Chapter 9 - Title, Deeds, and Ownership Restrictions (7%)

Question 1

Section 9.1: TITLE

:::STATE EXAM CONTENT AREA: IX.A: TITILE TO REAL PROPERTY:::

Title to Real Property

Answer 1

TITLE TO REAL PROPERTY IS THE OWNERSHIP OF SPECIFIED RIGHTS IN PROPERTY THAT FORMS AN ESTATE. (enforceable by law)

THE TYPE OF ESTATE, AS WE HAVE SEEN, IS BASED ON ALL, OR SPECIFIED PORTIONS OF THE BUNDLE OF RIGHTS

 Equitable title – right to gain ownership interest in the future

Question 2

Section 9.1: TITLE

:::STATE EXAM CONTENT AREA: IX.B.3: ACQUIRING LEGAL TITLE - TYPES OF NOTICES:::

** Notice of Ownership

Answer 2

 Actual Notice

 Possession

 Learned by reading, seeing, or hearing

** Constructive Notice (legal notice) - BEST EVIDENCE OF OWNERSHIP

** Recorded in the public record

** Lis Pendens - a recorded notice of pending legal action

Question 3

Section 9.2: PROTECTING TITLE

:::STATE EXAM CONTENT AREA: IX.B.4: ACQUIRING LEGAL TITLE - CONDITION OF TITLE:::

Protecting title, Abstracts, and Title Insurance

Answer 3

 Marketable or Merchantable or Clear title to real property is title in fee simple that is free from litigation and defects which enables an owner to hold it in peace and sell it to a person of reasonable prudence for its fair market value.

 Not proof but evidence

 Root of title - time period at which the assertion that no outstanding or unresolved cliams exist against the title can be made

 Abstract

 Chain of title - from root of title to present day

 History of title

 Opinion of Title (not guarantee)

 Issued by an attorney

 After examining an abstract of title

 Most attorneys do not guarantee it

• In Florida, the root of title extends back 30 years from the recording of the claim. Claims more than 30 years old are extinguished.
• Since many different types of documents may affect the title to property, a title search of all such documents must be made
• TITLE DEFECTS or CLOUD ON TITLE are claims or other factors that could cause the title to a property to be declared invalid. The title defect may issues such as failure to comply with local real estate document laws, or the discovery of other claims or liens on the property that were not acknowledged at the time the deed was issue.
• Title Insurance provides financial protection against losses sustained as the result of a defective title. Basic title policy coverage protects owners against issues that may arise with clear title to property, incorrect signatures on documents, forgery, fraud, restrictive covenants (warrants), encumbrances, or judgments.

 One time premium

 Pays damages for any defect not listed as an exception in the policy

 Lender’s (Mortgagee’s) Policy

 Issued for an amount equal to the loan

 May be transferred to new lender

 Most lenders require borrower to purchase

 Owner’s (Mortgagor’s) Policy

 Issued for the total purchase price

 May not be transferred

 Not required by Florida law

Question 4

Section 9.3: METHODS OF ACQUIRING TITLE

:::STATE EXAM CONTENT AREA: IX.B.1: ACQUIRING LEGAL TITLE - VOLUNTARY ALIENATION:::

** Transfer by Voluntary Alienation

Answer 4

** Voluntary Alienation - Separated from property by choice

 Public Grant- transfer of title from the government to an individual

** Deed (MOST COMMON) – written instrument used to convey interest in real estate from one party to another

** Will – interest in real estate conveyed by last will and testament from one party to another

** Testate - died with a will

** Intestate - died without a will

** NOTE: The willful disposition or gift of real property is called devise and the recipient is called the devisee. The disposition or gift of personal property is called a bequest and the recipient is called the beneficiary.

