Estates, Transfers, and Titles

Question 1

Deeds

Answer 1

In real estate transactions, a property deed is the instrument that is used to transfer ownership from one party to another. Deeds, the different types of estates that the deed grants, the various types of transfers, and a clear title all work together to transfer real estate from one party to another.

Question 2

General Warranty Deed

Answer 2

A general warranty deed both transfers the entirety of the grantor’s interest in the property but also makes it so the grantee can hold the grantor responsible for any problems that occur with the title, regardless of whether the title defects occurred during the time the grantor held the title or not.

Question 3

Covenant of seisin

Answer 3

This covenant assures a buyer that the grantor, the seller, owns the property and has the right to sell it. If this covenant is broken, the grantee, the buyer, may recover damages from the seller for up to the full price of the property.

Question 4

Covenant against encumbrances

Answer 4

In this covenant the grantor warrants that the property is free from other liens or encumbrances, except those specifically listed in the deed. These types of encumbrances could include mortgages, construction liens, and any easements on the property.

Question 5

Covenant of quiet enjoyment

Answer 5

This covenant offers a guarantee from the grantor to the buyer that the title is good against any third parties who may try to bring suit to establish title. If the grantee’s title fails, the grantor will be liable for the damages to the grantee. (The quiet enjoyment means that the grantee will enjoy his or her new property and everyone else will be ‘quiet’ about claims to the title.)

Question 6

Covenant of further assurance

Answer 6

In this covenant the grantor agrees to produce additional documentation needed to make the title good for the grantee, however, if the grantor has no power to fix the title with such documentation, this covenant does not apply.

Question 7

Covenant of warranty forever

Answer 7

This covenant covers the grantee literally forever in time. If the title fails at any point in the future for the grantee, the grantor will compensate the grantee for the damages or losses sustained.

Question 8

Special Warranty Deed

Answer 8

A special warranty deed is a conveyance that carries only one covenant. A special warranty deed transfers the title to the grantee while allowing the grantee to hold the grantor liable for any clouds on the title that relate to the period of time, and only then, when the grantor held the title. If there are additional warranties, those must be stated specifically in the deed as this deed only covers one.

Question 9

Deed Without Warranty

Answer 9

A deed without warranty is considered the lowest form of deed in Texas. It can also be called a bargain and sale deed. When a grantor is uncomfortable making any warranty whatsoever, he or she may offer a deed without warranty. Should defects later arise in the title, the grantee has basically no recourse towards the grantor. The only guarantee made in a deed without warranty is that the grantor owns the property and maintains the right to transfer it to the grantee.

Question 10

Foreclosure Deeds

Answer 10

A foreclosure deed is a legal document granting property ownership to the purchaser at a foreclosure sale. Depending on the type of foreclosure, a foreclosure deed may be a sheriff’s deed or a trustee’s deed. A foreclosure deed transfers legal title of property to a new owner.

Question 11

Quitclaim Deed

Answer 11

A quitclaim deed, while officially transferring the property title to another person, in actuality just releases the interest the grantor had in the property. A quitclaim deed doesn’t offer any guarantees or protection for the grantee of the quitclaim deed from clouds on the title. This kind of deed does not even ensure that the grantor actually owned the property. However, one protection it does offer is prevention of the grantor from making any future claims to the property.

Often, this kind deed is used to quickly transfer titles between family members. Given the risk connected with a quitclaim deed, these kinds of deeds are rarely employed to transfer titles from seller to buyer.

This kind of deed is sometimes used to transfer the title of a property when the property is bought at a public auction. The local municipality may auction a property to make up for back taxes on the property. The quitclaim deed absolves the municipality of any liability related to the auctioned property.

Question 12

Corporate Deeds

Answer 12

In Texas, a corporation is considered a legal entity. As such the corporation can transfer real property following the two basic rules:

  1. ) Corporations can convey real estate only by the authority granted in the corporate bylaws or by resolution of the corporation’s board of directors.
  2. ) During the transfer, only an authorized officer for the corporation can sign the deeds. The signing of the deed will be considered prima facie evidence of the resolution allowing the signatory to sign.

Because corporation law is a complicated area of law with a myriad of rules, if the sales agent managing the transaction has any question, or is dealing with a corporation with which he or she is unfamiliar, such as a not-for-profit or religious corporation, it is advisable to seek legal advice.

Question 13

Quiet Title

Answer 13

Quiet title is a lawsuit filed to silence other claims on and establish ownership of real property when the ownership is in question. Real property owners want to ensure that they have a clear title because a clear title is required to close a real property transaction. Having a clear title means there are no liens, levies, or other clouds on the title, and that there is no dispute over the property’s ownership. These clouds can be resolved by an action to quiet title.

Question 14

Marketable Title

Answer 14

A marketable title is a property title that is considered free from defect and, therefore, the possibility of litigation is eliminated. There may still be encumbrances on the title but it is one of which the parties are aware, such as a lien or an easement. The title is, in other words, clear enough to sell at a fair market price, there just may be restrictions on the use of the property per zoning, or a construction lien.

Question 15

Good and Indefeasible Title

Answer 15

A clear title, also called clean title, good title, or free and clear title, is different in that it means that the property title is free from all encumbrances, including those which are non-financial, such as in the previous example, the easement for the playground walkway. This is the one for which title companies insure, because if the title is good and indefeasible, any claim brought against the title of the property can be defeated.

