Conveyancing Part 2 (Deeds)

Question 1

Requirements for Valid Deed

Answer 1

Executing a valid deed requires the following:

1) A writing signed by the grantor
2) An unambiguous description of the land
3) Identification of the parties by name or description
4) Words of intent to transfer, such as “grant”

Question 2

The Closing

Answer 2

The controlling document is now the deed rather than the land sale K. The deed passes legal title from seller to buyer.

How does the deed pass legal title? It must be LED (lawfully executed and delivered)

Lawful Execution = deed must be in writing signed by grantor. Note: deed need not recite consideration nor must there be consideration to make a deed valid. Deed must contain description of the land. Doesn’t have to be perfect, but must be unambiguous and provide a good lead. What does that mean? Consider the next hypo:

Question 3

What It Means to be Imperfect but still Unambiguous

Answer 3

Question 1: The deed recites that O conveys “all of O’s land” or “all of O’s land in Essex County”. Would such descriptions suffice?

Answer: Yes. They provide a good lead. Why? Because we can learn the meaning of “all” and thus discern what land is included in that description.

Questions 2: O conveys “some of my land in Sussex County”. Does such a description satisfy the standard?

Answer: No. Too imprecise/unambiguous. Why? Because even with research, we won’t know the meaning of “some”. Even with research, when we scan public records, won’t know what was meant by the word “some”.

Question 4

Insufficient Description

Answer 4

If the description of the land is insufficient to provide a good lead, title isn’t transferred. The grantor retains title. If a description is ambiguous, rather than vague or inadequate, outside (parol) evidence is permitted to clear up the ambiguity.

Question 5

Defective Deeds

Answer 5

Defective deeds come in three varieties:
1) void deeds,
2) voidable deeds, and
3) fraudulent conveyances.

A void deed will be set aside even if it has been conveyed to a bona fide purchaser.

A voidable deed will be set aside only if the property has not passed to a bona fide purchaser.

A fraudulent conveyance is one made to avoid the grantor’s creditors. This typically looks like an insolvent grantor conveying property to a relative for much less than the value of the property to avoid the property being taken by a creditor. This type of conveyance will be set aside unless the grantee took in good faith and paid reasonably equivalent value.

Question 6

Closing Documents

Answer 6

Transferring title by deed sounds simple enough, but a closing usually involves a stack of documents to be signed and often includes last minute negotiations about repairs or fixtures. Besides the deed, the most important documents in that stack for bar exam purposes are:

1) The closing disclosure: This is a document provided by the mortgagee to the mortgagor detailing the loan provisions, such as the loan amount, interest rate, monthly payment, penalties, and closing costs.

2) Notification of defects: This is a form provided by the seller to the buyer detailing any physical defects on the property (e.g., leaky roof, termites) known to the seller. This is required even if the seller is selling the property “as is.”

3) Environmental report: This report usually comes up in commercial real estate sales. An owner of real property is responsible to pay to clean up any environmental damage on the property, even if it occurred before they owned the property. The parties often negotiate an environmental report explaining which environmental guarantees the seller is making.

Question 7

Delivery of the Deed

Answer 7

A deed isn’t effective to transfer an interest in realty unless it has been delivered. Delivery turns on the grantor’s intent that title pass immediately, even if possession is postponed. Acceptance is presumed.

Deed must be lawfully executed and delivered.

Delivery can be satisfied when grantor physically or manually transfers the deed to grantee. In that pursuit, the physical or manual handing over of the deed to grantee, it is permissible to use mail or agent or messenger.

Delivery could be satisfied by physical, manual, actual handing over, but it doesn’t necessarily require actual physical transfer of the deed instrument itself.

The standard for delivery is a LEGAL standard. Not a literal standard. As a legal construct, the standard is one of present intent. Did grantor have the present intent to be bound? Regardless of whether or not the deed instrument was handed over. You’re asking if the present intent to be bound immediately existed in the grantor.

