Real Property MBE Practice Test 2017

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In 1970 a farmer purchased 50 acres of farm land. Several years later he built a house and lived on the property while also farming it. The property was landlocked, but there was a gravel road over the adjoining land directly to the nearest highway. Both the farmer’s land and the adjoining lot came from a larger parcel that was divided by the original owner. The farmer used the gravel road for farming and personal use. In 1991, a new owner purchased the adjoining land. She bulldozed the gravel road shut. The farmer filed an action in equity, asserting his absolute necessity to continue using the road to get to the highway. The new owner disagreed, and claimed that if an easement was granted by the court, it must be restricted to use only for crops at certain times, and that personal use should be disallowed or severely restricted because it was an unauthorized expansion of the original use. Which of the following would be the more likely decision of the equity court based on generally prevailing principles? The court will decree an express easement for the crops but the farmer’s personal use will be limited to twice daily. The court will decree that there is an easement in gross that can be used as long as the farmer pays a monthly charge to be determined by the new owner. The court will decree an implied license to use the adjoining property, which the new owner may terminate at any time. The court will decree an easement of necessity which includes the expanding reasonable use of the easement for any lawful use.

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If real property is conveyed and is landlocked from the highway, the grantee is entitled by necessity to go over the lands of the original grantor who divided the property. The easement by necessity is defined by the reasonable and lawful uses of the dominant estate. An easement of necessity is not limited by its original use, but is allowed to accommodate reasonable changes. It has been said that an easement of necessity is coextensive with the reasonable needs, present and future, of the dominant estate consistent with the reasonable enjoyment of the servient estate. Tiffany, Real Property 345 (3d ed. 1939); see also Powell on Real Property 518 (1970). See, e.g., Fristoe v. Drapeau, 35 Cal. 2d 5, 215 P. 2d 729 (1950); Ragona v. DiMaggio, 42 Misc. 2d 1042, 249 N.Y.S. 2d 705 (1964); Soltis et ux. v. Miller, 444 Pa. 357 (1971); see generally 28 C.J.S. Easements § 88.

A man entered into a lease for an apartment with a landlord. The lease stated that the term was month-to-month. After one month, the man went to the city health and licensing department and complained about various sanitary code violations that the landlord failed to correct. The agency made an inspection and found 40 sanitary code violations. It cited the landlord, and ordered him to clear up all of the violations. After the inspection, the landlord brought an eviction action against the man and obtained a judgment against him for eviction. Will the eviction order hold up under the stated facts?

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In the leading case of Edwards v. Habib 397 F.2d 687 (D.C. Cir.1968), the federal Court of Appeals held that a landlord was not empowered to evict in retaliation for his tenant's reporting of housing code violations to the authorities. The court reasoned that the housing codes could not effectively be enforced unless tenants could report violations by landlords without fear of reprisals.

An owner signed papers and a deed to sell a piece of property to buyer one, who held his deed and did not record it. The next month the original owner sold the same property to a second buyer. Buyer two had information that buyer one had bought the property, but he knew that buyer one had not yet recorded a deed. Buyer two recorded five days later. The next day after the deed was executed and delivered to the second buyer, the original owner conveyed a deed to the same property to a third buyer, who was a good faith purchaser for value and who recorded his deed the very same day. Which buyer has superior title under a race-notice recording statute?

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Under a notice statute, a subsequent purchaser for value wins if, at the time of conveyance, that subsequent purchaser had no actual or constructive notice of the prior conveyance. Under a race statute, priority is determined by who wins the race to the recording office. With the race-notice statute, the subsequent purchaser for value wins if (1) at the time of conveyance, that subsequent purchaser had no actual or constructive notice of a prior conveyance, and (2) the subsequent purchaser records before the prior purchaser. Buyer three acted without notice and filed first, giving him the clear advantage over buyer one, who never recorded, and buyer two who was not innocent and who recorded after buyer three. In a typical race-notice statute, an unrecorded conveyance is void against any subsequent purchaser in good faith and for valuable consideration of the same real estate ... where that subsequent purchaser has recorded his deed first. See Utah Farm Production Credit v. Wasatch Bank, 734 P. 2d 904, 906 (Utah: Supreme Ct 1986). See also, Cox v. RKA CORP, 753 A. 2d 1112, 1116-17 (NJ Supreme Ct 2000).

