Chapter 6 - Transferring and Recording Title to Real Estate Flashcards
If a person dies with no legal heirs or relations and has left no valid will, what happens to real property owned by that person?
it is taken by the state according to the process called escheat
With the exception of a Torrens certificate, the best evidence of marketable title is…
title insurance
The fundamental purpose of recording instruments that affect real property is…
to give constructive notice of one’s rights and interests in the property
The type of statutory deed that contains the most complete protection for the grantee is a …
general warranty deed
The only required clause in a deed of conveyance is one that…
states the grantor’s intention, names the parties, describes the property, and indicates a consideration
A person wishes to convey any and all interests in a property to another without making any assurances as to encumbrances, liens, or any other title defects on the property. This party would most likely use …
a quitclaim deed
What is ‘chain of title’?
a chronology of successive owners of record of a parcel of real estate
The Torrens system differs from other title recording systems in that
title is conveyed only when conveyance is registered on the title certificate
The purpose of a covenant clause in a deed of conveyance is to
state the grantor’s assurance or warrant the grantee that a certain condition or fact concerning the property is true
Just prior to passing away, a person tells two witnesses that she would like her estate to pass to her husband. One witness records the statement and signs his name. This is an example of…
an unenforceable nuncupative will
If a person having several heirs dies intestate, the property will…
pass to heirs by the laws of descent and distribution
A one-time tax levied on a property for purposes of recording a transition is called …
a documentary stamp tax
A hermit secretly lives in a cave on a 200-acre property. After 20 years, the person makes a claim of ownership to the property. The claim will likely be…
declined because possession was secretive
For a deed to convey title, it is necessary for the deed to be…
accepted by the grantee
Legal title
title that can be documented and is available through public records.
Equitable title
a beneficial interest in real property that gives the title holder the right to acquire legal title to the property. Equitable title holders cannot transfer legal title to real property, but they derive benefits from the property’s appreciation in value.
Voluntary transferring of title includes
public grant, deed, will
Involuntary transferring of title includes
descent escheat, foreclosure, eminent domain, adverse possession, estoppel
A ___ is a legal instrument used by an owner, the grantor, or transfer title to real estate voluntarily to another party, the grantee.
deed
To be legally valid, delivery of the deed requires that the grantor..
-be competent at the time of delivery
-intend to deliver the deed, beyond the act of making physical delivery
It is necessary for the deed to be ______ and ______ by the grantee for title to pass.
delivered to and accepted
A deed must meet the following requirements for validity…
-be delivered and accepted
-have a competent grantor and legitimate grantee
-be in writing
-contain a legal description
-include consideration
-be signed by the grantor
-be acknowledged
Recording is ____ necessary to make a deed valid.
not - although it is in the grantee’s best interests to do so
Conveyance clauses
describe the details of the transfer
The principal conveyance clauses are…
-granting clause or premises clause (the only required clause)
-habendum clause
-reddendum clause or reserving clause
-tenendum clause
Granting conveyance clause
aka premises clause, the only required clause, contains the conveyance intentions, names the parties, describes the property, indicates nominal consideration
Habendum conveyance clause
describes the type of estate being conveyed (fee simple, life, etc)
Reddendum conveyance clause
aka reserving clause, recites restrictions and limitations to the estate being conveyed (eg deed restrictions, liens, easement, encroachments, etc)
Tenendum conveyance clause
identifies property being conveyed in addition to land
Covenant clauses present
the grantor’s assurances to the grantee
A deed of conveyance usually contains one or more of these covenants
-warrant of seisin
-warrant of quiet enjoyment
-warrant of further assurance
-warranty forever, warranty of title
-warrant of encumbrances
-warranty against grantor’s acts
Warrant of seisin covenant
assures that the grantor owns the estate to be conveyed, and has the right to do so
Warrant of quiet enjoyment covenant
assures that the grantee will not be disturbed by third party title disputes
Warrant of further assurance covenant
assures that the grantor will assist in clearing any title problems discovered later
Warranty forever; warranty of title covenant
assures that the grantee will receive good title, and that grantor will assist in defending any claims to the contrary
Warrant of encumbrances covenant
assures that there are no encumbrances on the property except those expressly named
Warranty against grantor’s acts covenant
states the assurance of a trustee, acting as grantor on behalf of the owner, that nothing has been done to impair title during the fiduciary period
The most common deeds are
statutory deeds - in which the covenants are defined in law and do not need to be fully stated in the deed
Bargain and sale deed
the grantor covenants that the title is valid but may or may not warrant against encumbrances or promise to defend against claims by other parties
“I own, but won’t defend”
General warranty deed
or warranty deed for short is the most commonly used deed. It contains the fullest possible assurances of good title and protection for the grantee.