Note: Express rejection defeats delivery.

Question 8

Presumptions Concerning Delivery

Answer 8

Courts recognize a number of rebuttable presumptions with respect to delivery. If the grantor retains possession of the deed, it is presumed that it hasn’t been delivered. Conversely, if the grantee has possession of the deed, delivery is presumed. Additionally, delivery is presumed if the deed is:

1) Handed to the grantee,

2) Acknowledged by the grantor in front of a notary, or

3) Recorded.

Question 9

Extrinsic Evidence

Answer 9

All types of evidence, including the grantor’s conduct or statements before or after the alleged delivery are admissible to prove the grantor’s intent to pass title. Outside evidence is not permitted to show that an unconditional deed given directly to a grantee was subject to a condition.

If the grantor keeps the deed in possession, that raises a presumption of no delivery. Thus, title would remain in hands of grantor.

Question 10

Delivery with Conditions: Oral Conditions

Answer 10

If a deed on its face is transferred to the grantee with an alleged oral condition, what result? The oral condition DROPS OUT.

The oral condition drops out because it’s not provable and delivery is done. It’s too susceptible to fraud or fabrication, so any accompanying oral condition is unenforceable. Delivery is deemed accomplished. The oral condition is VOID.

Question 11

Delivery with Conditions: Written Conditions

Answer 11

A deed containing a written condition is generally valid when delivered. If the condition is the grantor’s death, the deed creates a future interest (an executory interest) in the grantee.

Question 12

Delivery to Third Party

Answer 12

3 common situations where a deed is delivered to a 3rd party:

1. Transfer to Third Party without Conditions = A delivery to a third party with instructions to deliver the deed to the intended grantee is considered valid delivery. Whether a delivery to a third party without instructions is a valid delivery often hinges on whether that third party is an agent of the grantor or the grantee. For instance, a delivery to the grantor’s lawyer is probably not delivery, while delivery to the grantee’s lawyer probably is.
2. Transfer to Third Party with Conditions (Escrow Transaction) = This typically is related to the purchase of property and the condition typically is the payment of the purchase price. If the escrow agent is given written instructions, the grantor is bound by the delivery to the agent. But, if the grantor gives the escrow agent oral instructions, the grantor may change the instructions and recall the deed while it’s still in the agent’s hands, unless there is a written contract of sale.

What if grantor dies or becomes unavailable before the express conditions are met? Title still passes from escrow agent to grantee once the conditions are met. Anchor the idea of the escrow agent’s utilization and its efficacy -> grantor is allowed to deliver executed deed to escrow agent as intermediary with instructions that once certain conditions are met, title will pass from escrow agent to grantee. The advantage is that grantor doesn’t have to be present or even alive.

3. Donative Escrow with Conditions

If the grantor gives a deed to a third party with instructions to turn it over to the named donee only when certain conditions occur, is there a valid delivery or can the grantor change her mind and demand the deed back before the conditions occur? It depends on the condition. If the condition is something other than the grantor’s death (the grantee’s marriage, for example), the grantor may retrieve it. If the condition is the grantor’s death, the grantor cannot get the deed back because they intended to presently convey a future interest.

Watch out for a condition of survival. Although a condition that the grantee survive the grantor seems like the same thing as a condition of the grantor’s death, it isn’t. Unlike the condition of the grantor’s death, which conveys a future interest, a conveyance to the grantee “only if the grantee survives the grantor” indicates that the grantor does not intend to part with anything until death. Thus, there is no delivery.

Question 13

Merger

Answer 13

Once a deed is delivered and accepted, a buyer can sue only on the covenants in the deed. The seller is discharged from all obligations under the contract of sale. This is usually referred to as the contract “merging” with the deed.

Question 14

Common Exam Question: Return of Deed

Answer 14

L writes deed and gives to D. Then L discovers it was H’s dream home. H was disappointed that L gave it away. D returns it to L, then L deeds it to H. Who owns the house on this fact pattern with the return of a deed?