A seller conveyed a real estate parcel to a buyer through a quitclaim deed for $1.00. At the time, the seller was not the owner of the property. Later on, the seller became the owner in fee simple absolute by virtue of a gift of the property in the will of the now-deceased owner. The buyer demanded that the seller provide him with a warranty deed to reflect that the buyer's title as owner was absolute. Leaving aside whether the buyer could sue the seller for fraud, what is the nature of the buyer’s interest in the property at the time that he demanded the warranty deed?

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Where the “seller” had only an inheritance expectation which could have been defeated by a will or a prior conveyance, he has no vested ownership interest to convey. There are no warranties of title and no interest was conveyed. See Black's Law Dictionary 1126 (5th ed. 1979) (a quitclaim deed is a deed of conveyance intending to pass any title, interest or claim of the grantor, but not professing valid title, nor containing any warranties of title); Porter v. Wilson, 389 S.W.2d 650, 655-56 (Tex. 1965). Nor can this be changed by the later inheritance of the quitclaim seller. See Roberts v. Corbett, 265 SW 2d 127 (TX Ct of Civ. App. 1954). The quitclaim conveyance of any “right, title or interest” owned at the time of conveyance is like a release, and does not bring about an estoppel regarding after after-acquired property, whereas a warranty deed may have an estoppel result. A quitclaim deed does not work an estoppel or carry an after-acquired title. Marriage o Broderick, 257 Cal.Rptr. 397, 209 Cal.App.3d 489 (1989); (Accord, Klamath Land & Cattle v. Roemer, 12 Cal.App.3d 613, 618, 91 Cal.Rptr. 112.

A seller of residential property told the buyer that he could use his gravel road to the main highway if he purchased the property, which adjoined the seller’s property. Although the property was not otherwise landlocked, the buyer relied on the seller’s promise in making an offer. The buyer had specific uses in mind for improvements that needed the gravel road. The purchase took place but the seller did not include the easement in the deed or the other papers. The buyer built a garage that accessed the gravel road leading to the highway. The seller later decided to fence off the driveway and divert it from buyer’s use. Will a court compel the seller to open up the road and provide an easement to the buyer?

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Promises by the burdened party may create a reliance or expectation interest in the benefiting party. Easements by estoppel are created where the burdened party makes such promises but they are not put in writing, and the benefiting party makes expenditures in reliance on the promises. If the buyer acted in a good faith belief in the promises made, then the court may find that an estoppel easement must be created.

A tenant moved into a single-family residence. She and the landlord signed a lease-purchase agreement, which applied $200 of each month’s rent to the purchase price of $50,000. The tenant agreed to get a mortgage within 33 months and to pay the full balance due, less the payments credited, on the final settlement date, which was set for 90 days after the 33rd month. A default by the tenant caused a forfeiture of all credits and voided the agreement. The tenant made 31 consecutive payments, but stopped on month 32, when part of the roof caved in causing an uninhabitable situation in the dead of winter. She put the rental payments in an escrow account. The landlord sued for eviction and termination of the lease-purchase agreement. The tenant answered that the landlord had breached the warranty of habitability. She also counterclaimed to compel specific performance of the agreement because she was ready to tender the balance due and take full title to the property. Under the circumstances, what is the most likely ruling of the court?

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The agreement was substantially performed and then frustrated in its rental payments by the roof caving in, which remained the landlord’s responsibility, and was a breach of the warranty of habitability. Thus, the tenant was ultimately not at fault for not submitting the last few rental payments, and many states do now allow for placing the money in a restricted escrow account pending determination of the legal issues. The landlord’s at-fault breach does not give him the right to nonperformance of the purchase agreement. She substantially performed and is ready with the balance of the money on the closing date, so that the sale will be enforced by specific performance.

