The Closing: Deeds

Question 1

What is the legal effect of a buyer permitting closing to occur as it pertains to the land sale contract?

Answer 1

The contract merges with the deed and, in the absence of fraud, the seller is no longer liable on the promises in the contract, only those in the deed.

In other words, the deed becomes the controlling document, and the contract disappears.

Question 2

To pass legal title from grantor to grantee, the deed must be:

Answer 2

“LEAD”: Lawfully Executed And Delivered

Question 3

Lawful execution of a valid deed requires 4 things:

Answer 3

(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 (e.g., “grant”)

NOTE: The deed does not need to recite consideration, nor must consideration pass to make a deed valid.

Question 4

What is the effect of an insufficient description of the land to be conveyed in a deed? Example?

Answer 4

Title is not transferred. The grantor will retain title.

If the description is merely ambiguous, rather than vague or inadequate, parol evidence is permitted to clear up the ambiguity.

Sufficient description: O conveys “all of O’s land” or “all of O’s land in Essex County.” (Research would clarify the meaning of “all.”)

Insufficient description: O conveys “some of O’s land in Sussex County.” (This is too imprecise because no amount of research would clarify the meaning of “some” in this context.)

Question 5

If a deed is delivered without the name of the grantee, what will a court presume?

Answer 5

The court presumes that the person taking delivery has authority to fill in the name of the grantee. If the person fills in a name, the deed is valid.

Question 6

If there is no description of the land to be conveyed in a deed, what legal effect?

Answer 6

The deed is void unless the grantee was explicitly given authority to fill in the description.

Question 7

Delivery turns on the grantor’s _______ that title pass immediately, even if possession is postponed.

Answer 7

intent

Question 8

If delivery of a deed has occurred, _______ is presumed.

Answer 8

acceptance

Question 9

The delivery requirement could be satisfied when the grantor _______ or _______ transfers the deed to the grantee.

Answer 9

(1) physically
(2) manually

It’s permissible here to use the mail or an agent or messenger.

Question 10

Delivery does not necessarily require actual physical transfer from grantor to grantee of the instrument itself. The standard for delivery is a legal standard and is a test solely of _______.

Answer 10

present intent

In other words, did the grantor have the present intent to part with legal control?

Question 11

What is the effect of rejection of a deed?

Answer 11

Rejection defeats delivery. Acceptance is presumed, but if a grantee expressly rejects the deed, the deed is ineffective to pass title.

Question 12

Courts recognize these rebuttable presumptions with respect to delivery: (5 things)

Answer 12

(1) It is presumed that delivery has not occurred if the grantor retains possession of the deed
(2) Delivery is presumed if the grantee has possession of the deed
(3) Delivery is presumed if the deed is handed to the grantee
(4) Delivery is presumed if the deed is acknowledged by the grantor in front of a notary
(5) Delivery is presumed if the deed is recorded

Question 13

What kind of evidence is permitted and/or excluded to prove intent to pass title? To prove the existence of a condition?

Answer 13

(1) 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.
(2) Extrinsic evidence is NOT permitted to show that an unconditional deed given directly to a grantee was subject to a condition.

Question 14

If a deed, absolute on its face, is transferred to the grantee with an oral condition, what result? Why?

Answer 14

The condition is void (i.e., it drops out).

An oral condition on a deed is too susceptible to the potential for fraud or fabrication.

Question 15

If a deed containing a written condition is delivered, what effect?

Answer 15

The condition is valid

Question 16

If delivery of a deed is conditioned on the grantor’s death, what effect?

Answer 16

The deed creates a future interest (an executory interest) in the grantee

Question 17

What is the general rule regarding delivery of a deed to a third party? (3 scenarios)

Answer 17

(1) A delivery to a third party with instructions to deliver the deed to the intended grantee is considered valid delivery.
(2) A delivery to a third party without instructions is probably not valid delivery if the third party is an agent of the grantor.
(3) A delivery to a third party without instructions is probably valid delivery if the third party is an agent of the grantee.

Question 18

What is the general rule regarding an escrow transaction (transfer to third party with conditions)?

What if the instructions are written? Oral?

Answer 18

Grantor may deliver an executed deed to a third party (i.e., an escrow agent) with instructions that the deed be delivered to the grantee once certain conditions are met (typically the payment of the purchase price).

If the escrow agent is given written instructions, the grantor is bound by the delivery to the agent.

If the escrow agent is given oral instructions, the grantor may change the instructions and recall the deed so long as it is still in the agent’s hands, UNLESS there is a written contract of sale.

Question 19

If the grantor gives a deed to a third party with instructions to turn it over to a 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?

Answer 19

It depends on the condition.

If the condition is something other than the grantor’s death (e.g., the grantee’s marriage), 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. In other words, delivery is already complete and can only be defeated by the grantee’s rejection.

Question 20

O conveys to A “all of O’s land, only if A survives O.” Has O delivered the deed to A? Explain.

Answer 20

No. This conveyance indicates that O did not presently intend to convey any interest in the land to A, because the conveyance to A would only occur if A did not die first. Thus, no future interest was conveyed, and delivery has not occurred.

Question 21

O conveys to A “all of O’s land upon O’s death.” Has O delivered the deed to A? Explain.

Answer 21

Yes. This conveyance indicates that O presently intended to convey a future (executory) interest to A. This language not only would convey O’s land to A upon O’s death if A survives O, but also would convey O’s land to A’s heirs should A die before O. Thus, delivery has occurred.

Question 22

What are the three types of deeds used to convey property interests other than leaseholds?

Answer 22

(1) General warranty
(2) Special warranty
(3) Quitclaim

Question 23

What covenants does a quitclaim contain? What does a quitclaim convey?

