CHAPTER IX
Real Property
DISTINCTION BETWEEN THE LAW GOVERNING SALES OF REAL AND PERSONAL PROPERTY.—The main distinction between the law governing real and personal property is the increased formality necessary in transactions governing real estate. Contracts for the sale of real estate must be in writing and actual conveyances of an interest in land must not only be in writing, but, except where seals have been abolished by statute, must be executed under seal. In order to make the transaction valid against third persons, record in the Registry of Deeds in the county where the land is situated is also requisite. Unless a contract for the sale of real estate is recorded, a subsequent conveyance to a purchaser, for value and without notice, will destroy the right of the buyer under the first contract to get the land, though he will still have an action for damages against the seller. So, in many jurisdictions, creditors of the man contracting to sell may by attaching the land as the seller's property satisfy their claims from it to the detriment of the buyer's right. Therefore, an actual conveyance of real estate must be recorded in order to protect the grantee. As a pre-requisite for record it is generally required that contracts and deeds of real estate shall be acknowledged before a notary public or other official authorized by law.
DUTIES OF BUYER AND SELLER UNDER CONTRACT TO CONVEY REAL ESTATE.—The primary duty of the seller in a contract to convey real estate is to transfer a good title. It is important for the buyer to determine before the time for performance whether the seller's title is good in order to determine whether he himself will accept the deed and pay the price. Accordingly, the buyer has the title examined by search in the Registry of Deeds. If the search discloses that the seller's title is defective the buyer does not on that account necessarily have a right to rescind the contract. The defect of title may be removed before the time of performance, and if the nature of the defect is such that this is possible, the buyer can only give notice of the defect and request its removal. If the title of the seller is so defective that it cannot be cured, or if the seller manifests by his conduct an intent to repudiate the contract, as by selling the land to another, the buyer need not wait for the time for performance, but may at once give notice that he rescinds the contract. Unless the seller has expressly contracted to convey by warranty deed, his obligation is generally satisfied by a quit claim deed. It is well, therefore, for a purchaser, when he contracts to purchase a piece of real property, to insert in the contract a clause to the effect that the seller agrees to convey by a sufficient warranty deed. The seller is also bound not to commit waste on the premises between the time of the contract and the time of performance. The rule in regard to accidental injury is stated hereafter, but as to intentional or negligent injury of the premises, the law is clear that such an injury is a breach of duty by the seller. The buyer's duty is to pay the price according to the terms of the contract. The obligations of the seller to convey, and of the buyer to buy, are concurrent, unless the contract expressly provides the contrary; that is, the buyer in order to acquire a right against the seller must tender payment, as he demands a deed; and the seller in order to acquire a right against the buyer must tender a proper deed when demanding payment. The obligation of either party to tender may, however, be excused by circumstances showing that tender would be useless. Thus, if the buyer is insolvent, the seller need not tender a deed, and if the buyer has repudiated the contract or committed waste to a material extent, or conveyed the premises to a third person, the buyer need not tender payment, in order to acquire a right of action. But if there is any doubt at all, the purchaser or the seller, as the case may be, should make a tender, so as to preserve his legal rights.
DOWER AND CURTESY.—By the common law a wife on her marriage acquired a right in her husband's land, which, though not vesting until his death, encumbered the title immediately. On his death she became entitled to a life estate in a one-third interest of all the lands of which he had been possessed since the date of their marriage. Accordingly, where the common law rule of dower still prevails, a husband cannot give an unencumbered title to real estate unless his wife joins in the conveyance. Similarly a husband was entitled at common law to a life interest in the lands of his deceased wife if they had had a child born alive. This was called the estate by curtesy. Its extent, it will be observed, is not the same as that of dower. The husband's life interest extended to all the lands of the wife, but on the other hand, it did not arise at all unless there was a child born alive; whereas the wife's dower right arose immediately on marriage. The rules of dower and curtesy have been changed by statute to a greater or less extent in most States, but it is still almost universally important that a wife should join in her husband's conveyance of real estate, and that a husband should join in a wife's conveyance of her real estate.
DEFAULT IN PERFORMANCE.—The law regards more leniently a default in time in carrying out contracts for the sale of real estate than it does a similar default in the sale of personal property. In sales of personal property, especially if it is of a character which rapidly fluctuates in value, time is said to be "of the essence;" that is, the failure of either party to perform at or about the agreed day is fatal to his rights to enforce the contract; but in the case of real estate it is generally held that time is not of the essence of the contract unless it is either expressly so provided in the contract, or the circumstances of the case are such as to show that time was a matter of vital importance.