A tenant moved into a single-family residence. She and the landlord signed a lease-purchase agreement, which applied $200 of each month’s rent to the purchase price of $50,000. The tenant agreed to get a mortgage within 33 months and to pay the full balance due, less the payments credited, on the final settlement date, which was set for 90 days after the 33rd month. A default by the tenant caused a forfeiture of all credits and voided the agreement. The tenant made 31 consecutive payments, but stopped on month 32, when part of the roof caved in causing an uninhabitable situation in the dead of winter. She put the rental payments in an escrow account. The landlord sued for eviction and termination of the lease-purchase agreement. The tenant answered that the landlord had breached the warranty of habitability. She also counterclaimed to compel specific performance of the agreement because she was ready to tender the balance due and take full title to the property. Under the circumstances, what is the most likely ruling of the court?

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The agreement was substantially performed and then frustrated in its rental payments by the roof caving in, which remained the landlord’s responsibility, and was a breach of the warranty of habitability. Thus, the tenant was ultimately not at fault for not submitting the last few rental payments, and many states do now allow for placing the money in a restricted escrow account pending determination of the legal issues. The landlord’s at-fault breach does not give him the right to nonperformance of the purchase agreement. She substantially performed and is ready with the balance of the money on the closing date, so that the sale will be enforced by specific performance.

An owner conveyed residential real estate to a friend for life. The friend conveyed his interest in the same real estate to his brother. When the owner discovered the conveyance to the brother, he brought an eviction action against the brother. The brother refused to vacate the premises and appealed. What is the likely decision of the court regarding the requested eviction of the brother?

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The life estate holder is allowed to convey his interest while alive, but that interest only lasts while that life estate owner remains alive. Upon the life estate holder’s death, the fee simple title reverts back to the owner. The conveyance by the friend to his brother is for the life of the friend and ceases on his death. The current legal action of owner must fail. The owner gets the property back by operation of law on the death of the friend, and at that time he may bring an eviction action against friend’s brother.

A lessor leased real estate with a gas station business on it to a lessee for two-year terms that were renewable every two years until the tenth year. The property was described as being “located at 1900 Superpower Highway, fronting on the highway 100 feet and extending in depth of equal width 150 feet, as described in Deed Vol. 22, Page 10, with the privilege of using additional adjoining grounds for the general use of the business and the parking of customer's cars.” The lessor granted an option to purchase the “demised premises” at the “current market value at the end of the final term.” The lessee exercised the option (for property at Deed Vol. 22, Page 10) as provided, but the lessor refused to perform. Lessee brought an action for specific performance, to which the lessor responded that the price was indefinite and subject to debate, and that it was unclear if the option included the “additional adjoining grounds,” making specific performance unavailable. Will the court grant the complaint for specific performance and order that the plaintiff’s exercise of the option be enforced?

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It’s true that specific performance will not be granted where the terms are not definite enough to perform. Here, the “demised premises” does not include the additional adjoining grounds because, for one thing, the property is specifically determined by the dimensions included at the referenced deed book and page number. The term “market value” at a certain time has been held sufficiently definite to determine a price for the property. Where a contract specifies that the price is to be measured by the "fair market value" or "reasonable value" of the property involved, courts have generally held that the price is sufficiently certain to enforce the agreement. Moreover, the law recognizes in the area of enforceability of contracts the maxim, "id certum est quod certum reddi potest" (that is certain which can be made certain). See Portnoy v. Brown, 430 Pa. 401 (Pa. Supreme Court 1968).

A woman conveyed by deed her farm to her nephew, for the nephew’s life. The nephew died prior to his aunt. The deed was silent on what happens on the nephew’s death. The nephew’s heirs tried to assert control and ownership of the property. The aunt sued them to assert her claimed superior interest in the property. Will the court return the property to the aunt?

