THE ULTIMATE “RECORDING ACT” (They Hardly Ever Toured)

1. THE ULTIMATE “RECORDING ACT” (They Hardly Ever Toured) A DECADE OF STEELY DAN RECORDINGS 1972-80

2. Duty to Disclose DQ84: Ordinary Sellers v. Comm’l Sellers v. Agents/Brokers • Strawn distinguishes on-site & off-site defects • All sellers responsible for on-site (e.g., polluted water supply) • Only comm’l sellers responsible for off-site • Rev Prob 5B (Fri): Is noise an on-site OR off-site defect? • Sellers v. Agents/Brokers: I won’t test

3. Duty to Disclose Policy Q: What Should Count as a Defect? • Some states: Statutory disclosure list • Usually makes it easy to identify “defects” • But see P409: Calif. Statute requires disclosure of “neighborhood noise problems or other nuisances.”

4. Duty to Disclose Policy Q: What Should Count as a Defect? • Some states: Statutory disclosure list • Materiality also provides limit (no need to disclose if insufficient effect on value). Exact test varies: • Most states require that the fact be simply “material” to value (= “relevant”) • WVa stricter: “substantially affect” value/habitability DQ 85: Why might a state choose a more strict requirement like this? Is it a good idea?

5. Duty to Disclose Policy Q: What Should Count as a Defect? • Some states: Statutory disclosure list • Materiality also provides limit • Can argue some things shouldn’t count as matter of public policy even if tests all met. (Like preclusion issues for nuisance)

6. Duty to Disclose Policy Q: What Should Count as a Defect? • Some states: Statutory disclosure list • Usually makes it easy to identify “defects” • But see P409: Calif. Statute requires disclosure of “neighborhood noise problems or other nuisances.” • Materiality also provides limit • Can argue some things shouldn’t count as matter of public policy even if tests all met. (Like preclusion issues for nuisance)

7. Duty to Disclose Policy Q: What Should Count as a Defect? What shouldn’t count as “defect” as matter of public policy even if tests all met? Two related policy concerns: • Are there issues where we don’t think the seller should bear the burden of disclosure? • Are there issues for which disclosure itself is a bad idea?

8. Duty to Disclose Policy Q: What Should Count as a Defect? • Issues where we don’t think the seller should bear the burden of disclosure . • Could draw line at on-site v. off-site • Could draw line at subjective v. objective: (E.g., quality of local school district) • Could draw line where seller has no information advantage over buyer (e.g., Zoning: Compare info on laws to info on particular decisions)

9. Duty to Disclose Policy Q: What Should Count as a Defect? • Issues where disclosure is a bad idea. • Maybe effect on market value is irrational • Maybe possible harm/stigma/privacy issues • Examples: Early AIDS cases; Group homes for persons with disabilities • “Stigma statutes” provide lists of issues that need not be disclosed to avoid undue harm to value

10. Duty to Disclose Policy Q: What Should Count as a Defect? • Issues where disclosure is a bad idea. • “Stigma statutes” provide lists of issues that need not be disclosed to avoid undue harm to value: E.g., Fl. Stat. 689.25(1) (a)  The fact that an occupant of real property is infected or has been infected with human immunodeficiency virus or diagnosed with acquired immune deficiency syndrome is not a material fact that must be disclosed in a real estate transaction. (b)  The fact that a property was, or was at any time suspected to have been, the site of a homicide, suicide, or death is not a material fact that must be disclosed in a real estate transaction.

11. Duty to Disclose Defects DQ86-88 (Wheat)

12. DQ87: Strawn P411: No duty to disclose “transient social conditions” MEANS?

13. DQ87: Strawn P411: No duty to disclose “transient social conditions” What does it mean two sentences later when it says “we root in the land the duty to disclose off-site conditions”?

