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Chapter 16 - Real Property Sales and Mortgages.docx

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MKT 100
Jennifer Fraser

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Chapter 16: Real Property: Sales and Mortgages Registration Systems • Registration System: documents the existence of interests in land REGISTRY SYSTEM • Registry System: provides an opportunity to inspect and evaluate documents that may affect real property • Chain of Title: a series of transactions in which ownership was validly passed from one person to the next • Govt documents do not guarantee accuracy, so may want to purchase title insurance which provides a source of compensation if transaction does not include everything promised • From a risk management perspective, the registry system leaves something to be desired and may lead to disastrous outcomes LAND TITLES SYSTEM • Land Titles System: generates certificates of title that virtually guarantee the validity of the interests that are listed • Indefeasibility: means that, with very few exceptions, the interests that are included in a certificate of title cannot be defeated • That doctrine is based on three principles o Mirror Principle: states that all the interests listed in a certificate of title generally are valid o Curtain Principle: states that the only valid interests in a property generally are the ones listed in the certificate of title o Insurance Principle: states that a person who suffers a loss as a result of an error in the system generally is entitled to compensation • Mortgage Fraud o Land titles legislation may be amended to ensure that the original owner recovers title o Procedures may be tightened to make it more difficult to steal identities and forge documents o Land titles system may be restricted to individuals directly involved in transactions, rather than being entirely open to the public UNREGISTERED INTERESTS • Interest in land may be effective even if it is not registered • Common examples: o Short term leases – may be enforceable against a purchaser even if it is not registered so you should inspect the premises for any signs of tenants o Prescription and adverse possession – possible for a person to acquire an interest in land as a result of a long period of use or occupation o Public easements – should look for signs of activity on land (utility company may have the right to bury cables beneath the land, etc) o Unpaid taxes – govt may be entitled to seize and sell the land if you fail to pay your taxes which will be continue to exist after property has been transferred to another party o Unpaid creditors – writ of execution: document that allows a courts judgement to be enforced; unpaid debts can also be transferred with the property Land Scales • Sale: occurs when ownership is transferred in exchange for consideration RISK MANAGEMENT • General rule for purchasing land is “caveat emptor”: “let the buyer beware” • Vendor has no obligation to reveal facts that may ruin the sale; unless it is for a home, they cannot cover up defects especially if it is dangerous • Many dangers can be managed, using help from the following people o Real estate agent – can search the market for alternatives and help find the right property, put you in contact with other people you will need to safely purchase a property o Lawyer – performs a number of tasks including: communicating with seller or their lawyer, verifying which secondary pieces of property are included in sale, ensuring that local by-laws will allow you to use the land for your intended purpose, obtaining insurance coverage for property, checking mortgage arrangements, and preparing, filing, and registering the formal documents o Appraiser – gives opinion on factors affecting value of land o Surveyor – would reveal facts that may be inaccurate given by the vendor o Inspector – inspects premises for potential problems such as dangerous structures or other health and safety issues o Environmental auditor – could identify of leaked substances, etc. • If you hired these individuals, they would be liable for any problems they failed to discover and save yourself AGREEMENT OF PURCHASE AND SALE • Agreement of Purchase and Sale: a contract for the sale of land • Agreement must satisfy all usual contractual elements, including intention to create legal relations, an offer and acceptance, and consideration • Must be in writing • Vendor: person who sells the land • Purchaser: person who buys the land • Condition or Condition Precedent: a requirement that must be satisfied before the transaction can be completed • Does not prevent the creation of a contract but does suspend the parties’ obligations to complete the deal • In the context of land sales, there are various factors that may affect the contract if it has unexpected costs pg 397 • If conditions aren’t met then sale will not be completed • Subsidiary obligations – parties may be required to act in a certain way and if fail to do so, the party may be entitled to damages CLOSING • Once all conditions attached to the sale have been satisfied, the parties’ transaction can be closed or completed • Make sure all important information is up to date • Common for adjustments to occur at the time of closing • Purchaser’s lawyer will register the deed or transfer to protect the client’s rights • Lawyer generally helps with the paperwork that is needed to obtain insurance coverage on the property REMEDIES • Plaintiff is normally entitled to recover the value of the property it expected to obtain • Specific performance – Instead of being restricted to the monetary value of the property, the plaintiff could obtain the property itself by forcing the defendant to go through with the sale • Two special remedies available under a contract for the sale of land o Purchaser’s Lien  Purchaser’s Lien: allows the purchaser to have the land sold to satisfy the outstanding debt  Created whenever the purchaser pays money to the vendor o Vendor’s Lien  Vendor’s Lien: allows the vendor to have the property sold to satisfy the outstanding debt  Person may be willing to sell land on credit, without insisting full payment at the time of closing – danger that purchaser will later refuse to pay remaining amount Mortgages • Mortgage: an interest in land that provides security for the repayment of a debt • Mortgager: the person who borrows the money and provides the interest in land • Mortgagee: the person who lends the money and acquires the interest in land • A mortgage can be used in several ways: o Same property involved in two transactions o Two transactions can be distinct NATURE OF MORTGAGES • Registry System and Land Titles System o Mortgage creates a charge over the property in a land titles system o Charge: occurs when the mortgagor agrees that the land will be available to the mortgagee if the debt is not repaid o Mortgagee is required to remove that charge if the loan is repaid and if the other terms of the parties’ agreement are satisfied o Under a registry system, a mortgage does not merely create a charge it involves a conveyance of title o Mortgagor transfers property to the mortgagee who then becomes the legal owner • Subsequent Mortgages o Under registry system, mortgagee acquires the legal title to the property but the mortgagor is not left without anything o They receive an equitable interest in the land which arises because the borrower enjoys the equity of redemption o Court of law had a very harsh approach to mortgages o Court of equity created equity of redemption o Equity of Redemption: entitles the mortgagor to r
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