Right to sell property on default

ex: mortages, some judgements and security interests

things tangible and movable or fixtures

this adds fixtures to the article 2 definition

Property with no aspect of physical existence

1) accounts receivable

2) goodwill of business

1) Valid written security agreement or possession of the collateral:

i) Security Agreement:  

-with language transferring a security interest in collateral

-sighen by the debtor

-containing a description of colleteral sufficient to identify it

ii) An oral security agreement is enforceable if the secured party takes possession of the collateral.

2)  The secured party gives value:

i)Value: past or present consideration

3) Debtor has rights in the collateral:

i) ownership or permission from the owner to pledge the collateral

Once the three requirements (valid written security agreement or possession of collateral, the secured party gives value, and debtor has rights in the collateral) are met the security agreement is said to attatch to the collateral. 

Attatchment is the movement in time when the security agreement becomes enforceable.

Def:  perfection is the process to make the security interest enforceable against third parties (parties other than the secured party and the debtor) who take a later interest in the collateral.

1) By possession
i) Common Law pledge

ii)Pawn shop

2) By attatchment of security interest--> is the holder has a purchase money security interest (PMSI) in consumer goods, other than motor vehicles or fixtures

i) buy a dishwasher at Sears and they put you on a installment plan (lender gives you money to buy something specific)

ii) Consumer goods: purchased for non-business use

3) By filing a financing statment (effective 5 years)--> typical way to perfect in business transactions

Financing Statements

1) What it contains

2) When it is required

3) Where to file

A) Contents:

i) name and address of debtor

ii) name and address of the secured party

iii) description of collateral (type of collateral enough-->puts public on notice)

B) When they are required:

i) required method of perfecting for most business transactions: must file if no possession of collateral and no PMSI in consumer goods

C) Where to file

i) Secretary of the State's Office

Floating Liens

Proceeds, Future Advances, After-acquired property.

Proceeds: 

i) what ever is received by the debtor in exhcange for transferred collateral

ii) ex: anything you get in exchange for collateral (say Shaina trades her motorcycle for a boat)

Future Advances

i) loans (advances) to be made by a secured party in the future, that is some time after the promissory note is signed (collateral is security for line of credit)

-line of credit for a business

After-acquired property

i) property of a type similar to the collateral acquired by the debtor after the signing of the security agreement

ii) ex: inventory

Priorities to Collateral

5 types of parties in order of priority

1) Buyer of goods in ordinary course of busines--> take free of security interests in sellers inventory

i) ex: buying a tube of toothpaste at Walmart, you do not have to give that back to Walmart's creditors if Walmart defaults

2) Purchase Money Security Interest (PMSI) non-inventory PMSI if perfected within 20 days of attatchement to receive priority over other perfected secured parties

i) ex: buy a fridge for business... business has 20 days to file for the collateral (perfect) even if someone else has perfected in that time period

3) Secondhand Purchaser of consumer goods--takes free of security interest perfected by attatchment

i) "Garage Sale Rule"

*4) FIRST TO PERFECT OR BECOME LIEN CREDITOR (general rule)

a) perfection of a S.I. in any of the three ways: possession of collateral, attatchment or filing

b) Lien creditor--> creditor who has obtained a judgement and an execution lien; a trustee in Bankruptcy is the most common example of a lien creditor

5) First to attatch if no secured parties have perfected

a secured party may obtain a judgement based upon the amount owed rather than repossessing the collateral

-any creditor can file a lawsuit, even if they are unsecured!

eg: Finance company finances a car--but the engine blows (now only worth $100), so they sue and ignored collateral since they were owed $5000

1) a secured party may take possession of collateral covered by a secured agreement

2) No breach of peace is allowed when repossessing collateral.

3) ex: can't break into a house or garage.  can't beat up debtor.  However, minor trespass is not breach of peace

Effect of Disposition of Collateral at a Repo Sale

Transfer of Good Title

Effect of Disposition of Collateral at a Repo Sale

Order of Distribution of Proceeds

1) Expenses of the repo sale (possessing, holding and preparing collateral for sale, including attorny fees)

2) Satisfaction of Debt of 1st Lienholder

3)Subordinate security interest holders who gave written notification (2nd lien, then 3rd lien, etc.)

