Property Law Spring 2017

Professor Marc H. Greenberg

Golden Gate University School of Law

Land Transfers Part 2

 Land Transfers Part 2
• Licari v. Blackwelder
– The real estate broker is a fiduciary – and therefore owes a duty to act
with the utmost good faith towards his principal. Among the specific
duties this requires is the duty to disclose any material facts that many
affect the discharge of his/her duty. Deciding to self-deal and undercut
your principal’s bid for a property is something A) you can’t do, and B)
you would have to disclose.
• Broker’s Rules
– The traditional approach
– Buyer’s brokers
– Dual Agents
– Disclosure requirements
– MLS, Price fixing and antitrust
 Land Transfers Part 2
• Broker’s Rules (cont.)
–The economics of real estate brokerage
–Types of listings
•Open Listings
•Exclusive Agency Listing
•Exclusive Right to Sell Listing
–Crossing the line – the unauthorized practice of law by brokers
–When commission is due – arbitration of commission claims – prejudice
against brokers
•The Contract of Sale – The Statute of Frauds
•Hickey v. Green – Court’s grant specific performance of real estate contracts
where there is a showing that a party has changed their situation in reliance on the
sale of the property – and it helps if there is no dispute that an initial agreement,
even if oral, was undisputedly made between the parties. Here, it seems the only
reason Mrs. Green tried to cancel the transaction is that she found a buyer willing to
pay an additional $1000 for the house. Could she have obtained a backup offer?
 Land Transfers Part 2
•The Effect of the E-Sign Act on the Statute of Frauds in Real
Estate Transactions
•Lohmeyer v. Bower and the question of marketable title
– Is the Emporia zoning ordinance requiring frame buildings to be set
back at least three feet from a side or rear lot line the kind of restriction
referred to in the contract of sale, where it limits its warranty of delivery
of clear title as “subject, however, to all restrictions and easement of
record applying to this property, it being understood that the first party
(the seller) shall have sufficient time to bring…”.
–Can you convey marketable title if the property carries with it the hazard
of litigation?
–Do the restrictions alone make the property unmarketable?
 Land Transfers Part 2

• Stambovsky v. Ackley (the duty to disclose meets the Syfy

channel)
– Should the doctrine of Caveat Emptor apply when a seller creates a
condition which materially affects the value of the contract, and it
peculiarly within the knowledge of the seller, and is unlikely to be
discovered by even a prudent buyer who exercises due care in the
transaction?
– This question applies with equal force when the condition of the
property may be known to the local community, but not to outsiders.
Should there be different standards of disclosure in such cases? Should
we require parties to conduct internet searches, or newspaper archive
searches, to determine the provenance of a house?
– Is rescission the best remedy here? What about exorcism?
 Land Transfers Part 2
• Johnson v. Davis –
– This case is part of the trend away from Caveat Emptor in real estate
sales – the court notes that where a failure to disclose a material fact is
calculated to induce a false belief, there is very little difference
between failure to disclose and an affirmative misrepresentation.
– Here, the seller knew the roof leaked, and made an affirmative
representation that the roof was fine despite that knowledge, to induce
the buyer to make the purchase. When the truth was discovered, the
buyer is entitled to rescind the transaction.
• Seller’s Obligation to disclose - most states now require sellers to
complete standard disclosure forms identifying known material defects and
problems – which gets complicated when the problem is not a tangible
item, but problem neighbors, high crime or other social problems, or
negative history of the property (ie: a murder or suicide occurred there,
etc.)
 Land Transfers Part 2

• Lempke v. Dagenais and the Implied Warranty of Quality

– Construction defects pose complex problems in real estate transactions.
Many times the nature of the defect is not immediately known – it is a Latent
Defect, a defect that becomes manifest after the purchase, and in many cases
not until a subsequent purchaser acquires the property – and which was not
discoverable even had a reasonable inspection of the structure been made
prior to the original purchase. Defective wiring in the walls, defective
plumbing joints, leaky roofs, etc., are examples of latent defects.
– Since these defects often manifest after the original construction and
purchase of the property, there is no privity between the subsequent
purchaser and those responsible for the construction of the house (ie: general
contractors, subcontractors, laborers and craftspeople, and vendors of home
furnishings and fixtures in the house). How does the court address this issue?
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• Lempke v. Dagenais
– Why don’t most courts allow economic loss recovery in tort cases, but
do allow it in contract cases?
– What limitations does the court impose on liability for breach of the
implied warranty of workmanlike quality in construction?
– So is Caveat Emptor dead?