Law of Contracts - Champions School of Real Estate

TERLA

- Texas Real Estate License Act

- Created in 1939

TREC

- Texas Real Estate Commission

- Created in 1949 to administer/enforce TERLA

Real Estate Center

- Located at Texas A&M University

- Created in 1970

TREC-Promulgated Forms/Leases (Residential):

- One-to-Four Family Residential Contract (Resale)

- New Home Contract (Completed Construction)

- Residential Condo Contract (Resale)

- New Home Contract (Incomplete Construction)

- Unimproved Property Contract

- Farm and Ranch

(Note: TREC has promulgated contract addenda and other forms, listed on Thepage 18)

Four categories of unlawful trade practices are:

1 - Misleading or deceptive conduct employed by any person that was relied upon by the consumer to the consumer's detriment

2 - Breach of express or implied warranties

3 - Violation of the Texas Insurance Code (Chpt 51)

4 - An unconscionable action or course of action by any person

Physical Characteristics of Land

- Indestructibility: cannot be destroyed

- Immobility: cannot be moved

- Non-homogeneity: no two parcels are the same

Economic Characteristics of Land

- Scarcity: supply and demand

- Modification: value is affected by man made changes

- Fixity: additions take long periods of time to pay

- Situs: location, location, location

Which of the following is a requirement for the Texas real estate sales agent license?

1 - College Degree

2 - 30 hours of Real Estate Principles only

3 - Show competency by passing the licensing exam

4 - Must be Texan by birth

An active sales agent license may only be issued under __________.

1 - Court order

2 - The sponsorship of a licensed broker

3 - The supervision of a fellow sales agent

4 - The Deceptive Trade Practice Act

A license holder must not prepare which of the following documents

1 - Option agreements

2 - Title commitments

3 - Wills

4 - A license holder must not prepare any of these documents

Improvements

- Any man-made additions to the land that are permanent

Surface rights

- The ability to use extracted resources such as stone, gravel, and limestone

Subsurface rights

- Includes the rights to deed oil, gas, and other minerals

Personal property

- Things of a temporary or movable nature

Emblements

- Annual crops that are considered personal property even though they are attached to the land

Statutory law

- the body of laws and regulations enacted by federal and state legislatures

Bill of Sale

- used to accomplish the transfer of personal property along with real property

Fixture

- personal property that has become attached to the land in such a way as to become real property

Annexation - the process of attaching personal property so that it becomes real property

Severance - removing fixtures to create personal property

Trade Fixtures

- items necessary for an individual to carry out his/her trade or profession

In most states (including Texas), ownership of real estate can be held in three different ways:

1 - An estate in severalty involves ownership of real estate by one individual or entity

2 - Co-ownership involves ownership of real estate by two or more entities

Ex 1. Tenancy in Common

Ex. 2 Joint Tenancy

3 - A property may be placed in a trust, with ownership conveyed to a trustee for the benefit of others

Syndicate

- when two or more parties join together to create and operate a real estate investment

Blockbusting

- any attempt to induce panic selling in a neighborhood for financial gain

Todd planted two live oaks and four magnolia trees on his 3 AC property. These trees are examples of

- Improvements

- Emblements

- Fixtures

- Personal property

Patti, David, and Arthur inherited several acres from their parents. They each own a third of the estate. What type of ownership do the siblings have?

- Joint tenancy

- Estate in severalty

- Tenancy in common

- Community property

If you hire a mold remediator, he must give you a(n) ______ no later than 10 days after work is complete

- Certificate of Mold Remediation

Implied Contract

- a contract created by behavior

Express Contract

- A contract created by offer and acceptance

Executory Contract

- A contract that is binding on the parties even though certain contractual duties have not yet been performed

Bilateral Contract

- A contract created by offer and acceptance

Valid Contract

- A contract that must have competent parties, offer and acceptance, legal purpose, consideration, and be in writing

Elements of a valid and enforceable contract

1 - Competent parties

2 - Offer and acceptance (mutual agreement)

3 - Legal purpose

4 - In writing (when required by law)

5 - Consideration

Novation

- occurs when anew contract is substituted1 for an existing one

In order to comply with the ______, contracts for the conveyance of an interest in real estate or leases for a term of more than one year must be in writing

- Statute of Frauds

Broker Bernardo has signed a sales contract that has not yet gone to the closing table. Therefore, Bernardo has a(n) ______________ contract

- Executory

Bryan's client shows up to his closing after drinking three beers at a baseball game. Due to his consumption of alcohol, the closing cannot take place because Bryan's client is not legally __________

