Multistate Bar Examination (MBE) Real Property Flashcards

24 sample cards from the Real Property deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. List the six covenants of title and which are present vs. future covenants.

   PRESENT covenants (breached, if at all, at delivery; do not run with land in many states): (1) Covenant of seisin, (2) Covenant of right to convey, (3) Covenant against encumbrances. FUTURE covenants (breached upon later disturbance; run to successors): (4) Covenant of quiet enjoyment, (5) Covenant of warranty, (6) Covenant for further assurances.

2. What remedies are available for a seller's breach of a land sale contract?

   The buyer may sue for damages (benefit of the bargain—difference between contract price and market value), seek SPECIFIC PERFORMANCE (because land is unique, the standard remedy), or rescind and recover the deposit. The seller may keep the deposit, sue for damages, or seek specific performance (forcing the buyer to pay).

3. What is the purpose of recording acts, and whom do they protect?

   Recording acts establish priority among competing claimants to land and protect SUBSEQUENT bona fide purchasers (and mortgagees) against prior unrecorded conveyances. They do NOT protect donees, heirs, or those with notice (except under a pure race statute).

4. State the operative language and rule of a RACE recording statute.

   'First to record prevails.' Whoever records first wins, regardless of notice. Even a subsequent purchaser WITH actual knowledge of a prior unrecorded deed prevails if he records first. (Rare.)

5. State the operative language and rule of a NOTICE recording statute.

   A subsequent bona fide purchaser (BFP) prevails over a prior grantee who failed to record, IF the subsequent purchaser took WITHOUT notice (actual, record, or inquiry) and gave value. Recording by the subsequent purchaser is not required to prevail. Typical language: 'unless recorded... not valid against a subsequent purchaser without notice.'

6. State the operative language and rule of a RACE-NOTICE recording statute.

   A subsequent BFP prevails only if he (1) took WITHOUT notice of the prior conveyance AND (2) RECORDS FIRST (before the prior grantee). Typical language: 'unless recorded... not valid against a subsequent purchaser without notice who records first.'

7. Define the three types of notice under recording acts.

   (1) Actual notice—real knowledge of the prior interest. (2) Record (constructive) notice—properly recorded documents in the chain of title. (3) Inquiry notice—facts that would lead a reasonable person to investigate (e.g., someone in possession, references in recorded deeds).

8. Who qualifies as a bona fide purchaser (BFP)?

   One who (1) takes for VALUE (not a gift/devise/inheritance) and (2) takes WITHOUT notice (actual, record, or inquiry) of the prior interest. Donees, heirs, and devisees are not BFPs and cannot use notice/race-notice statutes.

9. What is the 'shelter rule'?

   A person who takes from a bona fide purchaser protected by the recording act 'shelters' under that BFP's protection—acquiring the same priority—even if that person otherwise had notice or did not pay value. This protects the BFP's ability to convey what she has.

10. What are a 'wild deed' and an estoppel-by-deed (after-acquired title) situation, and their effect on chain of title?

    A wild deed is a recorded deed outside the chain of title (because a prior link is unrecorded); it does NOT give constructive notice. Estoppel by deed: if a grantor conveys land he doesn't yet own (with warranty) and later acquires title, that title automatically passes to the earlier grantee; but a later BFP may still prevail because the after-acquired title deed is outside the chain in most states.

11. What is marketable title, and what defects make title unmarketable?

    Title reasonably free from doubt that a prudent buyer would accept. Defects rendering it unmarketable include: defects in the record chain, encumbrances (mortgages, liens, easements, restrictive covenants—unless waived/known), zoning violations (not mere zoning), and title acquired by adverse possession that hasn't been quieted.

12. How does title insurance protect a buyer, and how does it differ from deed covenants?

    Title insurance indemnifies the insured against losses from covered title defects existing at the policy date and pays defense costs. Unlike deed covenants (which run against a possibly-insolvent grantor), it gives a contractual claim against a solvent insurer; but it covers only listed/standard risks and excludes stated exceptions.

