Section 2 Unit 2 Flashcards
Legal and equitable title
legal title: ownership of the bundle of rights
equitable title: a conditional right to legal title subject to an owner’s agreements with buyers and creditors
For example, a buyer enters into a contract for deed to purchase a house. The seller lends the bulk of the purchase price to the buyer for a term of three years. The buyer takes possession of the property, and makes payments on the loan. During this period, the seller retains legal title, and the buyer owns equitable title. If the buyer fulfills the terms of the agreement over the three year period, the buyer has an enforceable contract to obtain legal title.
Another common example is a mortgage loan transaction that gives the lender the right to execute a strict foreclosure, which transfers legal title to the lender in the event of a default. With this contractual right, the lender has equitable title to the property.
In practice, the terms “title” and “legal title” are often used interchangeably.
Notice of title
how ownership is evidenced to the public
actual notice: knowledge acquired or imparted directly through demonstrable evidence, e.g., presenting or inspecting a deed, visiting a party in possession
constructive notice: knowledge one could or should have obtained, as presumed by law; imparted by recording in public records “for all to see”
Transferring title
voluntary by grant, deed, or will
involuntary by descent, escheat, eminent domain, foreclosure, adverse possession, estoppel
DEEDS OF CONVEYANCE
instruments of voluntary conveyance by grantor to grantee
Delivery and acceptance
legal title transfers upon competent grantor’s intentional delivery and grantee’s acceptance; in Torrens, title transfers upon registration
Validity
Validity of the grantee’s acceptance requires only that the grantee have physical possession of the deed or record the deed. Once accepted, title passes to the grantee. The deed has fulfilled its legal purpose and it can not be used again to transfer the property. If the grantee loses the deed, there is no effect on the grantee’s title to the estate.
premises clause: granting habendum clause: type of estate reddendum clause: restrictions tenendum clause: other property included warrants: seizen; quiet enjoyment; further assurance; forever; encumbrances; grantor's acts
Statutory deeds
bargain and sale: “I own but won’t defend”
general warranty: “I own and will defend”
special warranty: “I own and warrant myself only”
quitclaim: “I may or may not own, and won’t defend”
Special purpose deeds
used for different purposes, to convey certain interests, or by certain parties
Transfer tax
state tax on conveyances based on price
WILLS
last will and testament: voluntary transfer to heirs after death
maker: devisor or testator; heir: devisee; estate: devise
Types of will: witnessed; holographic; approved; nuncupative
Validity
adult; competent; indicates “last will and testament”; signed; witnessed; voluntary
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
Probate
if testate, estate passes to heirs; if intestate, to successors by descent; if intestate with no heirs, estate escheats to state or county
process: validate will; validate, settle claims and pay taxes; transfer balance of estate to heirs
If the will does not name an executor, the court will appoint an administrator to fulfill this role.
INVOLUNTARY TITLE TRANSFER
descent and escheat: no will
foreclosure: lose title by forfeiture
eminent domain: lose title to public for the greater good
adverse possession: by claim of right or color of title; continuous, notorious, hostile possession; may have to pay taxes
estoppel: barred by prior acts or claims
TITLE RECORDS
all instruments affecting title must be recorded
give public notice; protect owners; protect lienholders’ claims
Chain of title
successive property owners from original grant to present owner
abstract of title: chronology of recorded owners, transfers, encumbrances
Recording system
local property recording system governed by state law
Torrens registry: requires court action initially: legal title does not pass until recordation occurs
Title evidence
needed to prove marketable title as well as who owns
forms of evidence: Torrens; title insurance; attorney’s opinion of abstract; title certificates
Alienation
Transfer of title to real estate, occurs voluntarily and involuntarily.
Conveyance
When the transfer uses a written instrument.
Transferring Title to Real Estate: Voluntary
public grant
deed
will
Transferring Title to Real Estate: Involuntary
descent
escheat
foreclosure
eminent domain
adverse possession
estoppel
Voluntary alienation.
Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party. If the transferor is a government entity and the recipient is a private party, the conveyance is a public grant. If the transferor is a private party, the conveyance is a private grant.
deed of conveyance, or deed
A living owner makes a private grant
transfer by will
A private grant that occurs when the owner dies
Involuntary alienation.
Involuntary alienation is a transfer of title to real property without the owner’s consent. Involuntary alienation occurs primarily by the processes of descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel.
Grantor
A deed is a legal instrument used by an owner to transfer title to real estate voluntarily to another party, the grantee.
Recording.
Recording is not necessary to make a deed valid. However, it is in the grantee’s best interests to do so. Recording the deed gives the public constructive notice of the grantee’s ownership.
Deed clauses and covenants
Conveyance clauses and covenant, or warrant, clauses set forth all the necessary provisions of the conveyance.
Conveyance clauses.
Conveyance clauses describe the details of the transfer.
Granting clause, or premises clause
the only required clause; contains the conveyance intentions; names the parties; describes the property; indicates nominal consideration
Habendum clause
describes the type of estate being conveyed (fee simple, life, etc.)
Reddendum clause, or reserving clause
recites restrictions and limitations to the estate being conveyed, e.g., deed restrictions, liens, easements, encroachments, etc.
Tenendum clause
identifies property being conveyed in addition to land
Covenant, or warrant, clauses.
Covenant clauses present the grantor’s assurances to the grantee. A deed of conveyance usually contains one or more of the following covenants, depending on the type of deed.
Warrant of seisin
assures that the grantor owns the estate to be conveyed, and has the right to do so
Warrant of quiet enjoyment
assures that the grantee will not be disturbed by third party title disputes
Warrant of further assurance
assures that the grantor will assist in clearing any title problems discovered later
Warranty forever; warranty of title
assures that the grantee will receive good title, and that grantor will assist in defending any claims to the contrary
Warrant of encumbrances
assures that there are no encumbrances on the property except those expressly named
Warranty against grantor’s acts
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
Statutory Deeds
A deed of conveyance can make a variety of warranties and convey a range of interests. 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.
In a 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. If there is a warrant of defense, the deed is a full warranty bargain and sale deed.
The overall bargain and sale covenant is: “I own, but won’t defend.”
General warranty deed.
The 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. The deed is technically a bargain and sale deed in which the grantor promises to defend against any and all claims to the title.
The overall general warranty covenant is: “I own and will defend.”
Special warranty deed.
In a 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. The deed does not protect the grantee against claims that predate the owner’s period of ownership. Special warranty deeds are often used by trustees and grantors who acquired the property through a tax sale.
The overall special warranty covenant is: “I own and will defend against my acts only.”
Quitclaim deed.
A quitclaim deed transfers real and potential interests in a property, whether an interest is known to exist or not. The grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee.
The quitclaim is typically used to clear title rather than convey it. Where there is a possibility that prior errors in deeds or other recorded documents might cloud (encumber) the title, the relevant parties execute a quitclaim deed to convey “any and all” interest to the grantee.
If a party responsible for encumbering title refuses to quitclaim the interest, the owner may file a quiet title suit. This requires the lienor to prove the validity of an interest. If the defendant is unable to do so, the court removes the cloud by decree.
The overall quit claim covenant is: “I may or may not own, and I won’t defend.”
Special purpose deeds
A special purpose deed is one tailored to the requirements of specific parties, properties, and purposes.