My last blog dealt with the assignment of seller’s interest in land contract. Now, let’s put the skate on the other foot with a discussion of the assignment of purchaser’s interest in land contract. After execution of the land contract, it is possible for Mr. Datsyuk to convey his vendee interest. Let’s assume he wants to convey his interest to Nick Lidstrom. He knows that Nick is settled down and will probably get along better with Coach Babcock.
How does Mr. Datsyuk accomplish the transfer of his interest?
He will use two instruments: (1) the Assignment of Purchaser’s Interest in Land Contract, and (2) the quit claim deed.
Mr. Datsyuk has one responsibility concerning redacre; he is the vendee. He conveys his vendee interest by way of the assignment of purchaser’s interest in land contract. As a way of overkill, he will also execute a quit claim deed in favor of the new vendee. The use of a quit claim deed is proper in this situation. Mr. Datsyuk was not the owner of redacre, only a vendee under contract. As such, he was never seized of redacre and, therefore, could not have satisfied the covenant of seizen found in a warranty deed. Take a minute to digest this; it is important to understand the distinction.
In our example, Mr. Datsyuk would be the assignor, while Mr. Lidstrom would be the assignee.
Execution of the assignment of purchaser’s interest in land contract creates new interests in redacre, which are:
Owner: Mike Babcock.
Vendor: Mike Babcock.
Vendee: Nick Lidstrom.
Technical note: As a general rule, the vendor and vendee are free to convey their respective interests to a third party. However, if the terms of the land contract forbid assignment, an attempted assignment will not be effective. The terms of the land contract will control the relationship between the vendor and the vendee. If the contract is “silent” concerning assignment, an assignment will generally be permitted.
In your profession, you will run across the tiered land contract. It works like this:
A sells to B on land contract. (This is labeled the 1st land contract)
B then sells to C on land contract. (This is labeled the 2nd land contract)
C then sells to D on land contract. (This is labeled the 3rd land contract)
*It is possible for all three contracts to exist concurrently. In fact, it happens more often than you might think.
A, B, C, and D all have an interest in blackacre. A is the original owner in fee simple absolute and the vendor under the first contract. An examiner will look for the conveyance from A to B in fulfillment of contract 1. He will then look for subsequent conveyances from B to C and from C to D, all in fulfillment of their respective contracts. At the end of the day, an examiner will look for D to be the owner in fee simple absolute.
Obviously, a tiered land contract scenario can create numerous problems. In our example, we have four parties involved (A, B, C, and D). Judgments, liens, or other matters affecting either of the parties can create a logistical nightmare. Personally, I like these scenarios, as it gives me an opportunity to sort out and analyze all the interests.
If you encounter a tiered land contract scenario, don’t panic! Make sure to properly search all the party names and ask for successive deed conveyances in fulfillment of the respective contracts. If you can’t figure this out, there is one more escape hatch available to you: Contact Reputation First Title Agency immediately!
Dave Phillips ~ Title Examiner
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Tags: ExecutionLand ContractMike BabcockNbspNick LidstromNuanceOverkillProfessionPurchaserQuit Claim DeedRelationshipSeizenThird PartyTwo InstrumentsWarrantyWarranty Deed
A warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer). is in contrast to a quitclaim deed, where the seller does not guarantee that he or she holds title to a piece of real estate. A general warranty deed protects the grantee against title defects arising at any point in time, extending back to the property's origins. A special warranty deed protects the grantee only against title defects arising from the actions or omissions of the grantor.
A warranty deed can include six traditional forms of Covenants for Title, sometimes known as the English covenants of title. Those six traditional forms of covenants can be broken down into two categories: present covenants and future covenants.
- Present Covenants
- Covenant of Seisin: "A covenant of seisin or good right to convey." 
- Covenant of Right to Convey: Covenants that represent the seller's promise that he has valid title of the property being conveyed and has not contracted to sell it to another. 
- Covenant Against Encumbrances: Seller promises that there are no encumbrances, other than those that have been previously disclosed. 
- Future Covenants
- Covenant of Quiet Enjoyment: "The covenant of warranty is an assurance or guarantee of title, or an agreement or assurance by the grantor of an estate that the grantee and his or her heirs and assigns will enjoy it without interruption by virtue of a paramount title and that they will not, by force of a paramount title, be evicted from the land or deprived of its possession. . . ." 
- Covenant of Warranty: Covenants that represent seller's promise to protect the buyer against anyone who comes along later and claims paramount title to the property.
- Covenant of Further Assurances: The covenant of further assurances requires the seller to take affirmative steps to cure any defects in the grantor's title.
Most buyers perform a title search to determine if there are defects in title that must be resolved before they purchase real property. A title search provides constructive notice of any encumbrances, easements, or restrictions on the property being conveyed, and is generally considered part of a buyer's due diligence in the process of purchasing real estate. Buyers can also purchase title insurance to protect against title defects. A warranty deed is not a substitute for title insurance because, if the grantor later dies or goes bankrupt, the grantee may not be able to exercise the warranty.
- ^ abcdLarson, Aaron (21 January 2015). "Common Types of Deed". ExpertLaw. Retrieved 12 February 2018.
- ^ abcdefghiPowell, Richard R.; Rohan, Patrick J. (1949). 14 Powell on Real Property § 81A.03. Matthew Bender.
- ^E.g., Va. Code § 55-70.
- ^United States v. Lacy, 234 F.R.D. 140, 147 (S.D. Tex. 2005)
- ^21 C.J.S. Covenants § 21
- ^21 C.J.S. Covenants § 19
- ^21 C.J.S. Covenants § 20
- ^Primack, Mark A. (1 December 2009). "Representations, Warranties and Covenants: Back to the Basics in Contracts". National Law Review. Retrieved 12 February 2018.
- ^"Difference between a Guarantee and Warranty". Retrieved December 5, 2016.
- ^Ferara LN, Philips J, Runnicles J. (2007). Some Differences in Law and Practice Between U.K. and U.S. Stock Purchase Agreements. Jones Day Publications.