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Chapter 49

TRANSFER AND CONTROL OF REAL PROPERTY

I. Transfer of Real Property

A. Contract of Sale

1. Formation

2. Marketable Title

3. Implied Warranty of Habitability

B. Deeds

1. Types of Deeds

a. Warranty

b. Special Warranty

c c. Quitclaim

2. Formal Requirements

d a. Description of the Land

e b. Quantity of the Estate

f c. Covenants of Title

g d. Execution

3. Delivery of Deeds

4. Recordation

C. Secured Transactions

1. Form of Mortgages

2. Rights and Duties

3. Mortgage Regulation

h 4. Transfer of Mortgage Interests

a. By Mortgagor

b. By Mortgagee

4. Foreclosure

D. Adverse Possession

II. Public and Private Controls

A. Zoning

1. Enabling Acts and Zoning Ordinances

2. Variance

3. Nonconforming Uses

4. Judicial Review of Zoning

a. Invalidity of Zoning Ordinance

b. Zoning Amounts to a Taking

5. Subdivision Master Plans

B. Eminent Domain

1. Public Use

2. Just Compensation

C. Private Restrictions Upon Land Use

1. Covenants Running with the Land

2. Restrictive Covenants in Subdivisions

3. Termination of Restrictive Covenants

4. Validity of Restrictive Covenants

Cases in This Chapter

VonHoldt v. Barba & Barba Construction, Inc. Kelo v. City of New London

Cappo v. Suda

Chapter Outcomes

After reading and studying this chapter, the student should be able to:

Explain (1) the essential elements of a contract of sale of an interest in

real property, (2) the meaning and importance of marketable title, and

Describe the fundamental requirements of a valid deed and

distinguish among warranty, special warranty, and quitclaim deeds.

(1) Describe the elements of a secured transaction, (2) distinguish

between a mortgage and a deed, and (3) distinguish between an

assumption of a mortgage and buying subject to a mortgage.

De$ne and give examples of (1) adverse possession, (2) a variance,

(3) a nonconforming use, and (4) eminent domain.

Describe the nature and types of restrictive covenants.

TEACHING NOTES

The law is and always has been very cautious about the transfer of title to

real property. In contrast with personal property, which may be transferred

easily and informally from owner to owner, real property can be transferred

only through compliance with a variety of formalities. Title to land may be

transferred (1) by deed, (2) by will or intestate succession and (3) by open,

continuous, and adverse possession by a nonowner for a statutorily

prescribed period of time.

I. TRANSFER OF REAL PROPERTY

The most common way of transferring real property is by deed. Usually, such

transfers involve a contract for the sale of the land, the subsequent delivery

of the deed, and the payment of the agreed-upon consideration. However,

the transfer may also be made as a gift.

*** Chapter Outcome ***

Explain (1) the essential elements of a contract for sale of an interest in real property,

(2) the meaning and importance of marketable title, and (3) the concept of implied

warranty of habitability.

A. CONTRACT OF SALE

Formation

General contract law governs the sale of real property. Thus, to be

enforceable under the statute of frauds, a contract for the sale of land must

be in writing and signed by the parties. The simplest agreement should

contain (1) the names and addresses of the parties, (2) a description of the

property to be conveyed, (3) the time for the conveyance (called the

closing), (4) the type of deed to be given, and (5) the price and manner of

payment.

Marketable Title

conveyance of the same property by the seller), and

(3) events that deprive the seller of title, such as adverse possession or

eminent domain.

If the title search reveals any defect not specifically expected in the contract,

the seller has materially breached the contract. The buyer’s remedies for

breach include specific performance with a price reduction, rescission and

restitution, or damages for loss of bargain.

Implied Warranty of Habitability

The traditional common law rule with regard to improvements to the land is

caveat emptor — let the buyer beware. Under this maxim, the buyer must

inspect the property thoroughly before the sale is completed, since any

undiscovered defect would not be the seller’s responsibility. The seller is

liable only for any misrepresentations or express warranties he may have

made about the property.

CASE 49-1

VONHOLDT v. BARBA & BARBA CONSTRUCTION, INC.