Answer 23

A quitclaim contains no covenants at all.

A quitclaim conveys only what the grantor has at the time of the conveyance.

(This is the worst deed a buyer/grantee can get; it does not even promise that the seller/grantor has title to convey.)

Question 24

What does a general warranty deed warrant against?

Answer 24

All defects in title, including those attributable to the grantor’s predecessors

(This is the best deed a buyer/grantee can get.)

Question 25

The general warranty deed typically contains 3 present covenants and 3 future covenants. What are they?

Answer 25

Present covenants:
(1) Covenant of seisin

(2) Covenant of the right to convey
(3) Covenant against encumbrances

Future covenants:
(1) Covenant for quiet enjoyment

(2) Covenant of warranty
(3) Covenant for further assurances

Question 26

When are present covenants contained in a general warranty deed breached?

Answer 26

Present covenants are breached, if ever, when the deed is delivered.

Question 27

When does the statute of limitations for a breach of a present covenant begin to run?

Answer 27

At the time of delivery

Question 28

Explain the 3 present covenants typically contained in a general warranty deed.

Answer 28

(1) Covenant of seisin: promise that grantor has an ownership interest in the land and is entitled to transfer it
(2) Covenant of right to convey: promise that grantor has the power to transfer (i.e., grantor is under no temporary disabilities or restraints that restrict her power to transfer)
(3) Covenant against encumbrances: promise that there are no servitudes or liens on the land

Question 29

When are future covenants breached?

Answer 29

Future covenants are not breached, if ever, until the grantee is disturbed in possession.

Question 30

When does the statute of limitations for breach of a future covenant begin to run?

Answer 30

At the time the grantee is disturbed in her possession

Question 31

Explain the 3 future covenants typically contained in a general warranty deed.

Answer 31

(1) Covenant for quiet enjoyment: promise that grantee will not be disturbed in possession by a third party’s lawful claim of title
(2) Covenant of warrant: promise to defend against reasonable claims of title by a third party and to compensate the grantee for any loss sustained by the claim of superior title
(3) Covenant for further assurances: promise to do whatever is needed to perfect grantee’s title if it later turns out to be imperfect

Question 32

What is a special warranty deed?

Answer 32

A special warranty deed contains the same covenants as a general deed, but the grantor only makes those promises on behalf of himself, not his predecessors in interest.

Question 33

What is a statutory special warranty deed? What

Answer 33

In many states, statutes provide for what type of deed is conveyed by use of the word “grant” in a conveyance without a designation of the type of deed.

These statutes often provide for a deed that creates, by implication, two limited assurances against acts of the grantor (not her predecessors):
(1) that the grantor has not conveyed the same estate or any interest therein to anyone other than the grantee, AND

(2) that the estate is free from encumbrances made by the grantor

Question 34

Who may present covenants be enforced by/against? Why?

Answer 34

Present covenants can only be enforced by the grantee against their grantor.

Present covenants can’t be enforced by “remote” grantees. In other words, a grantee may not enforce a present covenant against their grantor’s grantor, or anyone else up the line.

This is so because the present covenants are personal as between the present grantor and grantee. The grantor cannot make such promises on behalf of anyone further up the title chain.

Question 35

Who may future covenants be enforced by/against? Why?

Answer 35

If there are successive conveyance by general warranty deed, future covenants may be enforced by grantees against anyone up the line. For example, if the last grantee in a succession of conveyances by general warranty deed is evicted by lawful claim of title, he may sue ANYONE UP THE LINE.

This is so because future covenants run with the land. They are promises by the present grantor not only to the present grantee, but also to any future grantees (so long as those grantees took by general warranty deed).

Question 36

What recovery is available for breach of a future covenant?

Answer 36

Some states allow the grantee to recover to the extent of consideration received by the defendant-covenantor.

Other states limit recovery to the lesser of what he paid or what the defendant-covenantor received.

Question 37

What is a void deed? What legal effect?

Answer 37

Void deeds include those that are forged, were never delivered, were issued to a nonexistent grantee, or were obtained by fraud in the factum (i.e., the grantor was deceived and did not realize that she was executing a deed).

A void deed will be set aside by the court even if the property has passed to a bona fide purchaser.

Question 38

What is a voidable deed? What legal effect?

Answer 38

Voidable deeds include those executed by minors or incapacitated persons, and those obtained through fraudulent inducement, duress, undue influence, mistake, and breach of fiduciary duty.

A voidable deed will be set aside only if the property HAS NOT passed to a bone fide purchaser.

Question 39

A and B are joint tenants of Blackacre. Unbeknownst to B, A conveys Blackacre to C, and executes a deed to C with B’s forged signature. What results?

Answer 39

B and C are tenants in common with 1/2 interest. The conveyance of A’s interest is valid, but the conveyance of B’s interest is void due to A’s forgery. Thus, the conveyance acts as a severance. B’s interest as a joint tenant becomes a tenancy in common, and C takes A’s interest as a tenant in common with B.

Question 40

Even when a deed complies with the required formalities, if may be set aside by the grantor’s creditors if it was made:

Answer 40

(1) with actual intent to hinder, delay, or defraud any creditor of the grantor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer, and the debtor was insolvent or became insolvent as a result of the transfer

The deed WILL NOT be set aside as against any grantee who took in good faith and paid reasonably equivalent value.

Question 41

Residential mortgage lenders must provide a closing disclosure to mortgagors at least _______ prior to closing.

This disclosure must provide details about the mortgage, including: (4 things)

Answer 41

3 business days

(1) principal, interest, and payment amounts (including taxes and insurance);
(2) closing costs;
(3) potential surprises to mortgagors (e.g., future changes in interest rates or balloon payments); AND
(4) cash required to close