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The reversion back to the aunt is implied by the circumstances. If the deed and/or will stated that someone else would inherit the remainder on the nephew’s death, then that person would take the fee simple. Otherwise, it is implied that it must go back to the original grantor, in this case being the aunt.

Plaintiffs agreed in writing to sell to defendants a single-family home for the sum of $40,000. The contract provided that this sum would be paid over a 15-year period with interest, in monthly installments. The sellers agreed to convey legal title upon payment in full as agreed. The purchasers were entitled to possession of the property, and all taxes, assessments and water rates, and insurance became their obligation. The contract provided that if the purchasers defaulted and failed to cure the default within 30 days, the sellers could elect to call the remaining balance immediately due, or elect to declare the contract terminated and repossess the premises, keeping all monies paid as liquidated contract damages. Defendants made improvements to the property, and made the payments for 10 years until one of them became disabled. At the time of default they had paid about $30,000 total of which 20,000 was applied to principal. The plaintiffs sued the defendants for breach of the contract, got a judgment against them, and evicted the defendants. Defendants appealed, claiming that they had equitable title, and a foreclosure action had to be first instituted. What result?

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Buyer builds up an equitable ownership interest as the payments are made. The interest of the parties here can only be determined by a sale of the property after foreclosure proceedings with provisions for disposing of the surplus or for a deficiency judgment. The vendee acquires equitable title and the vendor merely holds the legal title in trust for the vendee, subject to the vendor's equitable lien for the payment of the purchase price in accordance with the terms of the contract. The vendor may not enforce his rights by the simple expedience of an action in ejectment but must instead proceed to foreclose the vendee's equitable title or bring an action at law for the purchase price, neither of which remedies plaintiffs have sought.

A parcel of land was owned by owner one and owner two, as tenants in common. The owners signed an agreement with a real estate investor giving her the right of first refusal. If the owners offered the property for sale and if they got a bona fide offer to purchase, the investor would be given the exclusive right to purchase at the amount offered. At some time after that agreement was executed, owner one died and his property passed automatically by intestate succession to his two sons. The sons signed a deed of their interest over to owner two for $10,000. Owner two became the owner in fee. Shortly after that conveyance was recorded, the investor sued owner two and the sons on the basis that owner two should have first offered owner one’s 50% interest to the investor per the agreement. Will the court enforce the investor’s right of first refusal with respect to the transfer to owner two?

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The right of first refusal was intended to be triggered if the “owners” offered the property for sale and if they received a bona fide offer, none of which happened. The intent was to apply to the offering to the public of the combined interest of both owners. The agreement could have, but did not state, that the owners gave a right of first refusal to meet any bona fide offer for the purchase of either or both of their interests in the property to a third person or to each other. The agreement simply did not apply to one of the owners buying the other owner’s interest and combining ownership in one of them. There was not a bona fide offer because it was never offered for sale – this was an internal matter for the two sons to get a cash interest from their inheritance and turn over the property in return. The investor still has a right to exercise the right should owner two decide to sell.

Defendants agreed to lease to plaintiffs a building that they were going to build. The lease was for a period of 10 years. The lease of the building was to commence upon the “completion of the building.” The defendants were bound in the agreement to start “forthwith” and proceed to build the building “expeditiously” after receiving all permits, and to complete the project in a reasonable time. Plaintiffs put $10,000 down on the rental agreement. Plaintiffs and defendants started arguing about other terms, such as who was to pay for an expensive sprinkler system. Eventually, plaintiffs sued for rescission and for return of the down payment. One of the main contentions of the plaintiffs was that the agreement violated the rule against perpetuities in that it was impossible to tell whether it could be performed within 21 years due to the ambiguity over when the building would be completed. What is the likely decision of the court?