Supreme Court of Illinois, 1997

175 Ill.2d 426, 677 N.E.2d 836, 222 Ill.Dec. 302

http://scholar.google.com/scholar_case?case=17693796651563455274&q=677+N.E.2D+836&hl=en&as_sdt=2,34

Miller, J.

The plaintiff, John W. VonHoldt, Jr., brought the present action in the circuit court of Cook

County against defendant, Barba & Barba Construction, Inc. The complaint alleged that

defendant breached an implied warranty of habitability in its construction of a structural

addition to an existing residence. * * *

Background

Shortly after taking occupancy, plaintiff noticed a deflection of the wood flooring at the

partition wall separating the master bedroom from an adjoining bathroom. This deflection

created a depression in the floor plane. Plaintiff maintained that, due to the thickness of the

carpet, the depression was nearly concealed. An investigation revealed that the addition was

not constructed in accordance with the architectural plans approved by the Village of

Glenview or the Glenview Building Code. Specifically, the partition wall between the master

bedroom and the bathroom was constructed as a bearing element supporting a portion of

both the roof and ceiling construction. This variance resulted in excessive stress on the floor

joists and inadequate support for a portion of the roof and ceiling causing a greater than

expected floor deflection.

Discussion

The Implied Warranty’s Applicability to Additions

On appeal to this court, plaintiff contends that the appellate court erred in rejecting his claim

of breach of an implied warranty of habitability. Plaintiff asks us to extend the implied

warranty of habitability to a cause of action by a subsequent purchaser for damages against a

builder constructing a later addition to a house. Defendant argues that the protection of the

implied warranty of habitability should be limited to actions against builder-vendors and that

plaintiff’s action, if any exists, is time-barred. For the reasons expressed below, we find that

the implied warranty of habitability extends to cases brought by subsequent purchasers

involving subsequent additions to homes.

The implied warranty of habitability is a judicially created doctrine designed to avoid the

unjust results of caveat emptor and the doctrine of merger. [Citation.] Initially, Illinois courts

applied the doctrine to the sale of new homes to protect innocent purchasers who did not

* * *

Plaintiff claims that the implied warranty of habitabil-ity should now be extended to

include actions against a builder brought by a subsequent purchaser for latent defects in a

later addition to a home. In [citation], this court held that the defendants were not subject to

the implied warranty of habitability for a condominium-conversion project. The court held

that the doctrine of implied warranty of habitability did not apply because the refurbishing

and renovation of the project had not been significant. [Citation.] In the present case, the

builder made a major addition to an existing home. We now hold that, when a builder makes

We must next determine whether the plaintiff can bring this action even though he is a

subsequent purchaser. In [citation], this court extended the implied warranty of habitability

to subsequent purchasers of a new home, finding that there was no need for privity of

contract because the warranty of habitability exists independently of the contract for sale.

Because the doctrine of implied warranty of habitability has been extended to actions by

subsequent purchasers of new homes, we can see no reason why the doctrine should not be

extended to actions by subsequent purchasers of a home for latent defects in a significant

addition to the home made prior to the time of sale.

* * *

Conclusion

*** Chapter Outcome ***

Describe the fundamental requirements of a valid deed and distinguish among

warranty, special warranty, and quitclaim deeds.

B. DEEDS

A deed is a formal document transferring any interest in land. The party who

transfers property by a deed is called the grantor; the transferee of the

property is the grantee.

Types of Deeds

The rights conveyed by a deed vary, depending on which of the three basic

types is used.

Warranty — By a warranty deed, the grantor promises the grantee that the

grantor has a valid title to the property.

• In addition, the grantor, either expressly or implicitly, obliges herself to

make the grantee whole for any damage the grantee suffer, should the

grantor’s title prove defective.

• A warranty deed includes certain promises or covenants, the most usual

being title, against encumbrances, quiet enjoyment, and warranty.

These constitute an assurance that the grantee will have undisturbed

Special Warranty — deed warrants only that the title has not been

impaired, encumbered, or made defective because of any act or omission of

the grantor. The grantor warrants the title as it concerns his own acts or

omissions; does not warrant title as to the acts or omissions of others.