Question 5

Section 9.3: METHODS OF ACQUIRING TITLE

:::STATE EXAM CONTENT AREA: IX.B.2: ACQUIRING LEGAL TITLE - INVOLUNTARY ALIENATION:::

** Transfer by Involuntary Alienation

Answer 5

** Involuntary Alienation - Separated from property not by choice

** Descent & Distribution

** Heirs receive the property of an owner that dies intestate

** Determined by Florida Probate

** Escheat

** No known heirs dies intestate

** Eminent Domain

** Government takes private property for public benefit

** Condemnation proceedings

** Adverse Possession – True owner fails to maintain possession and property is taken by another

** Conditions

** Hostile

** Open

** Taxes Paid

** Claim

** Adverse Possession for 7 years

** Notorious

** Owner Sleeps On Their Rights

Question 6

Section 9.4: DEEDS

:::STATE EXAM CONTENT AREA: IX.C: DEEDS:::

** Transferring Title

Answer 6

** Parties

** Grantor - owner giving title

** Must be signed by a Competent Grantor of legal age and 2 witnesses

** Must be acknowledged (notarized) only if it will be Recorded

** Grantee - new owner receiving title

** Need not sign nor be competent

** Voluntarily delivered and accepted

THE ESSENTIAL ELEMENTS OF A DEED ARE:

** Writing

** Parties

** Grantor – legal capacity

** Consideration

** Granting (or premises) clause

** Habendum clause

** Legal description

** Legal rights (interest) conveyed

** Consideration

** Grantor’s signature & two witnesses

** Delivery and acceptance

** Acknowledged (notarized only if recording)

Question 7

Section 9.4: DEEDS

:::STATE EXAM CONTENT AREA: IX.C.1: CLAUSES - DEED:::

** Clauses in Deeds

Answer 7

** 1) Premises clause (Granting clause)

** Only required clause

** Parties

** Words of conveyance

** Consideration

** Date of transfer

** Legal description

** 2) Habendum clause

** “to have and to hold”

** bundle of legal rights being conveyed

** E.g. fee simple, life estate, etc.

** 3) Reddendum clause

** reserves a right in the title not the land (remainder estate) called reservations or restrictions

Question 8

Section 9.4: DEEDS

:::STATE EXAM CONTENT AREA: IX.C.1: CLAUSES - DEEDS:::

Warrants or Covenants in Deeds

Answer 8

Warrants or covenants are clauses containing PROMISES made by the grantor to the grantee. However, if the grantor is insolvent, he/she may be unable or unwilling to fulfill the promises made.

 Warrant:

1) of Seisin(seizin) promises that the grantor owns the property and has the right to convey
2) against Encumbrances - grantor has not burdened the title except as disclosed in the deed
3) of Quiet enjoyment promises that the grantee will not suffer hostile claims
4) of Warranty forever promises the grantee will enjoy uninterrupted use of property
5) Warrant of further assurances promises that the grantor will protect and defend the title

The clauses (promises)are only as good as the grantor, if the grantor can not or will not stand behind them then they are of little or no value

Question 9

Section 9.4: DEEDS

:::STATE EXAM CONTENT AREA: IX.C.2: STATUTORY DEEDS:::

** Types of Deeds

Answer 9

** 1) Quit Claim Deed - conveys all rights that the grantor MAY have, if any; contains NO WARRANTS

** Rarely used in day-to-day transfers

** Grantor does not claim to have any rights

** Used most often to clear defects (clouds) on title

** Includes Granting Clause

** Used: divorce actions, remove easements, etc.

** (BEST TYPE OF CONVEYANCE FOR SELLER)

2) Bargain and Sale Deed – conveys all rights that the grantor has

 Includes

 Granting clause

 Habendum clause

 Covenant of Seisin (seizin)

 No promise to defend the title

3) Special Warranty Deed - conveys all rights that the

grantor has; BARGAIN AND SALE DEED W/ PROMISE TO DEFEND TITLE

 Includes

 Granting clause

 Habendum clause

 Covenant of Seisin (seizin)

 Promise to defend the title for defects that occurred during period of ownership

** 4) General Warranty Deed (IMPLIED IF NOT EXPRESSED IN A DEED)- conveys all rights that the grantor has; BARGAIN AND SALE DEED W/ ALL PROMISES

** Includes

** Granting clause

** Habendum clause

** Covenant of Seisin (seizin)

** Plus

** Quiet Enjoyment

** Further Assurance

** Warranty Forever

** Promise to defend the title against all lawful claims

** (BEST PROTECTION FOR BUYER)

Question 10

Section 9.4: DEEDS

:::STATE EXAM CONTENT AREA: IX.C.3: SPECIAL PURPOSE DEEDS:::