DESTRUCTION OF PREMISES.—Where personal property, which the owner has contracted to sell, is destroyed, the loss is the seller's provided the title is still in him, and the buyer has committed no default; but in most jurisdictions, if real estate is similarly destroyed, the buyer must nevertheless pay the price. In the absence of special provisions in a contract of sale, if a house on the premises sold has burned between the time of the contract and the time for its performance, without fault of the seller, the seller can compel the buyer to accept a deed of the land without the house and pay the full price. This rule has been much criticized, and it is not universally in force; for example, it is not the law of Massachusetts. In some other States the loss will not fall upon the buyer unless possession of the premises has been delivered to him under the contract, but in New York, and probably a majority of the States, even though the seller still has possession, as well as title, the risk of accidental loss rests upon the buyer. Where risk of destruction of the premises is thrown on the buyer, immediately after he has made a contract to purchase, it is of obvious importance that he should immediately insure the premises. The insurance of the seller, unless transferred to the buyer at that time with the company's assent, will not protect the buyer. Insurance is a contract of personal indemnity, and the seller's insurance only protects the seller's interest. The result is that if the premises are destroyed, the insurance company will not be obliged to pay the seller his insurance, since the seller, under the contract of sale, can recover from the buyer; and even if the insurance were paid to the seller, the buyer could not claim the benefit of it.
SPECIFIC PERFORMANCE.—In addition to the ordinary remedy for a breach of contract, namely an action at law for damages, another remedy, that of specific performance, is permitted in the case of contracts for the sale of land; that is, the court will actually compel one who has contracted to sell land to make a conveyance thereof on receiving the agreed price, and will similarly compel one who has contracted to buy to pay the agreed price on receiving a deed of the premises. Specific performance of such contracts is granted on the theory that money damages are an inadequate remedy, and that the nature of the situation is such that it is possible to compel the actual performance of the contract. In contracts for the sale of personal property, damages are generally considered adequate, but contracts for the sale of a painting or a race-horse would be specifically enforced. Sometimes the seller is unable fully to perform his agreed contract. He may not be able to give a title free from encumbrances, or he may have committed waste on the premises. In such a case, though the buyer need not carry out the contract unless he wishes, he can if he chooses get a conveyance decreed to him and an allowance deducted from the price commensurate to the injury caused by the encumbrance or waste. Specific performance will be granted not only against the seller, but if the seller in violation of his contract has conveyed the land to a third person who had notice of the contract or who did not give value in exchange for the land, the court will compel the grantee of the premises to convey them to the person who had the original contract to buy. If, however, one who has agreed to sell the premises actually sells and conveys them to another who is a purchaser for value without notice of the prior contract, such a purchaser gets an indefeasible title, and the person having the prior contract to buy must resort, for his only relief, to an action for damages against the seller. For this reason it is important to record a contract to buy or sell. This record operates as notice to all the world, and no purchaser subsequent to the record will have the rights of a purchaser for value without notice.
VENDOR'S LIEN.—In some States a seller of land who has not been paid the price is entitled to what is called a vendor's lien on the land. This enables him to compel a sale of the property to satisfy his claim for the purchase money unless the land has been conveyed, before proceedings are brought to enforce the lien, to a purchaser for value without notice that the original vendor is still unpaid. In many States, however, the seller has no vendor's lien and must take a mortgage back for any unpaid portion of the purchase price if he desires security for its payment.
DEFINITION OF MORTGAGE.—A mortgage is a transfer of property to a creditor to secure a debt. Unless there is a debt there can be no mortgage, and the original idea of a mortgage, still preserved in the forms of conveyance in many States, is that the mortgagor or debtor transfers the title to the mortgagee or creditor. In popular understanding the mortgagor owns the mortgaged premises but the mortgagee will take or sell them if the debt is in default. The theory of the common law, however, was that the mortgagee became the owner of the premises as soon as the mortgage was made, but that the mortgagor was entitled to re-acquire the ownership by payment of the debt at maturity. Indeed, early mortgages were often made by two separate instruments: (1) an absolute deed of conveyance to the mortgagee, and (2) an instrument called a defeasance which provided that on payment of the amount of the debt, on a given day, the property should revest in the mortgagor.