14. DQ87: Strawn P411: No duty to disclose “transient social conditions” EXAMPLES MUST DISCLOSE Landfill Planned superhighway; Office complex approved nearby CAN YOU ARTICULATE DIFFERENCE? • Changing nature of neighborhood • School in decline • Group home nearby

15. What Should Count as a Defect:DQ86: Hypotheticals Arguments from Policy & Strawn Language • Violent crime in the house itself. • Why relevant? • Should seller have to disclose?

16. What Should Count as a Defect:DQ86: Hypotheticals Arguments from Policy & Strawn Language • Violent crime in the house itself. • Violent crime in a neighboring house. • Reasons to treat differently from (a)?

17. What Should Count as a Defect:DQ86: Hypotheticals Arguments from Policy & Strawn Language (f) Physical contact with some of the plants in the yard gives many people rashes or blisters.

18. What Should Count as a Defect:DQ86: Hypotheticals Arguments from Policy & Strawn Language (f) Physical contact with some of the plants in the yard gives many people rashes or blisters. NOTE TIE TO NUISANCE ISSUE

19. Duty to Disclose DefectsDQ88: Waivable? (Check State) • Casebook: Most jurisdictions don’t allow waiver re fraud • Johnson (FL) suggests can’t waive duty to disclose • Stambovsky (S115): Disclaimer in this contract irrelevant • Only covers physical defects (not reputation) • Note cute contract interpretation point: • IF this is a physical defect, then premises not “vacant” • Ct. says can’t disclaim if peculiarly within knowledge of seller.

20. Duty to Disclose DefectsDQ88: Waivable? Suppose a court allowed residential buyers to waive the duty to disclose in some circumstances. • What facts should be relevant to this determination? • What circumstances would provide the best case for allowing waiver?

21. Duty to Disclose DefectsDQ88: Final Qs (For You!) • What is best approach to problem? • Caveat emptor v. Disclosure form v. Lawsuit • What is best legal test? • Relevant policy debate • Protecting homebuyers v. requiring homebuyers to act diligently (inspect/ask Qs). • Are policy arguments in the cases convincing? • Applicability of Duty to Disclose Rules to Landlord/ Tenant (Interesting Q; Outside Scope of Course)

22. POP CULTURE QUIZ:NAME THAT BAND • First Billboard #1 Hit in 1958 • Won 5 Grammy Awards; Nominated for 8 Others • Won American Music Award for Best Soundtrack Album • Featured in a Major Studio Motion Picture Released in 2009 ANSWER ON FRIDAY

23. LOGISTICS • Friday’s Class • Start with Duty to Disclose Review Problems • Finish Recording Acts • Start Easements • Housing Discrimination • Practice Midterms • Grading: 12 + 12 + 60 = 84 • Line ‘em up & draw lines

24. NOTICE & THE RECORDING SYSTEM

25. NOTICE (of Conflicting Property Rights) • Actual Notice: Fact Question • Constructive Notice: Generally Legal Q • Record Notice (from public records) • Inquiry Notice (facts suggesting conflicting interest)

26. Operation of the Recording System • Every jurisd. in US has recording office • If a real property interest is transferred, normally grantee records document • Deeds, Mortgages, Easements • Court judgments; lis pendens (Nightmare) etc. • Clerks of court: “blind” recipients w date stamps • County keeps documents & notes them in indexes

27. Purposes of Recording System • Provides public record of land titles: gov’t knows who is responsible • Secures copies of important documents • Provides notice to subsequent buyers • Can see chain of title of seller • Can see non-ownership interests (e.g., easements, other servitudes) • Gives grantees incentive to record

28. Recording Acts: Problem Addressed • Transfer of Interest in Same Property to Two Different Grantees (OA, OB) • Can be resale of whole parcel • More frequently, transfer of partial interest (e.g., easement or mineral rights) that conflicts with later transfer of complete interest

29. Recording Acts: Problem Addressed • Transfer of Interest in Same Property to Two Different Grantees(OA, OB) • O liable for fraud or breach of warranty • A v. B: who gets ppty rt & who just gets lawsuit? • Common law answer: 1st in time = 1st in Right, so A gets ppty right