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Generally, modern cases hold that a document should be interpreted if feasible to avoid the conclusion that it violates the rule against perpetuities. The mandates for expeditious action, to start forthwith and complete within a reasonable time all militate toward finishing within 21 years. The court will not assume that the parties will breach their promises in order to be able to apply the rule against perpetuities to invalidate the transaction. See Wong v. Di Grazia, 60 Cal. 2d 525(Cal. Supreme Court 1963).

A man signed an agreement to purchase real estate from a woman for $10,000. He put $250 down at the time of signing the contract but was bound to put up another $750 within 10 days, so as to equal a total of 10% down, as per the written contract terms. The ten days passed without the balance being deposited. The purchaser’s broker told him that the title search revealed an ancient easement over the rear of the property allowing a farmer to take his sheep across the land. Nothing more was said about it. About 30 days after the date of the agreement, the seller gave written notice that she did not intend to perform the agreement and enclosed the check for $250 to the purchaser. The purchaser did not cash that check and put the remaining $750 in the escrow. He then sued for specific performance. Will the court enforce the agreement and compel the seller to sell under the contract?

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A suit for specific performance cannot be enforced in favor of one who has not fully and fairly performed all conditions precedent on his part. Failure to pay the money within the specified time deprives the purchaser of his right of action to enforce performance. If he had a problem with the title search he had a duty to complain and demand a refund, but he did not do that.

A married couple own a residential premises. They received a foreclosure action from the first mortgage lender in a state that has judicial foreclosure procedures. The state also statutorily extends the right of redemption both prior to the sale, and for a period of one year after the sale. The sale took place; the property was sold to the lender. The lender then filed a deficiency judgment action. The couple received a loan from family members about six months after the sale. It was sufficient to pay the balance on the mortgage plus interest and costs. The couple notified the lender and the court of their intent to exercise their right of redemption. What is the likely outcome?

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At the end of the redemption period, if the former homeowner cannot exercise the right of redemption, the new owners have the right to evict them. Here, the couple will be able to exercise the right of redemption, assuming they have sufficient funds to do so, and title will revert back to them by order of court.

Several landowners had residential premises in a development called “The Lakes.” One owner’s property contained a small improved beach area that could be used for swimming. That owner gave oral permission to several neighbors to use the beachfront for swimming, as a friendly neighborly gesture. That owner sold her property to a new owner. The new owner erected fences and signs saying, “keep out.” The neighbors sued, claiming that they had an easement by implication through prior usage to use the beachfront. Will the court restore the use of the beachfront to the neighbors?

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A license is the permission to do an act or series of acts on another’s land without possession of any estate in the land. An oral license without any consideration being paid for the use of the license is revocable at the will of the person granting the license. A license is thus mere permission to perform a certain act. A license in writing for which consideration is paid can be irrevocable, depending on the circumstances. The above example has no indication of being compensated or having any other characteristics of becoming irrevocable.

A broker and a seller of residential real estate entered into an “exclusive right to sell” contract (an exclusive listing agreement) in which the broker had the exclusive right to sell the property for the period of nine months and would receive 6% of the sales price if the property was put under agreement during that nine-month period. The agreement also stated that “if the property is withdrawn from sale, transferred, conveyed, leased without the consent of Broker, or made unmarketable by the owner's voluntary act during the term hereof or any extension thereof," the broker would receive 6% of the selling price of the property as set forth in the listing agreement.” The broker began performing all of its duties in aggressively trying to sell the property, but shortly after the agreement, the seller advised that it didn’t want to sell anymore, and it thwarted all efforts of the broker to take further action to sell the property. The broker demanded the 6% amount set forth in the withdrawal of sale provision, but the seller claimed a right to change his mind. Will the court likely enforce the broker’s claim for 6% of the listed price?

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This was a withdrawal of sale within the terms of the agreement and thus an enforceable contractual provision. The parties to a broker's contract for the sale of real property are at liberty to make the compensation depend upon any lawful conditions they see fit to place therein. See Blank v. Borden, 524 P. 2d 127 (Cal. Supreme Court 1974).