Special Purpose Deeds

Answer 10

 When the owner can not sign a deed*

 Guardian’s Deed* – Minor

 Committee’s Deed* - Declared legally incompetent

 Personal Representative’s Deed* – Deceased (intestate)

 Master Deed – developer

 Unit Deed – condo assoc. to public

 Certificate of Title – foreclosure (owner will not sign deed)

 Tax Deed – government sells for delinquent taxes

Question 11

Section 9.4: DEEDS

:::STATE EXAM CONTENT AREA: IX.B.4: ACQUIRING LEGAL TITLE - CONDITION OF TITLE:::

** Curing Defects in Title

Answer 11

 In order to make a property merchantable, title defects or “Clouds on Title” must be cured of the problem that caused the defect

** 1) Quitclaim deed –

** party with the claim releases interest

 2) Suit to Quiet Title

 Court proceedings

 3) Marketable Record Title to Real Property Act (MARTA) - eliminates claims-in-antiquity

 Root of title in Florida

 30 years

Question 12

Section 9.5: LIMITATIONS ON PROPERTY OWNERSHIP

:::STATE EXAM CONTENT AREA: IX.D.4: OWNERSHIP LIMITATIONS AND RESTRICTIONS - PUBLIC/GOVERNMENT RESTRICTIONS:::

**/*** Government Limitations on Private Property Ownership

Answer 12

PETE:

*** 1) Police Power - the right for the government to protect the health, welfare and safety of its citizens.

*** Health, Zoning, and Building Codes

*** Broadest power

** 2) Eminent Domain - the right that government has to take private land for public use

3) Taxation – Gov’t levies property taxes

 Can foreclose for non-payment

4) Escheat – owner dies intestate

 No lawful heirs – State acquires property

Question 13

Section 9.5: LIMITATIONS ON PROPERTY OWNERSHIP

:::STATE EXAM CONTENT AREA: IX.D.5: OWNERSHIP LIMITATIONS AND RESTRICTIONS - DEED RESTRICTIONS:::

Private Limitations on Property Ownership

Answer 13

Private limitations are restrictions placed by an owner that affect the use of the property by subsequent owners

 Deed Restrictions (restrictive covenants)

• MOST COMMON FORM
• Most often placed against several properties at the same time by a DEVELOPER or BUILDER
• They limit virtually anything that is contrary to law, such as height, color, architectural style, fencing, and even landscaping.
• The DEVELOPER, usually, but not necessarily, records these restrictions in the public records

Question 14

Section 9.5: LIMITATIONS ON PROPERTY OWNERSHIP

:::STATE EXAM CONTENT AREA: IX.D.1: OWNERSHIP LIMITATIONS AND RESTRICTIONS - EASEMENTS:::

Private Limitations on Property Ownership

Answer 14

 Easements

 Authorized use of another owner’s property for specific purpose

 Encumbrance affecting use

 May affect value

 Created by

 Contract

 Deed

 Operation of law

• 3 TYPES:
  1) Easement appurtenant– involves 2 or more parcels of property and “runs with the land”, which means the right attaches to the land, not a person or other entity, and is binding on all present and future owners.

 E.G. Easement by necessity

 Servient estate

 Dominant estate

2) Easement in gross – involves rights of access by one party onto a parcel or real estate owned by another party.

 E.G. utilities (power, phone)

3) Easement by prescription –uninterrupted use for at least 20 years

 E.G. (pathway)

 License – not an interest in land; temporary, revocable

 Encroachment – unauthorized physical intrusion such as a fence built over the property line

Question 15

Section 9.6: LEASES

:::STATE EXAM CONTENT AREA: IX.D.2: OWNERSHIP LIMITATIONS AND RESTRICTIONS - LEASES:::

Lease - Definition

Answer 15

 Legal interest in property – not ownership

 Owner – lessor

 Tenant – lessee

 Oral or written

 Lease termination

 Destruction of property

 Lien foreclosure

 Condemnation though eminent domain

 Term expiration

 Bankruptcy of tenant

 Agreement by parties

 Breach of lease provisions

• A valid lease contains the following:
  1) The names and signatures of the lessor and lessee
  2) Consideration (money or something of value given by the lessee to the lessor)
  3) Term of tenancy
  4) Legal description of property

Question 16

Section 9.6: LEASES

:::STATE EXAM CONTENT AREA: IX.D.2: OWNERSHIP LIMITATIONS AND RESTRICTIONS - LEASES:::