“I own and will defend”
Special warranty deed
the grantor warrants only against title defects or encumbrances not noted on the deed that may have occurred during the grantor’s period of ownership or trusteeship
“I own and will defend against my acts only”
Quitclaim deed
transfers real and potential interest in a property, whether an interest is known to exist or not.
“I may or may not own, and won’t defend”
Special purpose deed
is one tailored to the requirements of specific parties, properties and purposes
Types of special purpose deeds
-personal representative’s deed
-guardian’s deed
-sheriff’s deed
-deed of trust
-deed in trust
-master deed
-partition deed
-patent deed
-tax deed
Personal representative’s deed
used by an executor to convey a decedent’s estate, also called an executor’s deed
Guardian’s deed
used by a court-appointed guardian to transfer property of minors or mentally incompetent persons
Sheriff’s deed
used to convey foreclosed property sold at public auction
Deed of trust
used to convey property to a third-party trustee as collateral for a loan; on the satisfaction of the loan terms, the trustee uses a reconveyance deed to convey the property back to the borrower
Deed in trust
used to convey property to the trustee of a land trust
Master deed
used to convey land to a condominium developer; accompanied by the condo declaration when recorded
Partition deed
used to convey co-owned property in compliance with a court order resulting from a partition suit; a partition suit terminates an estate when one or more co-owners want to dissolve their relationship and are unable to do so without the assistance of a court
Patent deed
used to transfer government property to private parties
Tax deed
used to convey proeprty sold at a tax sale
State law usually requires payments of a _____ on a conveyance of real property
documentary stamp tax
Exemptions from transfer tax include
-transfer within the immediate family
-consideration less than a certain amount
-transfer between government entities or non-profits
A will, or more properly, a last will and testament
is a legal instrument for the voluntary transfer of real and personal property after the owner’s death. It describes how the maker of the will, called the testator or devisor, wants the property distributed. A beneficiary of a will is called an heir or devisee. The property transferred by the will is the devise
A will takes effect
only after the testator’s death
A will, is an amendatory instrument, meaning
that it can be changed at any time during the maker’s lifetime.
A will generally takes one of the following forms
Witnessed - in writing and witnessed by two people
Holographic - in the testator’s handwriting, dated and signed
Approved - on pre-printed forms meeting the requirements of state law
Nuncupative - made orally, and written down by a witness; generally not valid for the transfer of real property
State law establishes requirements for a valid will. The law generally requires that:
-the testator be of legal age and mentally competent
-the testator indicate that the will is the “last will and testament”
-the will be signed
-the completion of the will be witnessed and signed by the witnesses
-the will be completed voluntarily, without duress or coercion
A court proceeding called ______ generally settles a decedent’s estate, whether the person has died testate (having left a valid will) or intestate (having failed to do so).
probate
Probate of real property occurs
under jurisdiction of courts in the state where the property is located, regardless of where the deceased resided
The probate court’s objectives are to:
-validate the will, if one exists
-identify and settle all claims and outstanding debts against the estate
-distribute the remainder of the estate to the rightful heirs If the will does not name an executor, the court will appoint an administrator to fulfill this role.
Distribution by probate:
Testate, w/heirs: 1. creditors, 2. leagle life estate, 3. heirs by will
Intestate w/heirs: 1.creditors, 2. legal life estate, 3.heirs by descent
Intestate w/no heirs: 1.creditors, 2.state by esheat
Testate proceeding.
If the decedent died with a valid will, the court hears the claims of lienors and creditors and determines their validity
Laws of descent
Involuntary alienation occurs when a title-holder dies without a valid will. The state’s statutes of descent and distribution identify heirs and the respective shares of the estate they will receive. In the absence of heirs, title transfers to the state or county by escheat.
Abandonment
Property that has been abandoned for a statutory period may also escheat to the state or county.
Types of involuntary title transfer
Laws of descent
Abandonment
Foreclosure
Eminent domain
Adverse possession
Estoppel
Foreclosure
A property owner who fails to fulfill loan obligations or pay taxes may lose an estate through foreclosure.