An elderly man died with a will that had the following clause: “After payment of such debts and funeral expenses, I give and bequeath to my beloved wife the farm on which we now reside and all my personal property, so long as she remains my widow; the remainder on her remarriage or death to go to my son John..” Which one of the following estates in real property most closely reflects the wife’s interest upon her husband’s death?

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These words give the remainder of the estate, after his wife's decease or remarriage, to the son. They manifest the testator’s intention to make a future provision for his son as clearly as the first part of the bequest manifests his intention to make an immediate provision for his wife. The devise of a remainder clearly limits the extent of the wife’s interest to a life estate. The fact that there must be a remainder on her death going to her son shows that she did not get a fee simple. See Giles v. Little, 104 US 291 (1881).

A buyer and seller agreed on terms to transfer a property to buyer. They wrote up a contract themselves that said: Seller is selling the Old Wilson property to the Buyer, for a value they have agreed on, and the sale should be finished and done in thirty days by cash payment by buyer, or in installments if buyer cannot get a mortgage. The seller changed his mind and filed suit, asking for rescission of the document, on the basis that it was not a contract due to ambiguity and leaving out basic required information. Will the court likely order rescission?

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The document would require a more clear description of the property to be sold, a more clear statement of the purchase price, amount and disposition of earnest money, date of closing and that time is of the essence. Most of these are missing and it leaves too much to guess-work, which is not an enforceable agreement. Rescission will be ordered.

A man conveyed a large parcel of land to a friend. The deed stated that it was to “my friend as long as he uses the property to grow organic vegetables that are not genetically manipulated, and if that proper use is not maintained, the property will immediately revert to the grantor.” 11 years later, the friend was charged with using genetic engineering techniques in violation of the regulations of the state’s agricultural department. What kind of an interest, if any, did the grantor retain by the wording in the deed?

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The estate conveyed was a fee simple determinable. If the friend (grantee) violates the restriction, the property reverts back to the man who conveyed it ( the grantor), or to some third party named by the grantor, in the deed. This potential loss of title by the grantee is a future interest in the grantor which is called a possibility of reverter. Some state laws may affect the strength or extent of the possibility of reverter. It is called a "possibility of reverter" because the event upon which the limitation depends may never occur. In the meantime, the grantee has a fee simple estate. See, e.g., Jacobs v. CNG Transmission Corp., 332 F. Supp. 2d 759, 773 (W.D. Pa. 2004).

A developer signed a contract to purchase 100 acres of land for construction of single-family dwellings. The land price was $100,000. The contract was contingent on approval of a subdivision plan being accepted by the township for 70 one-acre homes and 30 acres of open space. The subdivision plan was filed with the township but shortly thereafter, the township passed a zoning ordinance that increased the minimum size of building lots in rural areas to five acres per home, in order to preserve the rural nature of the countryside and prevent too much population growth. There was known to be little or no market for five-acre homes. The developer sued the township on the basis that the ordinance was not a reasonable use of the police powers and the property should revert to the original one-acre limitation. The county court denied the developer’s request for injunctive relief against the zoning board. Will the appellate court reverse the county court and issue an order declaring the new 5 acre rule to be an unreasonable and arbitrary use of the police power?

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It is generally held that four and five-acre limitations are too restrictive and constitute an arbitrary use of the police power. Municipalities, furthermore, are not allowed to prevent development of the locality by zoning that is overly harsh and restrictive. If a group of private persons wants to keep an area rural they can together buy the land and not develop it. Otherwise, reasonable development must be allowed in a zoning framework that is fairly designed to meet a variety of needs and allow for a variety of types of growth.

Two parties entered into an agreement of sale for a residential property. The title insurance company called the seller’s attorney to advise that one of the owners in the seller’s prior chain of title over 40 years ago had neglected to get a first mortgage with a private lender satisfied. It was likely that the mortgage was paid but that someone neglected to file a satisfaction notice with the recorder. If the problem had been corrected back then there was no evidence of it on the record. As such, the open mortgage now constituted a cloud on title. The title company required that the seller take action to clear title before final closing could be approved. Which of the following is the most likely way for the seller to clear title so that conveyance can be made.