- Impaired

Freehold estate

- Occurs when an individual owns property

Equitable estate

- Rights or privileges in land that are less than ownership, but exist

Statutory estate

- Created by law

Police power

- The government's right to regulate land usage

Prior appropriation

- First in time is first in right (water law)

The most common example of police power is

- zoning

Downzoning

- changing the zoning of a property to a lower value use

Buffer zone

- an area of land separating one land use from another

Setback

- the amount of space required between the lot line and the building line

Building codes

- apply to all types of commercial and residential buildings

Eminent Domain

- the right of the government to take private land for public use. The action of taking the land is called condemnation. Easements by condemnation are also allowed under the right of eminent domain

(inverse condemnation occurs when a landowner sues the government, to force the government to buy his land)

Taxation

- the government retains the right to tax real property

- property taxes are known as ad valorem taxes

Escheat

- if a person dies interstate (without a will) and without heirs, the government will take title to his real property under the rights of escheat

Statutory Estates

- Community property

- Homestead

- Dower and curtest

- Tenancy by the entirety

Easement in gross

- belongs to a person or corporation and does not belong to the land. The most common example of this is utility easement

Easement appurtenant

- runs with the land and passes to new owners when the land is sold. The most common use of this easement is for ingress and egress

Easements may be created by

1 - grant

2 - reservation

3- implied grant

3 - prescription

4 - necessity

5 - condemnation

Easements can be terminated by

- merger

- release

- abandonment

- death

Riparian rights

- the rights an owner has to use water from a river or a stream on or next to a property

Littoral rights

- the right to use water from a lake, ocean, or sea on or next to property

Appurtenance

- a right or privilege or improvement that belongs to and passes with land, but is not necessarily a part of the land

Enroachment

- intrusion of one's property onto another's property creates an encroachment.

Examples: a neighbor's fence that crosses a boundary, or a tree limb extending over a boundary

Environmental Site Assessment (ESA)

Phase 1

- Site Inspection

- Review of regulatory records

- Interviews with former or current owners and are locals who may have information about the history of the property

Phase 2

- Samples of soil, surface water, and groundwater are collected from the flagged areas and tested for contamination. The specific cause of the contamination will be determined. The assessment will recommend remediation to clean the property of hazardous materials

Phase 3

- The remediation phase

- Clean-up phase

- Soil excavation, soil washing, air stripping, pump and treat, and chemical oxidation

Listing Agreement

- employment agreement for listing broker

Buyer-agency agreement

- employment agreement for selling broker

Lease

- an agreement that transfers the right to possess a property for a period of time

Option Agreement

- gives potential buyer or tenant the right to purchase or lease a property

Contract for deed

- also called an installment contract, a land contract or real estate contract

A contract is considered "discharged" when

- all parties have performed

- full execution most often is achieved at the closing of the transaction

Elements of a Listing Agreement

- Agency relationships

- Brokerage fees

- Property condition

- Relationships with buyers

- Market value of the property being listed

- Local market conditions

Additional items:

- Permission to place a sign on the property

- Permission to place a lockbox on the property

- Permission to advertise the property online

- Other provisions regarding showing times and instructions

The Statute of Frauds

- is a body of law that requires certain contracts to be in writing in order to be enforceable

Types of Listing Agreements

- Exclusive Right to Sell

- Exclusive Agency

- Open Listing

- Net Listing

Elements of a Buyer Representation File

- General property characteristics

- Buyer/Broker obligations

- Term of agreement

- Broker's duties to clients/customers

- Compensation agreement

- Consent for the broker to represent other buyers

- Fair-Housing language

- Signatures of parties

- Intermediary consent

(Buyers who do not sign a representation agreement with an agent are considered customers)

Elements of a Property Management Agreement

- duties/responsibilities of the property manager and property owner

- management term

- detailed description of the property

- policies and procedures for repair of the property

(traditional approach to management fee is to take a percentage of the rent for the service offered)

Contract vs Economic Rent

Contract rent - the rental income stipulated by the parties in a lease

Economic rent - the rent the property could currently command on the open market

Types of Leasehold Estates

- Estate for years (definite beginning and end)

- Periodic tenancy (month-to-month; week-to-week)

- Tenancy at sufferance (holdover tenant)

- Tenancy at will (uncertain time period)

Common addenda forms

- financing addendum

- lead-based paint

- flood hazard

- mineral reservation

- seller financing

- property owners association