Anything I can do (Part 3)

In Uncategorized on February 13, 2010 at 6:04 pm

Well, it seems like you all are kicking my butt at these questions. Congratulations (jerks). Well, today is “Real Property,” which sucks. Except that I’m good at it. Except when it comes to applying the Rule Against Perpetuities. Because that Rule is incomprehensible, I’ll not ask one those, even though those were the questions I missed today. See the comments section for today’s answer!)
Real Property (beware! a trick question today!)

A buyer entered into a written contract with a seller to purchase his commercial property for $100k. The contract did not specify the quality of title to be conveyed and made no mention of easements or reservations. The closing was set for Nov. 25, three months after the signing of the contract. Shortly thereafter, the buyer obtained a survey of the property, which revealed that the city had an easement for the public sidewalk that ran in front of the store. Because this actually enhanced the value of the property, the buyer did not mention it to the seller.

Subsequently, buyer found a better location. On Nov. 1, the buyer notified the seller that she no longer intended to purchase the property. The seller told her that he intended to hold her to the contract. At closing, the buyer refused to tender the purchase price, claiming that the seller’s title was unmarketable and citing the sidewalk easement as proof. In a suit for specific performance, the seller will most likely:

a) Prevail, because the contract did not specify the quality of title to be conveyed
b) Prevail, because the buyer was aware of the visible easement and it enhanced the value of the property
c) Not prevail, because an easement not provided for in the contract renders title unmarketable
d) Not prevail, because the buyer gave the seller sufficient notice of her change in plans and yet he made no effort to try to find another purchaser

  1. Best answer: b

    So this is a tricky question because the more you know about real property law, the more phrases from the question jump out at you as being relevant, but in this case are not. For instance, that it was a “written contract” is supposed to alert you that the Statute of Frauds is satisfied. Ultimately, though, the only “red light” that’s important is that the easement “enhanced the value of the property.” That fact makes this a trick question.

    Normally, in sales for real property (i.e. real estate usually), the seller must deliver “marketable title” to the buyer at the date of closing. (All the dates here were just to be confusing, which is why “d” might seem like a good answer, but it’d be wrong.) Marketable title requires the title to be relatively “free of encumbrances,” which includes easements (i.e. giving someone else a right to use your property). The sidewalk is definitely an easement and the fact that the seller didn’t alert buyer makes title unmarketable. Thus, “c” should be correct. There’s an important reason “a” isn’t correct: every type of real property contract has the warranty of marketable title. Thus – for those that know what a “quitclaim deed” is, i.e. basically saying “I give you whatever I have, which may be nothing” – the type of contract information was to throw you off.

    Finally, the answer is “b” because of the exception to “c.” When a buyer can see an easement (like a sidewalk) AND THE EASEMENT ENHANCES THE VALUE OF THE PROPERTY, the encumbrance doesn’t make the title unmarketable. A very narrow exception and a tricky one. Yikes…hope you figured that one out (unlike me)!

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