Please select 2 correct answers

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A quiet title action is the usual method to clear title. It is a lawsuit filed by the current owner against whoever holds an outstanding claim against the real estate giving that party and his heirs a certain number of days to bring an action in ejectment against the current owners or forever give up any claims that they may have. In most instances, these actions are against long-ago predecessors, so that more often than not there is no answer filed. This leads ultimately to a final judgment against those persons and their heirs. When the actual whereabouts of the predecessor with the outstanding claim cannot be found, a quiet title action is served by obtaining a court order that authorizes service by notice in a local newspaper and usually also a publication of the bar that is designated for such notices.

An owner leased land to a tenant who said that he was going to use the land for farming. The tract contained farmland and dozens of acres of pristine, scenic woodlands that were part of the view from the owner’s adjoining residence. The owner noticed that the tenant was cutting down trees and selling them to companies who manufactured wood and paper products. After a while, 20 acres or so had been cut down and the activity was continuing, leaving a ravaged sight on the land. Does the landlord have a right to stop the activity and recover the value of the lost trees?

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Voluntary waste is the willful destruction and carrying away of something that is attached to the premises. It creates injury and some form of damage to the leased premises. Although he is conducting a business, this particular business is like strip mining, where once the activity is completed, there is no further profit to be gained but instead the property has lost in its intrinsic value and turned into an eyesore. In all likelihood, damages and an injunction would be granted in this case.

A father made out a deed to a parcel of farmland to his three daughters, as joint tenants. State law recognizes the right of survivorship among joint tenants. The youngest sister sold her interest to an unrelated purchaser for value. The eldest sister then died. After that sister’s death, the remaining sister sold her interest to one of her cousins. What is the resulting status of the ownership interests in the land?

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When the youngest sister sold, she sold a one-third interest only and broke up the joint tenancy only with respect to that one-third interest. This left the two sisters as joint tenants as to a two-thirds interest, which they held as tenants in common with the purchaser for value, who held a one-third interest.

A married couple own a residential premises. They received a foreclosure action from the first mortgage lender in a state that has judicial foreclosure procedures. The state also statutorily extends the right of redemption both prior to the sale, and for a period of one year after the sale. The sale took place; the property was sold to the lender. The lender then filed a deficiency judgment action. The couple received a loan from family members about six months after the sale. It was sufficient to pay the balance on the mortgage plus interest and costs. The couple notified the lender and the court of their intent to exercise their right of redemption. What is the likely outcome?

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At the end of the redemption period, if the former homeowner cannot exercise the right of redemption, the new owners have the right to evict them. Here, the couple will be able to exercise the right of redemption, assuming they have sufficient funds to do so, and title will revert back to them by order of court.

An owner and a buyer signed an agreement of sale for the owner’s residential premises. Time was of the essence. The closing date was set for 90 days from the date of the agreement. The buyer turned over a significant down payment, which was held in escrow by the real estate broker. The settlement was contingent on the buyer obtaining a conventional mortgage at prevailing rates within 45 days of the date of the agreement. The buyer promised to make a good faith effort to apply for a mortgage. The only mortgage that the buyer was able to obtain was a variable rate mortgage that was then set at 5 points above the prime rate. It contained a balloon payment in 5 years with a large balance that the buyer could ill-afford if he was unable to obtain new financing. The buyer advised the seller that he could not get a mortgage and demanded his down payment back. The seller disputed that the buyer could not get a mortgage and refused the refund. Will the court enforce the refund?

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The contingency protected the buyer in the event that he could not get a standard mortgage or if he could get no mortgage. Here, the high interest rate and the variations from a conventional fixed-rate loan were too drastic to compel the buyer to accept it.

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