor any covenant in his lease that has been assigned by the landlord to a third party, if the covenant touches and concerns the land. Here, the liability waiver touches and concerns the land because it has to do with clients using gym equipment in the gym facility.

The owner of a wooded parcel of land conveyed the land "to [her accountant] and his heirs, provided that, if this parcel is developed, [the owner] and her heirs may reenter and retake the property." Subsequently, the owner transferred "all my interests in real property" to her friend. When the owner died, she willed "all my interests in real property" to her coworker, with whom she had developed a longtime friendship. At the time of her death, the owner's only heir was her niece. One year after the owner's death, the accountant began construction of a house on the wooded parcel of land.Property taxes assessed against this parcel of land may be challenged only by the owner of the property who holds the current possessory interest in the land. Based on these facts alone, who may challenge the property taxes assessed against this parcel of land?

The friend The coworker The niece The accountant Answer choice D is correct. The owner conveyed the parcel of land to the accountant in fee simple subject to a condition subsequent because she used the phrase "provided that" in limiting the property interest transferred to him. She retained for herself and her heirs a right of reentry. Unlike the possibility of reverter, a right of reentry does not automatically trigger the transfer of ownership of the property to the holder of the right of reentry. This property interest gives its holder the right to compel the holder of the fee simple subject to a condition subsequent to transfer ownership and possession to the holder upon the breach of the condition. Until the holder of the right of reentry exercises that right, the holder of the fee simple subject to a condition subsequent retains the current possessory interest in the property. Consequently, the accountant, as the holder of the fee simple subject to a condition subsequent interest in the parcel, is the only person who may challenge the property taxes assessed against the parcel of land.

A man owned a building. He executed a deed conveying the building to a local church "for the purpose of using the building to further religious education." Six years later, the man died, leaving his niece as his sole heir. The man's duly probated will left his entire estate to a friend. Eighteen months later, the local church, having never made use of the building, conveyed all of its interest in the building to an investor for valuable consideration. The investor has filed an action to quiet title against the friend and niece. The investor has also joined a state official who argues that a valid charitable trust was created, and that the attorney general of the state should be permitted to enforce the charitable trust. In whom should the court find proper title is vested?

The investor The friend The state official The niece Answer choice A is correct. The man conveyed the building to the church in fee simple because the language "for the purpose of using the building to further religious education" is precatory language that only limits the property's purpose, rather than conditional language (e.g., "so long as") that is necessary to create a defeasible fee. The church then conveyed its interest in the building to the investor, who now possesses title to the building outright.

A man decided to sell his house after receiving a new job in a neighboring state. Before putting the house on the market, the man told his friend, who had always said how much she enjoyed the house, that he was selling the house and she could buy it at a lower price than he would seek from other potential buyers. Excited at the prospect of home ownership and the lower price, the friend immediately agreed to purchase the house and entered into a contract with the man for the sale of the house, without inquiring as to any issues with the house the man had experienced or knew about. Although he did not say anything to the friend, the man was not aware of any issues. Pursuant to the contract, the man delivered a general warranty deed to the friend at the closing. The friend then moved into the house and decided she would hire a contractor to perform some slight renovations to the upstairs bathroom. As soon as the contractor broke through the wall, he discovered black mold all throughout the interior of the bathroom and along the pipes. Upon further inspection black mold was found behind the walls, throughout the upstairs. The friend brought suit against the man for damages. Pursuant to statute, a seller has a duty of disclosure in all home-sale transactions in the jurisdiction. For whom is the court likely to rule?

The man, because the friend did not ask about the condition of the house. The man, because he was not aware of the black mold. The friend, because the covenants contained in the general warranty deed were breached. The friend, because the black mold constituted a material physical defect in the house. Answer choice B is correct. In a majority of jurisdictions, including the jurisdiction here, a seller of a residence has a duty to disclose. The seller must disclose all known material physical defects to the buyer. The defect must not be readily observable or known to the buyer. In this case, the man was not aware of the presence of black mold in his house. Therefore, he did not violate the duty of disclosure imposed on him by statute.

A landowner died and left a piece of land to his three sons as joint tenants with the right of survivorship. The youngest son sold his interest in the property to the oldest son. The oldest son then died and left all of his real property interests to his daughter. The youngest son later died. Following the youngest son's death, the middle son gave his interest in the property to a nephew. The applicable jurisdiction continues to follow the common law with regard to joint tenancy. Who owns the property?