4) Debtor is entitled to any surplus. *usually a debtor is responsible for a deficiency)

1) a listing agreement is an agreement with a realtor to be the seller's agent for the purpose of selling the property

2) Exclusive Listings: seller of real estate gives realtor the exclusive right to sell the property.

What happens if seller finds buyer:

(if realtor has no contact with buyer)

Purchase price is pain in full at closing; title is transferred immediately

this happens 99% of the time

Also called contract for deed.

Seller finances purchase and retains title and deed until consideration is paid in full.

If you default anything you paid is gone, like you were renting

Grantor: transfers interest in land

Grantee: receives interest in land

Warranty Deed: title is guaranteed

Quitclaim Deed: title is not guaranteed

-gift transfer land for Trust, title may not be clear

a) entire ownership, subject to a condition

b) ex: Schoolhouse land given as long as land is used for "school purposes".  Once it went abandoned the original owner gets it back

1) Easements: right to use a portion of real estate without owning it

i) ex: roadways, utilities

2) Profits: right to enter land and remove something from it

i) ex: mineral or timber rights

3) Licenses: revocable, temporary right to use real estate

i) ex: football ticket, license to hunt on another's land, or use their lake

Types of Ownership Interests:

Life Estate

Types of Ownership Interests:

Future Interest

1) an ownership interest in land which becomes tangible in the future

2) ex: reversionary interest in which possession of land reverts to a grantor after a life estate

1) Abstract: a summary of transactions pertaining to the land since title came from the gov't

a history of title

2) Title Opinion: a lawyer's opinion on marketability of the title after examining the abstract

(who's title is it really?)

*more efficient than abstract or title opinion

1) insurance company guarantees good title

2) make sure to check exclusions carefully

Mortgagor: transfers a mortgage (borrower)

Mortgagee: receives and holds a mortgage (lender)

i) title theory: titile and possession in mortgagee

(didn't get to live on land until you paid lender back)

*ii) Lien Theory: title and possession in mortgagor (borrower)

-if they default, the mortgafee can foreclose however

1) Cash on closing with mortgage

2) installment land contract

3) lease with option to buy (used if borrower does not have credit to get a loan)

2 Types of Financing Insmnt and which is most used in MO?

1) Mortgage: a lien on real estate where the mortgagee personally exercises foreclosure rights

*2) Deed of Trust: a lien on real estate where a third party, the trustee exercises foreclosure rights

*most used in MO

Signed

notorized,

delivered

writing just as with deeds

1) Lower in priority and usually later in time than the first

2) may also have 3rd or 4th mrtge etc

A) Acceleration:  allows declaration that entire balance is due if there is a default on a loan (eg not wait 30 yrs)

B) Due on Sale: allows acceleration if interest in land is sold

C) Power of Sale:  allows private foreclosrue (nonjudicial foreclosure-->no court hearing)

D) Points:  Loan origination fee where one point equals one percent of loan amount

i)pay more points for a lower intrst rate

ii)pay fewer points for a higher inrst rate

E) Prepayment Priveleges: allows early payment without penalty--> typically unless borrower has bad credit.

1) Accleration

2) Private or Judicial Foreclosure

3) Deficiency Judgment-sueing to get money still owed after a repo sale

1) Statutory notice of forclosure sale (certified mail)

2) Equity of Redemption: right to repurchase the real estate prior to foreclosure

i) by paying the entire balance due to mortgagee

3) Statutory Redemption: right to repurchase after foreclosure

i) this right is very limited in MO.