Eminent domain
Various government and public entities can transfer private property to the public sphere by the power of eminent domain.
Adverse possession
State laws may allow a real property owner to lose legal title to an adverse possessor.
An adverse possessor is
someone who enters, occupies, and uses another’s property without the knowledge or consent of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time.
To claim legal title, the adverse possessor must:
be able to show a claim of right or color of title as reason for the possession
have notorious possession, which is possession without concealment
maintain a consistent claim of hostile possession, which is a claim to ownership and possession regardless of the owner’s claims or consent
occupy the property continuously for a statutory period of time
in some states, pay taxes
A claim of right is
based on the adverse possessor’s occupying and maintaining the property as if he or she were the legal owner
Color of title results when a
grantee has obtained defective title, or received title by defective means, but occupies the property as if he or she were the legal owner
Notorious possession and hostile possession give
constructive notice to the public, including the legal owner, that a party other than the legal owner is occupying and claiming to own the property.
Avoiding adverse possession.
An owner can avert the danger of involuntary alienation by adverse possession by periodically inspecting the property within statutory deadlines and evicting any trespassers found
Estoppel prevents
a person from claiming a right or interest that is inconsistent with the person’s previous statements or acts
As a basis for involuntary alienation, the doctrine of estoppel
can prevent an owner from re-claiming a property that was transferred under false pretenses
State laws require the recording of all documents that affect
rights and interests in real estate in the public real estate records of the county where the property is located.
title records, contain a history
of every parcel of real estate in the county, including names of previous owners, liens, easements, and other encumbrances that have been recorded.
Deeds, mortgages, liens, easements, and sale contracts are among the documents that must be recorded.
Title records serve a number of purposes, not the least of which is to avoid ownership disputes. Other important purposes are:
-Public notice
-buyer protection
-lienholder protection
Public notice: Title records protect the public by giving all concerned parties
constructive notice of the condition of a property’s legal title: who owns the property, who maintains claims and encumbrances against the property.
Buyer protection: Title records protect the buyer by revealing
whether a property has marketable title, one free of undesirable encumbrances. The buyer is legally responsible for knowing the condition of title, since it is a matter of public record. Recording a transaction also protects a buyer by replacing the deed as evidence of ownership
Lienholder protection: Title records protect the lienholder by
putting the public on notice that the lien exists, and that it may be the basis for a foreclosure action. Recording also establishes the lien’s priority
Chain of title refers
to the succession of property owners of record dating back to the original grant of title from the state to a private party.
An abstract of title is
a written, chronological summary of the property’s title records and other public records affecting rights and interests in the property.
A title plant is a
duplicate set of records of a property copied from public records and maintained by a private company, such as a title company.
Each state prescribes procedures and requirements for recording in public title records
forms, proper execution, acknowledgment, and witnessing.
The Torrens system.
Certain states and counties use the Torrens system of recording. The Torrens system differs from other title recording systems in that title passes only when the conveyance has been duly registered on the title certificate itself.
the value of a property is only as good as
he marketability of its title,
To demonstrate marketable title to a buyer, a seller must show that the title is free of
doubts about the identity of the current owner
defects, such as an erroneous legal description
claims that could affect value
undisclosed or unacceptable encumbrances
The four principal forms of evidence the owner can use to support these assurances are:
a Torrens certificate
a title insurance policy
an attorney’s opinion of the title abstract
a title certificate
Torrens certificate. If available
the Torrens certificate is the best evidence, for the reasons given earlier– it is not merely a record, but is the title itself.
Title insurance. In the absence of Torrens registration, a title insurance policy is
commonly accepted as the best evidence of marketable title. A title insurance policy indemnifies the policy holder against losses arising from defects in the insured title
Standard title insurance coverage
protects against title defects such as incompetent grantors, invalid deeds, fraudulent transaction documents, and defects in the chain of title
Extended title insurance coverage
protects against liabilities that may not be of public record, including fraud, unrecorded ownership claims, unintentional recording errors, and unrecorded liens
An attorney’s opinion of abstract states that
the attorney has examined a title abstract, and gives the attorney’s opinion of the condition and marketability of the title
A title certificate is a summary of
the condition of title as of the date of the certificate, based on a search of public records by an abstractor or title analyst.