The nephew owns the property outright. The daughter and the nephew each own a one-half interest in the property as tenants-in-common. The daughter and the nephew hold the property as tenants-in-common, with the daughter owning a one-third interest and the nephew a two-thirds interest. The daughter and the nephew hold the property as tenants-in-common, with the daughter owning a two-thirds interest and the nephew a one-third interest. Answer choice C is correct. At the landowner's death, each of the three sons held a one-third interest in the property as joint tenants with the right of survivorship. The sale of the property from the younger son to the older son severed the unity of title; therefore, upon the youngest son's sale of his interest to the oldest son, the oldest son held a one-third interest as a tenant-in-common, and a one-third interest as joint tenant with the middle son. (Note: The youngest son's subsequent death had no effect on ownership rights in the property, because he had already transferred his interest.) Upon the oldest son's death, the daughter was entitled by the terms of her father's will to the one-third interest he held as a tenant-in-common. His remaining one-third interest became the property of the middle son pursuant to the right of survivorship, giving the middle son a two-thirds interest as a tenant-in-common with the daughter. The middle son then gave this interest to his nephew. Thus, the nephew owned a two-thirds interest in the property as a tenant-in-common with the daughter.

A purse maker sought to market its line of "smart" purses that were compatible with a new handheld device. As part of its plans, the purse maker sought to purchase a store from which to sell its purses. The purse maker found a suitable store, and entered into a contract with the owner of a store. The contract was in writing, signed by both parties, and stated the essential terms, including a closing date in 30 days. Due to the purse maker's plan to sell her purses in advance of the release of the new handheld device, the contract stated that the closing date could not be delayed. One week before the closing date, the purse maker discovered that the store was in violation of a zoning ordinance that mandated an updated version of the current fire sprinkler system. The owner promised that he would promptly update the fire sprinkler system and that, although it would not be finished by the closing date, it would be done in time for the grand opening of the store. In addition, the owner promised to provide a warranty deed upon closing to shield the purse maker from any potential liability stemming from the outdated fire sprinkler system. On the day before the grand opening, the purse maker refused to close the land sale deal. In an action by the owner for specific performance against the purse maker, who will prevail?

The purse maker, because the owner did not provide marketable title to her on the closing date as stated in the land sales contract. The purse maker, because the warranty deed would not protect her from liability for the zoning ordinance violation. The owner, because the warranty deed would protect the purse maker from liability for the zoning ordinance violation. The owner, because the fire sprinkler system would be updated in accordance with the zoning ordinance before the store's grand opening. Rationale: Answer choice A is correct. Absent contrary language, an implied covenant of marketable title (i.e., a title free from defects) is part of a land sales contract. Here, the owner was obligated to deliver marketable title to the purse maker on the date of the closing. Generally, a court will assume that time is not of the essence in a real estate contract, unless the contract specifically states that time is of the essence, circumstances indicate that this was the intention of the parties, or one party gives the other party notice that time is of the essence.

A brother and sister coowned a farm on which they lived. The sister held a 60 percent interest in the farm, and the brother held a 40 percent interest. Each moved away. The sister rented the farm to a third party at a yearly rent of $10,000. The brother subsequently died. By will, he left all of his property to a cousin. When the sister received the next annual rental payment from the third party, the cousin demanded that she pay him his share of the rental payment, but she refused. The cousin then sued the sister for $4,000, representing 40 percent of the total rental payment that she had received from the third party. Who will be successful?

The sister, because she has the right to possess the entire farm. The sister, because, upon the death of her brother, she owns the farm outright. The cousin, because he has the right to prevent the third party from possessing 40 percent of the farm. The cousin, because he owns a 40 percent interest in the farm. Answer choice D is correct. Upon the brother's death, the cousin received the brother's 40 percent interest in the farm through the brother's will. The cousin is entitled to the rents received by the sister from the third party in proportion to his ownership interest in the farm. Consequently, he is entitled to $4,000 of the $10,000 rental payment made by the third party to the sister.

A buyer and seller entered into a written agreement for the purchase and sale of a residential home. The land sales contract stated that the buyer would pay $250,000 in exchange for the delivery of a general warranty deed. The contract called for the closing to take place on March 15. After executing the land sales contract but prior to the closing, the buyer encountered substantial difficulties in obtaining the financing necessary to purchase the home despite acting in good faith. On March 10, the buyer informed the seller in writing that he would not be able to close on March 15 and would need "a few extra days." On March 19, the buyer attempted to pay the seller the $250,000 but the seller refused, and did not provide the buyer with a general warranty deed. The seller realized that he could get a better offer on the home. The buyer brought an action seeking specific performance of the land sales contract. Will the buyer likely prevail?

Yes, because the buyer was ready to perform within a reasonable time after the intended closing date. Yes, because the buyer acted in good faith in attempting to obtain financing prior to the closing date. No, because the buyer breached the contract by failing to pay on the closing date. No, because monetary damages are an adequate remedy for the buyer. Answer choice A is correct. Generally, a court will assume that time is not of the essence in a real estate contract, unless the contract specifically states that time is of the essence. If time is not of the essence, strict adherence to the closing date set in the contract will not be required in equity. Thus, a failure to perform will generally not be grounds for rescission of the contract. A party can sue for specific performance, though, as long as the party was ready to perform within a reasonable time from the date set for performance.