The Law Office of Robert L. Risley

Office: 626-397-2745

Real Estate

Real Estate Contracts

The law of contracts is central to an understanding of real estate transactions. Rules relating to listing agreements, deposit receipts, options, escrow instructions, broker's commissions, and the like are not separate and distinct branches of law unrelated to the general body of contract law. They are merely a specialized part of it.

A real estate contract is a binding agreement to do something, or refrain from doing something. It is more than a simple exchange of promises to act in the future. A contract is an exchange of promises or acts that create a legal duty that the law will enforce. Real estate contracts involve unilateral and bilateral contracts. They involve express, implied, and quasi-contracts. They involve executory and executed contracts, and finally, they involve void and voidable contracts.

The elements for creation of a real estate contract involve mutual consent, consideration, legal capacity to contract, and a lawful object. Like other contracts, they involve offer and acceptance, performance or excuse, the full ramifications of which are well developed in this body of the law, but are too extensive to reiterate here.

Brokers and Agents

Real estate transactions almost always involve an agency relationship between brokers and buyers and brokers and sellers. The broker acts as an intermediary to facilitate or bring about the desired transaction. There is a set of legal rules which govern the relationship of buyer/seller and intermediary. Agency law establishes the general principles and rules and regulations imposed on all parties. Of course, brokers and agents are licensed by the state which establishes a framework for their operation. Most importantly brokers and agents are fiduciaries to buyer and seller and accordingly owe a high standard of care and duty to each.


In California escrows are nearly always used in real estate transactions because the transfer of title by the seller and payment of the purchase price by the buyer are concurrent conditions and need to be handled by neutral escrow agents. The escrow serves as a clearing house for the payment of certain obligations and aids in obtaining title insurance for the buyer. Sometimes, the title company performs these escrow responsibilities. This practice often occurs in Northern California, but far less frequently in Southern California.

Deeds Grants Conveyances

Real property can be transferred only by operation of law or by an instrument in writing signed by the seller. Written transfer of title to real estate is called, "Grant" or "Conveyance." The term "Grant" can have different meanings depending on the context and the nature of the transaction. A "Deed" is a form of grant or conveyance and is a written instrument which conveys or transfers the title to real property. It is an "executed conveyance" and acts as a present transfer of the property. The "Deed" is subject to the rules of interpretation applicable to contracts in general. The prime rule for interpreting deeds is to determine the objective intent of the parties by an examination of the Deed. The Deed must have a seller and a buyer. The Deed document must contain the name of a seller and a buyer. It must be signed by the seller, and it must be delivered to and accepted by the buyer. These are the minimum requirements for a valid Deed, and if they are all present, the Deed is effective to transfer title to the buyer. There are many types of Deeds which, unfortunately, cannot be described in this limited space.

Title Insurance

Title insurance is used because of the great complexity of modern real estate titles. In most transactions, it is customary and reasonable that the title of the seller and/or the lien priority of the lenders be assured as a necessary condition of the conveyance or the loan. Buyers normally will not, and should not, accept transfer of title except upon condition of receiving a policy of title insurance. In California, title insurance companies are regulated by the California Insurance Commissioner. To be a title insurer in California, a company must meet strict financial requirements and receive a Certificate of Authority from the Insurance Commissioner.

Deeds of Trust and Mortgages

There are two, well-recognized security devices used to protect lenders. Deeds of Trust are the preferred security device in California and in most states. Mortgages are less frequently used for a variety of reasons. The law covering Trust Deeds is substantially different from the law covering Trusts. In real estate transactions, legal title passes to the Trustee solely for the purpose of securing the performance of the obligation, and the Trustee receives only such title as is necessary for the execution of his Trust. The Trustees title remains inactive until a default occurs. All the incidents of ownership, including the right to possession, maintenance, encumbrance, and transfer remain in the Trustor/Owner. The Trustee has none of these attributes of ownership. A mortgage involves only two parties, whereas a Deed of Trust involves three, namely the Trustor, who is the debtor owning the property, the Trustee, as security for the obligation, and the beneficiary, who is entitled to recover its loan.

Landlord and Tenant

Landlords and tenants are related through leases or rental agreements. A lease or rental agreement is a formal written document which grants exclusive possession or use of property to a tenant for a specified term and for a consideration with a reversion of possession to the owner at the end of the term, but it does not transfer title of the leased or rented premises to the lessee. The law of landlord and tenant rights of possession and eviction are highly controlled by statute in California and in most jurisdiction.

Incorporeal Hereditaments

And easement is one kind of incorporeal hereditament, and is a right of an owner of real property to use property of another for the benefit of his land. Easements are created by grant, necessity, implication, and prescription. Once an easement is perfected, it creates a burden on one parcel for the benefit of another and is transferred to the new owners with the benefit or burden attached.


There are other, numerous areas of the law affecting real estate, including subdivision, dedication, covenants, condemnation, construction contracts, mechanics, liens, etc.