The deed says that L conveys the house to D. But it makes no sense when D gives it back to L. Only a new deed could convey it back. Without conveying a new deed, D still owns the house even if the original L->D deed is given back to L.

Question 15

Covenants for Title

Answer 15

Types of Deeds = The seller’s liability for title defects is governed by the covenants of title contained in the deed. There are three types of deeds classified according to the promises they contain:

1) the quitclaim deed,
2) the general warranty deed, and
3) the special warranty deed.

Question 16

Quitclaim Deed

Answer 16

Quitclaim Deed = contains no promises or covenants. Grantor isn’t even promising he has good title to convey. The quitclaim is the worst deed buyer could hope for.

Note: there is a mitigating factor. Even here with a quitclaim, grantor implicitly promised in the land K to provide marketable title at closing. This offers a bit of hope to grantee, but this promise is SHORT LIVED. It applies at the moment of closing and dies right after. It applies at moment of closing but dies right away.

Question 17

General Warranty Deed

Answer 17

General Warranty Deed = warrants against all defects against title including those due to grantor’s predecessors. it’s the best because it has a bunch of promises grantor makes not just on behalf of himself but also on behalf of previous owners. Assuming the sins of predecessors in interest. That is a very benevolent deed. Contains all 6 covenants (first 3 present last 3 future):

Present Covenant breached if ever at time the deed is delivered. That’s important for litigation because the statute of limitations for breach of present covenant is from moment of delivery. Clock starts ticking at delivery.

1) Covenant of Seisin = grantor promises she owns this estate. Not delivering something she doesn’t own.
2) Covenant of Right to Convey = grantor promises she has power to transfer the property. This means there are no temporary restraints on alienation. No restrictions on grantor’s ability to sell or transfer Blackacre. Also, grantor is under no disability (of requisite age, sound mind competent)
3) Covenant Against Encumbrances = grantor promises no servitudes or liens or encroachments on Blackacre

Future Covenants not breached until grantee is disturbed in possession. When would statute of limitations for breach of future covenant begin to run? only when grantee is disturbed in possession. Cause of action accrues only then. 3 future covenants:

1) Covenant for Quiet Enjoyment = grantor promises that grantee will not be disturbed in possession by 3rd party’s lawful claim of title. Grantor is saying there is no 3rd party out there.

2) Covenant of Warranty = grantor will defend grantee against any superior title claims. If there is someone else asserting superior claim of title, that will be a big surprise to grantor since he did covenant for quiet enjoyment, but if for some reason it happens, grantor will step up to defend grantee

3) Covenant of Further Assurances = grantor promises to do what’s needed in the future to perfect the title if it turns out to be imperfect. This is a housekeeping or ministerial sort of promise. Whatever future actions needed to be undertaken

Don’t be fooled into thinking marketable title is waived if the contract calls for a quitclaim deed. As we’ll see, a quitclaim deed makes no promises with respect to title. However, the type of deed called for in the contract has no effect on the implied promise to deliver marketable title at closing.

Question 18

Special Warranty Deed

Answer 18

Special warranty deeds contain the same covenants that general warranty deeds do, but they limit the promises to defects arising while the grantor owned the property. The grantor promises that they did not do anything to cause a title defect.

Many states have a statutory special warranty deed that makes only the following two limited assurances against acts of the grantor (not her predecessors): (i) that prior to the time of the execution of such conveyance, the grantor has not conveyed the same estate or any interest therein to any person other than the grantee; and (ii) that the estate conveyed is free from encumbrances made by the grantor.

Question 19

Remedies for Breach of Covenants

Answer 19

Breach of the covenants for title is treated like a breach of contract, and the remedy is damages. The general guide is that the injured party should be put in the position they would have been in had the title been as promised. However, many states impose limitations. For instance, some states limit the grantor’s liability to the purchase price and others bar recovery altogether if the deed was a gift.