Closing, Title Assurance, and Recording Flashcards
Closing is the conveyance of
- consideration for the sale (the purchase price, less any
deposit)
a. From lender & buyer (if mortgage involved); or
b. Buyer (if cash) - Title to the property in the form of a deed. Typically, the deed
and mortgage are recorded in the public land records. Title
insurance is issued to insure the lender’s mortgage and the
buyer’s title.
Statute of Frauds- Deeds
The Statute of Frauds also applies to deeds, because they transfer an interest in real property.
Deeds therefore must:
* Be in writing;
* Contain the essential terms of the conveyance; and
* Be signed by the grantor.
Rosengrant v Rosengrant (deed delivery requirement)
- case where the envelope had both names of gifter and “receiver”
- there was no legal delivery AND because gifter name was on it they deemed it retrievable
- No, trial court did not err. Legal delivery requires intent to make a present transfer of title to the
recipient. H&M intended a future transfer, which was invalid. If they intended a testamentary
transfer, that needed to happen via a will.
Vazquez v Vazquez (deed delivery requirement)
Question: Has the deed been effectively delivered when it is placed in the control of a third person? Whether Juanita intended to relinquish all dominion and control over the quitclaim deed at the time
she delivered it to her attorney?
Holding:
When a grantor delivers a deed to a third person without a reservation of a right to recall it, and instructs the third person to deliver it to the grantee on the grantor’s death, the grantor thereby makes an effective delivery as a matter of law
* Juanita’s quitclaim deed was effectively delivered. Brigido got the property.
Parties to real property sales
transactions have three basic options in the event of a breach
- specific performance
- damages
- rescission
Gianni v First National Bank
Facts
- seller said they could not deliver promised real property because they did not secure condominium status
To dismiss specific performance they tried to argue:
- non existence, non unique property, and it would be uneconomical
Holding:
- Non-existence is caused by Defendant’s unwillingness to place property into condominium status. Therefore, trial court erred in dismissing specific performance claim on this basis.
- Ordinary presumption is that specific performance in real estate contracts will be available
because properties are unique. Here, despite the fact that this is a condo in a multi-unit building
with other identical properties, there is not enough evidence of non-uniqueness to dismiss the
claim
- A court may refuse to grant specific performance where the remedy would cause a peculiar
hardship or an inequitable result. Spending money to place the building into condominium
status is what the seller contracted to do, so it would be unfair to allow the seller not to do that,
and then disallow the remedy of specific performance due to $ “hardship.”
Remedies besides specific performance
Damages
* Monetary damages – incl. return of the deposit
and “benefit of bargain” damages (= the
difference between contract price and fair market
value of property at time of breach)
Rescission
* Invalidation of the contract
* Placing the parties in the status they held before
the contract was signed
General, special, and quitclaim deeds
- General warranty deeds- contain the greatest degree of assurances
- Special Warranty deeds contain some assurances about the grantors use/knowledge of encumbrances during the grantors possession.
- Quitclaim deeds- contain no assurances.
Doctrine of Merger
- After acceptance of the deed, a buyer cannot challenge marketable title.
- Too late to assert contract related (statute of fraud) issues.
- Promises made in the contract ended at the closing unless they were restated in the deed. The contract as merged into the deed. Grantee’s now can demand grantors provide assurances of title in the deed.
Warranty Deed Covenants
- Covenant of warranty- promise to defend the grantee against any claim superior to the title.
- Covenant of quiet enjoyment- promise that the grantees possession of the property will not be disturbed by anyone holding superior title.
- Covenant of future assurances- promise that grantor will take all future steps reasonably necessary to
Three Methods of Title Assurance
1) Title Covenants: The grantor promises in the deed that the grantor has good
title to convey (General Warranty Deed)
* (2) Title Insurance: purchases the insurance from a title insurance company that
insures the grantee’s title (a promise that the title being conveyed to the buyer
is free from encumbrances).
* (3) Title Opinion: a professional opinion rendered by a lawyer or other
professional about the state of title after searching the seller’s title in public
records.
Marketable Title v Title Covenants
Duty to Convey Marketable Title
* This doctrine applies to defects discovered before the closing
* This is an express or implied promise in the purchase contract (Lohmeyer case).
Title Covenants
* These apply to defects discovered after the closing
* These are express promises in the DEED
* Three covenants (warranty, quiet enjoyment and further assurances) are future
covenants. They are breached, if at all, after the closing.
Recording Acts
Deeds do not have to be recorded to convey title from grantor to grantee.
* BUT deeds must be recorded to protect the title holder from title claims made by
third parties.
* At common law, courts would examine competing deeds to the same property to see
which one was recorded first, and that holder would have paramount title (this is the
race to record).
* If multiple parties have deeds purporting to convey an interest in the same property, a
court will use the recording acts of each state to determine which title is paramount.
* Race jurisdictions (small minority): purchaser who records first has priority
* Notice jurisdictions: subsequent bona fide purchaser (BFP) has priority if the purchase takes
without notice of a prior interest in the title.
* Race-notice jurisdictions: subsequent BFP who both takes without notice and records first has
priority
In washington recording act is
race notice