Question 16

Constructive Notice

Answer 16

Constructive notice is the legal fiction that an individual received notice even though actual notice was not personally delivered to them. The law may provide that a public notice put on the courthouse bulletin board is a substitute for actual notice. It is assumed that documents properly recorded (at the county clerk’s office in the county where the property is located) into the public record is constructive notice to the world of a particular individual’s rights or interests in the property.

Question 17

Actual Notice

Answer 17

In contrast, actual notice, also called direct knowledge, is when the information is available and the individual has received the information and actually knows it. This is used in court to counter an individual’s claim of lack of constructive notice to justify their claim. An individual can search the public records and perform a property inspection, and this will serve as actual notice for that individual.

Question 18

Abstract of Title

Answer 18

An abstract of title, or property abstract, is a collected and condensed history of a property. An abstract is the documentation of the “chain of title.”

Question 19

Owner’s Title Insurance Policy

Answer 19

Owner’s title insurance is protection from future claims against you in regards to purchased residential property.

Question 20

Title Insurance

Answer 20

Title insurance is a type of insurance policy drafted to protect parties with financial interests in a piece of property from losses associated with title defects or problems with the enforcement of liens against the property.

Question 21

T-47 Affidavit

Answer 21

requires that a seller swear under oath that no easements have been granted on the property and that no material change exists in the structures, fences, structures on adjoining properties, conveyances, or replats.

Question 22

Freehold Estates

Answer 22

Fee simple estates
Defeasible fee estates
Conventional life estates
Legal life estates

Question 23

Legal life estates

Answer 23

This estate terminates upon the death of the individual on whose life the estate is based.

Question 24

Conventional life estates

Answer 24

This estate is created by the owner as an interest in real property (for our purposes here) that is limited in duration to the owner’s life or a provision in the owner’s will after the owner’s death

Question 25

Defeasible fee estates

Answer 25

Defeasible fee estates is an estate wherein the owner has a fee simple title that may be disposed of through either a future occurrence or nonoccurrence

Question 26

Fee simple estates

Answer 26

Fee simple estates are the highest type of interest recognized by law in Texas and is complete ownership of the property. It is the default interest that is transferred in a real estate transaction, unless otherwise noted

Question 27

Inheritance

Answer 27

In Texas, if a husband and wife receive real property through inheritance, it is presumed to become community property (see the slide regarding community property). If two or more unrelated parties receive real property and the conveyance does not address the character of the tenancy created, it is by law given as a tenancy in common between the parties.

Question 28

Inter Vivos Trust

Answer 28

Also known as a living trust, an inter vivos trust takes effect during the lifetime of its creator. This trust’s duration is established during the trust’s creation. Property is transferred to the trustee with instructions that it be managed and that the income from the trust assets be paid to the trustee’s children, spouse, relatives, or a charity during the trustee’s lifetime. One important reason for establishing a trust is to avoid probate—a process of distributing the deceased’s assets in court.

Question 29

Testamentary Trust

Answer 29

The opposite of an inter vivos trust is a testamentary trust. A testamentary trust will is one in which a portion of a person’s estate is placed under the control of a third party. The third party, called a trustee, manages the portion of the estate under his, her, or their control until certain conditions allow the trustee to distribute the portion of the estate held in trust to a designated party or parties called beneficiaries. Trusts provide property management and financial control, as well as a number of tax and estate planning advantages.

Question 30

Land Trust

Answer 30

A land trust is exclusive to real estate and most likely the owner, the trustor, is the beneficiary. So the trustee has the real property interest, but only can deal with the property per the beneficiary’s written instructions to the trustee. The beneficiary keeps management and control of the property through the trustee in this manner, which includes the right of possession, and the right to income, and the right to proceeds from the sale.

Question 31

Simple or Statutory Will

Answer 31

Simple wills, sometimes known as statutory wills, are usually employed by people with small and uncomplicated estates. A simple will is usually a printed form that can be filled out by the testator. It is still advised that an attorney be consulted even when drafting a simple will.

Question 32

Holographic Will

Answer 32

A holographic will is recognized by Texas and is a will completely written by hand by the testator, with language demonstrating that it is intended to be the will of the testator. There is no witness requirement for a holographic will.

Question 33

Joint Wills

Answer 33

Joint wills are created by two testators who each leave their estate or portion of an estate to the other testator. This type of will also specifies the distribution of the estate upon the death of the surviving testator. Joint wills cannot be revoked without the consent of both testators.

Question 34

Reciprocal Wills

Answer 34

Similarly, reciprocal wills, or mirror wills, set up conditions where two parties leave their individual estates to the other party. Unlike joint wills, each party drafts their own reciprocal will.

Question 35

Codicil

Answer 35

A codicil is an addition to a will that a testator uses to modify his or her will. The codicil must be in the same form as the will it amends. For example, a handwritten note attached to a formal will, signed and witnessed by two parties would not be considered a legal codicil.

Question 36

Testate vs. Intestate

Answer 36

Testate is the legal term for having a will, whereas intestate is the legal term for dying without a will. Having property which is intestate means that the state (rather than the owner of the property) will determine how the property is distributed.

Question 37

Habendum Clause

Answer 37

The habendum clause is used to define or limit the ownership interests of the grantee for a fee simple absolute property transfer. It is the part of the deed where the language begins with “to have and to hold,” follows the granting clause and defines the extent of ownership the grantor is conveying. (It is also called the “to have and to hold clause.”) The provisions in the habendum clause must agree with those in the granting clause.

Question 38

Involuntary Alienation

Answer 38

Again, alienation is the act of transferring property from one to another. Involuntary alienation is done through actions such as eminent domain, adverse possession, or foreclosure.