Chapter 4 - Transfer of Title to Real Property Flashcards
Adequacy of Description
The three most acceptable types of property description are metes and bounds, the government rectangular survey system, and description by reference. Latent ambiguity is legally sufficient but not professionally acceptable. Patent ambiguity is neither legally nor professionally acceptable.
Metes and Bounds
A way to describe property primarily used in North Carolina and the other 13 colonies. Metes = distances, Bounds = directions. Must contain a point of beginning (POB) and must end where it started.
Government Rectangular Survey System
Method used in the rest of USA, not the 13 colonies.
Principal lines = North/South called Medians, Base lines = East/West.
Ranges
Area between the Meridians and Base lines.
Township
Squares within Ranges that are 6 miles by 6 miles. Divided into 36 sections. Numbered starting with 1 in the upper right corner and snaking down to 36 in the lower right corner.
Sections
1 square mile area within a Township. can be divided into quarters and subdivided further. Each section contain 640 acres.
Description by reference
Sometimes the only reference in the deed, usually in addition to Metes and Bounds description. Reference is made to a Plat or property map and lot number(Plat book and pg number is the reference itself)
Reference to publicly recorded documents
Reference made to another document that contains a more thorough description.
Informal reference
Only a legal reference if the description identifies the property to the exclusion of all other properties. EG: Street address, tax parcel number or word picture.
Property Survey
Used to determine the boundaries of a specific tract of land, a plat or map is then prepared. Survey also includes locations of buildings, fences, and other structures, and the location of easements and rights-of-way. The way an encroachment is discovered.
Intestate Succession (By Descent)
Laws that govern how property is distributed to heirs By Descent if a person dies without a valid will (intestate)
By Will
A gift of real property By Will is is a Devise and the recipient of the real property is a devisee. A gift of personal property by will is a bequest and the recipient is a beneficiary.
Testate v Intestate
Testate = died with valid will Intestate = died without valid will
Testator or Testatrix
Man or Woman that dies with a valid will
Executor or Executrix
the person appointed to carry out the provisions in the will.
Probate
The judicial determination of the validity of the will by the courts.
By Deed (Voluntary Alienation)
The only way to voluntarily alienate (remove oneself from ownership). Willing transfer of interest in property accomplished by transfer of deed.
Deed
Written instrument that transfers an interest in real property when delivered and accepted. All deeds do two things, convey title and/or convey a warranty.
Involuntary Alienation
Can happen in 1 of 4 ways:
- Lien Foreclosure sale
- Adverse possession
- Condemnation under power of Eminent Domain
- Escheat
Lien Foreclosure Sale
Involuntary alienation. A Sale of property conducted without consent of owner who incurred a debt that resulted in a lien.
Judicial Deed
The way title is conveyed to a buyer from a Lien foreclosure sale, executed by the official authorized by the court to conduct the sale and transfer the title.
Adverse Possession
Involuntary Alienation. Squatters. A method of acquiring title to real property by conforming to statutory requirements:
- Possession must be Open (Notorious)
- Hostile (without permission of owner)
- Exclusive (not shared with true owner)
- Open and Notorious (available to view by the public)
- Continuous for period specified by the state.
Title acquisition Not Automatic - Action to Quiet Title.
Color of Title
This exists when someone has a document that appears to give him or her title but actually does not. the “continuous” period for proof with color of title is 7 years.for private land and 21 years when claiming state land. Contrast with 20 years private and 30 years state without Color of Title.
Suit to Quiet Title
Court action to claim title when all conditions of Adverse Possession are met. Required to make the adverse possession claim part of public record and therefore discoverable in title searches.
Escheat
Involuntary Alienation at Death. When no one is eligible to receive the property on the intestate. The property then becomes the states.
Eminent Domain v Condemnation
Involuntary Alienation. Eminent Domain = The police power of the government to to take private property for public use and benefit. Condemnation = process of law for government agencies to acquire property from individual owner. Property owner can appeal the value of the property but not the condemnation. The property owner must be compensated at fair market value.
Essential elements of a valid deed
- Written (statute of frauds)
- Grantor must be competent (age of majority and mentally competent, must be able to positively identify, must exist)
- Named Parties (legal names of Grantor and Grantee)
- Words of Conveyance (words that demonstrate the grantors intention to convey title to grantee. Contained in the Granting Clause).
- Property Description (adequate legal description of the land as recognized by law: Metes and Bounds, GRSS, Description by Reference)
- Properly executed by grantor (grantee not required)
- Delivery and Acceptance
Acknowledgement of Deed
To accomplish the grantor must appear before a public officer (notary public) who is able to take an acknowledgement and state that the signing of the deed was actually done by the grantor and was a voluntary act. Deed valid without but can’t be recorded.
Non-Essential Elements of a Deed
- Consideration - doesn’t need to state actual price but must indicate that something of value is present.
- Seal - In North Carolina, deeds do not have to be sealed to be valid.
- Recording - registering the doc on public record not required but a good idea
- Witnessing - NC is one of the few states that doesn’t require the grantor’s signature to be witnessed
- Dates
General Warranty Deed
Strongest and broadest form of guarantee of title of any type of deed. Provides the greatest protection to the grantee and the greatest liability to the grantor. Goes back for an unlimited period of time. Usually contains the:
- Covenant of Seisin
- Covenant of Right to Convey
- Covenant against Encumbrances
- Covenant of Quiet enjoyment
- Covenant of Warranty
- Grantee’s Right to Recovery
Covenant of Seisin
Assurance to the Grantee that the Grantor actually has the fee simple title.