** Types of Leases

Answer 16

** 1) Gross lease

** Landlord receives “gross” amount

** Landlord pays expenses

** Taxes, insurance, maintenance

** Example:

** RESIDENTIAL

2) Ground lease (land lease)

 LONG-TERM COMMERCIAL

 Tenant may develop property

 Tenant pay expenses

 Taxes, maintenance, insurance, financing costs

 Lease termination – structures and improvements revert to owner

 Usually long term – 50 – 99 years

** 3) Net Lease

** Landlord receives “net” amount

** Tenant pays fixed rent

** Tenant pays taxes, insurance & maintenance

** Examples:

** COMMERCIAL & INDUSTRIAL

** 4) Percentage Lease

** Tenant pays fixed rent

** -plus-

** Percentage of annual or monthly sales

** Example:

** RETAIL CENTERS

** SHOPPING MALLS

5) Lease-Option

 Lease with option to purchase

 Specified time frame

6) Sale-Leaseback

 Owner sells property to investor

 Investor leases property back to owner

 Owner has no equity – 100% financing

 20-30 year long-term lease Benefits: income taxes, easier to borrow money – less debt

 Example:

 WALMART, TARGET, ETC.

Question 17

Section 9.6: LEASES

:::STATE EXAM CONTENT AREA: IX.D.2: OWNERSHIP LIMITATIONS AND RESTRICTIONS - LEASES:::

Assignment and Sublease

Answer 17

 Assignment

 Lessee transfers all of the space for entire lease period

 Assignor – lessee

 Assignee- tenant receiving rights

 Specified time frame

 Sublease (sandwich lease)

 Lessee transfers less than 100% of space or less than the entire lease period

 Sublessor – (original tenant) makes payments to landlord whether sublessee pays or not

 Sublessee – new tenant

 Original tenant is sandwiched between landlord and sublessee

Question 18

Section 9.7: LIENS

:::STATE EXAM CONTENT AREA: IX.D.3: OWNERSHIP LIMITATIONS AND RESTRICTIONS - GENERAL AND SPECIFIC LIENS:::

** Liens

Answer 18

A lien is a financial claim against property by a creditor or unit of government that is used to secure the payment of a debt or other obligation owed by the property owner

There are 2 types of liens:

NOTE: SPECIFIC is against PROPERTY and GENERAL is against PERSON

** 1) SUPERIOR - takes precendence over all other liens

** a) Real Estate Property Taxes (specific)

** Before all other liens

** b) Special Assessment (specific)

** Sidewalks, sewers, and other improvements

** c) Federal Estate Tax (general)

** Assessed at time of death

** 2) JUNIOR - priority is based on the date of recording

** a) Mortgage Lien(specific)

** Pledge property as security

** b) Vendor’s Lien (specific)

** an owner who sells a property is entitled to a lien against the property which is being sold to secure any unpaid balance of the purchase price IF NO OTHER FORM OF SECURITY HAS BEEN RECEIVED

** c) Judgment lien (general)

** imposed when a party is entitled to collect damages awarded by a courst as a result of a lawsuit

** d) Construction Lien (specific)

** Protects contractor not paid for property improvements

** this lien will take priority over other junior liens filed b/w the date the work was first performed and the date the lien is filed

** e) Federal Income Tax Lien(general)

** f) State Corporate Income Tax Lien(general)

Question 19

Section 9.7: LIENS

:::STATE EXAM CONTENT AREA: IX.D.3: OWNERSHIP LIMITATIONS AND RESTRICTIONS - GENERAL AND SPECIFIC LIENS:::

Lis Pendens

Answer 19

 Notice of pending lawsuit

 NOT A LIEN

 Lawsuit successful – lien

 Lawsuit not successful – no effect on title

 Serves notice to potential purchasers

Question 20

Section 9.7: LIENS

:::STATE EXAM CONTENT AREA: IX.D.3: OWNERSHIP LIMITATIONS AND RESTRICTIONS - GENERAL AND SPECIFIC LIENS:::

Brokers Right to Record Documents Affecting Title

Answer 20

 Broker cannot file liens against residential property for payment

 Two Exceptions

 Authority granted in listing contract

 Judgment rendered in Florida court