1) Fisrt to record a mortgage or deed wins

i) Race to the courthouse

ii) Record with the recorder of deeds for county where land is located

1) on who has notice of another's interst prior to receiving an interest in land cannot defeat the other's interest

i) once someone records a notice, the entire world is said to be "aware" of the notice

2) Recording is one way to provide notice

1) First to record without notice of another's interest wins

*2) This is the MO rule! (on test)

month to month

a tenancy for automatically renewable successive periods of time

no specific time frame

terminable by either party at any time

Wrongful possession land by a tenant

*wrongful holding over after a lease term

Covenenats in Lease

Dependent and Independent Covenants

1) Dependent: breach is material, non-breaching party is released.

2) Independent: breach is immaterial, non-breaching party is still bound to the lease

i) ex: broken garbage disposal

A breach of a condition may result in forfeiture--early termination of the lease

ex: having a dog when there is a "no-pet" policy

Landlord Must Give Possession

English, American Rule

English Rule: acutal possession given to tenant

American Rule: legal right to possession (Wild West)

Define Interference with Tenant's Possession

Define Nuisance

1) Interference by previous tenants

2) Nuisance: using one's land in a way which unjustifiably interfereds with the use or enjoyment of another's real estate

i) ex: neighbor has loud parties every night

Landlord must prevent this type of interference

1) Defect in premise cause substantial interference with ability to live there

2) Tenant notifies landlord who fails to remedy the defect

3)Tenant leaves the premise (this is considered wrongful eviction)

An eviction as a response to a complaint to a housing authority.

In MO may not evict for one year after complaint.

1) Non-payment of Rent

2) Waste or prohibited alterations

3) Unlawful use or nuisance

Landlord Duties of Repair

Common Law/Modern Rule

Implied Warranty of Habitability

Common Law: no duty of landlord to repair

Modern Rule:

i)Housing Codes require landlords to meet certain standards

ii) Implied Warranty of Habitability: requires residential landlord to keep the property fit for human habitation, that is the property must be free of defects which endanger life, health, or safety

iii) Duty to Keep Common Areas Safe

iv) contractual duties

*exculpatory clause: can be used for residents, but non-residents or children can't sign away their rights

1) Common Areas: liable to 3rd parties, not liable for residents if they have an exculpatory clause

2) High Crime Areas: adequate lighting etc. somestimes held liable for inadequate security measures if a resident or 3rd party is a victim of a crime on their property

Tenant's Obligation to Repair

Commercial, Residential, and Areas in Resident's Control

Commercial: entire obligation to repair often allocated to tenant

Residential: tenant's duty is reduced by housing codes and the implied warranty of habitability

i) tenant may contract to make certain repairs, also responsible for intentional or negligent actions which damage prprty

Areas in Tenant's Control:  must be kept safe for invited guests

i) ex: store open to public should wipe up spills so patrons don't slip

Lease Clauses as to Payment:

Rent/Late Charges/Deposits/Taxes and Insurance

a) Rent: a dependent covenant (if you don't pay, landlord is released of obligation)

b) Late Charges: a type of liquidated damages

c) Deposits: secure against nonpayment of rent and against damages

d) taxes and insurance:  landlord usually pays, but in commercial leases or leases with options to buy, the tenant frequently pays all or part of these expenses

transfer by tenant of all first tenant's rights to second tenant (assignor to assignee)

-no reversionary rights

transfer of part of tenant rights to second tenant (sublessor to sublessee)

better for 1st tenant

Notice to Quit

Month to Month

Year to Year

M to M: notice must be given before the first day of the month to terminate the lease at then end of the month

i) ex: the soonest I can get out would be 1/31/10

Y to Y: notice must be given 60 days prior to the end of the lease year to terminate the lease at the end of the year

Holding Over After Lease Term:

With and Without Landlord's Approval

With Approval: lease reverts to month to month

Without Approval: the tenant is responsible for double rent

Remedies: 

Summary Procedures

Landlord's Lien

Duty to Mitigate

a) summary procedures: allow a landlord to evict tenant quicker by providing for a quicker trial date and fewer defenses

b) landlord's lien: allows a landlord to keep tenants property as security for nonpayment or damages

c) Duty to Mitigate: duty to lessen tenant's damages, usually by seeking a new tenant

i) in MO there is no duty to mitigae unless the landlord keeps the security interest