30. Recording Acts: Operation • Recording has no effect on rights of parties to original transaction as betw. themselves: • Unrecorded OA deed still valid • O can’t defend suit by A by saying “unrecorded”

31. Recording Acts: Operation • Recording has no effect on rights of parties to original transaction as betw. themselves: • Protects buyers who record against other transferees • Often yields different results than 1st in time • Most jurisdictions protect later bona fide purchaser (BFP) for value against unrecorded interests

32. BFP for VALUE: Definitions Bona Fide Purchaser = good faith • No notice of prior transaction • Status is specific to one prior transaction • Can only be true of later player

33. BFP for VALUE: Definitions Bona Fide Purchaser = good faith What is value? (jurisdiction specific) • donees, heirs, devisees usually not prot’d • split re amount of consideration needed

34. 3 Kinds of Recording Acts • Race • Notice • Race-Notice

35. 3 Kinds of Recording Acts • Race • 1st to Record Wins • N.C. + La. + Del. for all interests • Some others for some specific interests • Notice • Race-Notice

36. 3 Kinds of Recording Acts • Race • Notice • Protects BFP for Value against prior unrecorded interests regardless of when or if BFP records • About half the states (e.g. TX + FL) • Race-Notice

37. 3 Kinds of Recording Acts • Race • Notice • Race-Notice • Protects BFP for Value against prior unrecorded interests only if BFP records 1st • About half the states (e.g. NY + CA)

38. DQ89 featuring ALL • Shir, Jeremy • Perez, Yuri • Johnson, Shanelle • Habib, Payam • Foster, Brandon • Gavalier, Cody • Rea, Kyle • Christie, Alexis • Bell, Brian • Jordan, Ashley • Forman, Jeff • Ramsaran, Jerome

39. DQ89: Situation 1 OA OB (BFP) B records [O B deed] A records [O A deed] WHO WINS IN …? • RACE: • NOTICE: • RACE-NOTICE:

40. DQ89: Situation 1 OA OB (BFP) B records [O B deed] A records [O A deed] WHO WINS IN …? • RACE: B • NOTICE: B • RACE-NOTICE: B

41. DQ89: Situation 2 OA A records OB B records WHO WINS IN …? • RACE: • NOTICE: • RACE-NOTICE:

42. DQ89: Situation 2 OA A records OB B records WHO WINS IN …? • RACE: A • NOTICE: A • RACE-NOTICE: A

43. Moral of Situations 1 & 2: If you record immediately, you are always in the best position possible.

44. DQ89: Situation 3 OA OB (NOT BFP) B records A records WHO WINS IN …? • RACE: • NOTICE: • RACE-NOTICE:

45. DQ89: Situation 3:RACE STATUTE: PROTECTS BAD FAITH PURCHASER WHO RECORDS FIRST OA OB (NOT BFP) B records A records WHO WINS IN …? • RACE: B • NOTICE: A • RACE-NOTICE: A

46. DQ89: Situation 4 OA OB (BFP) A records B records WHO WINS IN …? • RACE: • NOTICE: • RACE-NOTICE:

47. DQ89: Situation 4:NOTICE STATUTE: PROTECTS BFP EVEN IF DOESN’T RECORD FIRST OA OB (BFP) A records B records WHO WINS IN …? • RACE: A • NOTICE: B • RACE-NOTICE: A

48. DQ89: Title Search with Grantor-Grantee Indexes Purchasing from Ms. Cohen. How do you begin?

49. DQ89: Title Search with Grantor-Grantee Indexes Purchasing from Ms. Cohen. • Check grantee index under Cohen going backward from present.You find record of deed: Baker-Bradley  Cohen (1984). What now?

50. DQ89: Title Search with Grantor-Grantee Indexes Purchasing from Ms. Cohen. • Deed: Baker-Bradley  Cohen (1984). • Check grantee index under Baker-Bradley going backward from 1984.You find record of deed: Amadi  Baker-Bradley (1969). What now?