13. What is the difference between a lien-theory and a title-theory state for mortgages?

    In a LIEN-theory state (majority), the mortgagee holds only a lien/security interest and the mortgagor keeps title and possession—a mortgage does NOT sever a joint tenancy. In a TITLE-theory state, the mortgagee holds legal title until the debt is paid, and granting a mortgage CAN sever a joint tenancy.

14. Define a mortgage and the equity of redemption.

    A mortgage is a security interest in land given to secure a debt (mortgagor = borrower/debtor; mortgagee = lender). The equity of redemption is the mortgagor's right, BEFORE foreclosure sale, to redeem the land by paying the full debt (plus interest/costs); it cannot be waived in the mortgage ('clogging the equity of redemption' is prohibited).

15. What is an equitable mortgage and a deed of trust?

    An equitable mortgage arises when a deed absolute is given as security for a loan—courts treat it as a mortgage requiring foreclosure. A deed of trust conveys title to a third-party trustee to hold as security; on default the trustee may sell the property (often via power of sale), functioning like a mortgage.

16. What is an installment land contract (contract for deed) as a financing device?

    The buyer pays in installments and the seller retains legal title until full payment, then conveys a deed. Traditionally forfeiture clauses let the seller keep payments on default, but many courts now require foreclosure-like protections, restitution, or treat it as a mortgage to protect the buyer's equity.

17. When a grantee takes property 'subject to' a mortgage versus 'assuming' it, who is personally liable?

    'Subject to': the grantee takes the land but does NOT promise to pay; only the original mortgagor remains personally liable, though the land can still be foreclosed. 'Assuming': the grantee PROMISES to pay the debt and becomes primarily liable; the original mortgagor becomes secondarily liable (surety) unless released by a novation.

18. Does a 'due-on-sale' clause affect a transfer of mortgaged property?

    A due-on-sale clause lets the lender demand full payment (accelerate) if the mortgagor transfers the property without consent. They are generally enforceable (federally validated by the Garn-St. Germain Act), preventing buyers from taking over loans without the lender's approval.

19. What is the order of priority among mortgages and other liens, and the general rule?

    Priority is generally determined by 'first in time, first in right,' subject to the recording acts (a later mortgagee who is a BFP recording first under the statute may gain priority over a prior unrecorded mortgage). A purchase-money mortgage has special priority over previously arising claims against the mortgagor.

20. What is a purchase-money mortgage (PMM) and its priority advantage?

    A PMM is a mortgage given to secure a loan used to BUY the very property securing it (to the seller or a third-party lender). It has priority over other claims, liens, and mortgages against the buyer that arose before acquisition, even if those were recorded first; a seller-PMM generally beats a third-party-PMM.

21. What is foreclosure, and what is the effect of a foreclosure sale on junior and senior interests?

    Foreclosure is the forced sale of the mortgaged property to satisfy the debt. The foreclosing mortgage and all JUNIOR interests are wiped out (junior lienholders are paid from surplus in order of priority); SENIOR interests survive—the buyer takes subject to them. Necessary junior parties must be joined or their interests survive.

22. How are proceeds of a foreclosure sale distributed, and what is a deficiency judgment?

    Proceeds pay: (1) foreclosure expenses/costs and attorney's fees, (2) the foreclosing mortgage debt, (3) junior interests in order of priority, then (4) any surplus to the mortgagor. If proceeds are insufficient, the lender may seek a DEFICIENCY JUDGMENT against the debtor personally for the shortfall (subject to anti-deficiency statutes in some states).

23. Distinguish the equity of redemption from a statutory right of redemption.

    Equity of redemption: the right to redeem by paying the debt BEFORE the foreclosure sale (exists in all states; cannot be clogged). Statutory right of redemption: in about half the states, the right to redeem AFTER the foreclosure sale within a set period by paying the SALE PRICE (not the debt), reclaiming the property from the foreclosure purchaser.

24. What is a deed in lieu of foreclosure?

    The mortgagor voluntarily conveys the property to the mortgagee to satisfy the debt and avoid foreclosure. The lender takes title immediately but takes SUBJECT TO any junior liens (which are not extinguished as they would be in a foreclosure sale).

What this deck covers

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