Covenant of Right to Convey
Assurance to the Grantee that the grantor has the legal capacity to convey title (usually coupled with the covenant of seisin.
Covenant Against Encumbrances
Assurance that there are no encumbrances except that which are of public record. Usually acceptable encumbrances are: recorded easements, restrictive covenants or mortgage liens.
Covenant of quiet enjoyment
Assurance that the title doesn’t have a defect and that the grantee et al. can have quiet possession and enjoyment of the property as a result. The NC General Warranty Deed doesn’t contain this covenant. Instead is has the Covenant of Warranty or considered to be the same as CoW.
Covenant of Warranty
Assurance that the grantor will warrant and defend the title against lawful claims from anyone. The most important covenant.
Grantee’s Right to Recovery
If the covenants are broken, the grantee may recover from the grantor any financial loss up to the paid price of the property.
Special Warranty Deed
This warranty goes back in time only for the period that the grantor was owner.
Quitclaim Deed
Simply a deed of release, contains no warranties. In other states, a Bargain or Sale Deed may be used to serve the same purpose.
Cloud on a Title
When someone has a possible claim against a title. While it exists, the title is not a good marketable title. The Granting clause: “remise, release, and quitclaim” vs words of conveyance.
Deed of Gift
Any of the deeds can be used when gifting property but if a general warranty deed is used, the warranties cannot be enforced. Must be recorded with 2 years to remain valid. It requires no excise tax and it’s fraudulent to convey property with a gift deed to defeat a creditor’s rights.
Excise Tax
Revenue or transfer stamps. to be paid by the seller. Amount is $1 per $500 of the full purchase price. To calculate, round up to the nearest $500 and then divide by 500.
County Transfer Tax
A few counties in NC have this, it affects housing affordability.
Title Assuance
Assurance to the Title company that the title is of good quality. Covenants of title in deeds is one way this is accomplished. It protects the grantee from third parties. This provides the grantee the assurance that they can sue the grantor if a covenant is breached.
Title Examination
Determine the quality of a title and concerned only with the recorded documents on the public record.
Title Examination Procedure
- Exam all public records that possible affect a title to real estate. (Grantor and Grantee Indexes - search by name)
- Trace successive conveyance of title from the present to an appropriate time in the past (typically 40-60 years) to prove an unbroken Chain of Title.
- Identify and clear all missing links (look in wills, etc.)
Attorney’s Opinion of Title
After title exam is complete, the atty provides the opinion which contains the:
- Contains the history or Abstract of title
- Legal description of the property
- A statement that the records have been carefully examined
- Period of time cover by the examination
- Specific info regarding any liens or encumbrances
- the examiners opinion of the title
Title Insurance
An Indemnity of contract protecting the purchaser mortgagee against loss resulting from a defect in title. Must be covered by the policy and in existence when the policy becomes effective. Three types:
- Owner’s
- Mortgagee’s
- Leasehold
Owner’s Title Insurance Policy
For the protection of the owner and owner’s heirs. For the full price of purchase, which remains the same for the life of the purchase. Optional but advantageous. Paid for by the buyer.
Mortgagee’s Title Insurance Policy/Lender’s Policy
Protects only the lender. Diminishing liability as the mortgage is paid the amount covered decreases. Once mortgage is paid off you don’t have insurance anymore. Prudent and cost-effective for buyers purchase both this and Owner’s policy.
Leasehold Policy
Protects a Lessee (Leaseholder) or Mortgagee against defects in title. Issued to the Mortgagee.
Title Recordation
Recording is not required in North Carolina, but should be considered essential. Puts the world on notice as to the claim in title. Constructive Notice (Legal notice).
Connor Act
Certain real estate docs are not valid against third parties until recorded. NC a pure race state, whomever records the title first is the rightful owner. Additional docs that are applicable under the Connor Act:
- Purchase and Option agreements (exception for standard contract to purchase, closes in 30-60 days)
- Title recordation
- deeds
- Mortgage instruments
- assignments of interest,
- leases for more than 3 years
- easements
- restrictive covenants.
If the document has to be in writing according to Statute of Frauds, it has to be recorded according to the Connor Act.
Recording Procedures
Done at Register of Deeds office
Copies are put in a book in Chron order of receipt
Recorded in the Grantor and Grantee Indexes
Original docs returned to owners
NC: Can also record a “memo of contract” that outlines the details of the contract
Marketable Title Act
If a Chain of Title can be established for 30 years without conflicts, claims outside the chain are extinguished.
Torrens System
A Method of recording. Any change in the status of the property must be reflected in a rew registration certificate and the old one destroyed. Provides evidence of title without the need for an additional search. Usually used for commercial properties or big ships. National exam (similar to skipping the TSA line)
Action to Quiet Title
A action (not usually a court case) to settle the a small mistake or defect in title. Correction of who the legal owner is and to eliminate potential title disputes.
Chain of Title
Trace the title back from Grantee to Grantor
Approved Attorney State
Attorney performs Title search (or paralegal)
Atty submits an opinion of title (application)
Title Company then issues a title commitment (description of the policy)
Constructive Notice
Legal Notice - title recordation when filed in the public record. Puts the world on notice, enters the public record.
Physical Notice
Taking possession of the property (moving in and everyone can see)
Statue of Frauds
Documents for the conveyance of real estate must be in writing to be enforceable.
Mortgage Instruments
Mortgage paperwork or in NC Deed of Trust