Formal Requirements

Any interest in land that is of more than a limited duration falls within the

statute of frauds and must be in writing. The wording in almost all deeds,

whatever the type, follows nearly the same pattern:

Description of the Land — must be clear enough to permit identification of

the property conveyed.

Quantity of the Estate — description of type of estate being conveyed to

grantee (e.g., life estate).

Delivery of Deeds

A deed does not transfer title to land until it is delivered. Delivery, or an

intent that the deed is to take effect, is evidenced by the acts or statements

of the grantor. Physical transfer of the deed is usually the best evidence of

intent, but it is not necessary.

Recordation

In most states, recording a deed is not necessary to pass title. However,

unless the grantee has the deed recorded, someone who in good faith

subsequently purchases the same property for value will acquire title

superior to that of the grantee. Recordation consists of delivering a duly

executed and acknowledged deed to the recorder’s o<ce in the county

where the property is located. There, a copy of the instrument is inserted in

the current deed book and is indexed. Once recorded, documents such as

deeds, easements, and mortgages or deeds of trust become public records.

The purpose of recordation is to give constructive notice to the rest of the

world that an interest in property has been conveyed.

*** Chapter Outcome ***

(1) Describe the elements of a secured transaction, (2) distinguish between a mortgage

and a deed, and (3) distinguish between an assumption of a mortgage and buying

subject to the mortgage.

C. SECURED TRANSACTIONS

A secured transaction involves

• a debt or obligation to pay money and

• the creditor’s interest in specific property that secures performance of

the obligation.

A security interest in property cannot exist apart from the debt it secures:

discharging the debt in any manner terminates the interest.

When real estate secures a debt, the debtor is referred to as the mortgagor;

the creditor is the mortgagee.

Forms of Mortgages

A mortgage is a security interest in land. The mortgage instrument must be

in writing, must contain an adequate description of the property, and must

be executed and delivered.

Rights and Duties

Mortgagor’s rights: (1) In most states, the mortgagor retains title and is

entitled to possession of the premises to the exclusion of the mortgagee,

even if the mortgagor defaults. Only through foreclosure (sale) or through

the court appointment of a receiver can the right of possession be taken

from the mortgagor. (2) The mortgagor has the right to redeem his

mortgaged property by paying the debt that the mortgage secures. This

right of redemption can be defeated only by operation of law.

Mortgagor’s duty: The mortgagor has a duty not to commit waste, which

would impair the security. For example, the debtor’s failure to pay taxes or to

discharge a prior lien may impair the security of the mortgagee.

Mortgagee’s rights: (1) The mortgagee has a right to recover the amount

of the debt. (2) And he or she has the right to foreclose the mortgaged

property upon default to satisfy the debt. Foreclosure is an action through

the debt immediately due and payable, permitting foreclosure for the entire

amount.

NOTE: See Figure 49-1: Fundamental Rights of Mortgagor and Mortgagee

Mortgage Regulation

In July 2010, President Obama signed into law the Dodd-Frank Wall Street

Reform and Consumer Protection Act (Dodd-Frank), the most signiticant

change to U.S. financial regulation since the New Deal. One of the many

stand-alone statutes included in the Dodd-Frank is the Mortgage Reform and

Anti-Predatory Lending Act of 2010, which modi$es the Truth-in-Lending Act

Transfer of Mortgage Interests

By Mortgagor — A purchaser who assumes the mortgage takes the

property and is personally liable for payment to the mortgagee. This

requires an assumable mortgage and the consent of the mortgagee. If the

property is taken subject to the mortgage the transferee’s liability is limited

Foreclosure

After default by the mortgagor the property is sold to pay the debt. Some

mortgages provide that upon default of one installment payment the entire

*** Chapter Outcome ***

De$ne and give examples of (1) adverse possession, (2) a variance

(3) a nonconforming use, and (4) eminent domain.

D. ADVERSE POSSESSION

This is a very rarely used method of transfer of title to land. It is involuntary

and takes place without any deed or other formality.