The Closing - Deeds Flashcards
Lawful Execution of a Deed
Executing a valid deed requires the following:
- A writing signed by the grantor
- An unambiguous description of the land
- Identification of the parties by name or description
- Words of intent to transfer, such as “grant”
NOTE: THE DEED NEED NOT RECITE CONSIDERATION, NOR MUST CONSIDERATION PASS TO MAKE A DEED VALID.
Description of Land
The description of land in the deed need not be perfect, but it must be unambiguous and at least provide good “lead.”
Effect of Insufficient Description
If the land 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.
The Delivery Requirement
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.
Delivery could be satisfied when the grantor physically or manually transfers the deed to the grantee. It’s permissible here to use the mail or agent or messenger.
Delivery does not necessarily require actual physical transfer of the instrument itself. The standard for delivery is a legal standard and is a test solely of present intent.
Acceptance and Rejection
Rejection defeats delivery.
Acceptance is presumed, but if a grantee expressly rejects the deed, the deed is ineffective to pass title.
Presumptions concerning delivery
Courts recognize a number of rebuttable presumptions with respect to delivery.
If the grantor retains possession of the deed, it’s 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:
- handed to the grantee;
- acknowledged by the grantor in front of a notary; or
- Recorded.
Extrinsic Evidence
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.
Delivery with Oral Conditions
If a deed, absolute on its face, is transferred to the grantee with an oral condition, what result?
Delivery with Written Conditions
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.
Delivery to 3P
A delivery to a 3P with instructions to deliver the deed to the intended grantee is considered valid delivery. Whether a delivery to a 3P without instructions is a valid delivery often hinges on whether that 3P is an agent of the grantor or the grantee. For instance, a delivery to the grantor’s lawyer is probably no delivery, while delivery to the grantee’s lawyer probably is.
Transfer to 3P with Conditions
Grantor may deliver an executed deed to a 3P, known as an escrow agent, with instructions that the deed be delivered to the grantee once certain conditions are met. 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. written contract of sale.
Covenants for Title
There are three types of deeds used to convey property interests other than leaseholds:
- the general warranty deed
- The special warranty deed
- Quitclaim deed
Quitclaim Deed
The quitclaim deed contains no covenants.
Grantor isn’t even promising that he has title to convey. This is the worst deed a buyer could hope for. It conveys only what the grantor has at the time of conveyance.
General Warranty Deed
The best deed a buyer could hope for because it warrants against all defects in title, including those attributable to grantor’s predecessors.
General warranty deed typically contains all six of the following covenants. The first three are present covenants, meaning that the covenant is breached, if ever, at the time the deed is delivered. The second three are future covenants. A future covenant is not breached, if ever, until the grantee is disturbed in possession
Present Covenants
- Covenant of Seisin
- Covenant of the right to convey
- Covenant against encumbrances
Future Covenants
- Covenant for Quiet Enjoyment - Grantor promises that grantee will not be disturbed in possession by a 3P’s lawful claim of title
- Covenant of Warranty - Grantor promises 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.
- The covenant for further assurances - Grantor promises to do whatever is needed to perfect grantee’s title if it later turns out to be imperfect.
Special Warranty Deed
this deed contains the same covenants as the general warranty deed, but here the grantor makes those promises only on behalf of himself.
He makes no representations on behalf of his predecessors
Statutory Special Warranty Deed
Many states have statutes that provide for what type of deed is conveyed by the use of the word “grant” in a conveyance without a designation of the type of deed. Often these statutes provide for a deed that creates by implication two limited assurances against acts of the grantor (not her predecessors):
- that the grantor has not conveyed the same estate or any interest therein to anyone other than the grantee and
- that the estate is free from encumbrances made by the grantor.
Damages and Remote Grantees
Present covenants can’t be enforced by remote grantees, but future covenants run with the grantee’s estate. If there are successive conveyances by general warranty deed and the last grantee is evicted by lawful claim of title, he may sue anyone up the line.
Some states allow him to recover to the extent of consideration received by a defendant-covenantor. Other states limit recovery to the lesser of what he paid or what the defendant-covenantor received.
Defective Deeds
A void deed will be set aside by the court even if the property has passed to a bona fide purchaser, but a voidable deed will be set aside only if the property has not passed to a bona fide purchaser.
Void deeds include those that are forged, were never delivered, were issued to a nonexistent grantee (for example, a grantee who is dead at the time of delivery), or were obtained by fraud in the factum (that is, the grantor was deceived and did not realize that she was executing a deed).
Voidable deeds include those executed by minors or incapacitated persons, and those obtained through fraud in the inducement, duress, undue influence, mistake, and breach of fiduciary duty.
Fraudulent Conveyances
Even when a deed complies with the required formalities, it may be set aside by the grantor’s creditors if it was made:
- with actual intent to hinder, delay, or defraud any creditor of the grantor; or
- 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.
However, the deed will not be set aside as against any grantee who took in good faith and paid reasonably equivalent value (bona fide purchaser).
Closing Documents
Most real estate closings require more than the exchange of a deed.
They are complex events involving the signing of numerous documents and sometimes last-minute negotiations.
Closing Documents may include:
Closing disclosure
Notification of Defects
Environmental Report
Conveyance by Gift
In addition to sales, real estate may be conveyed by gift or will.
A deed may validly convey real property by inter vivos gift so long as there is:
- Donative intent,
- Delivery, and
- Acceptance
Conveyance by will
If property is specifically devised or bequeathed in the testator’s will, but the testator no longer owns it at the time of death, the gift fails.
ADEMPTION - applies only to specific bequests, which can be satisfied only by the delivery of a particular item, not by money.
A gift of land is always a specific devise. IF the testator specifically devises property and then sells or gives away a part of that property, only that portion is adeemed; the remainder passes to the devisee.
Land Under Executory Contract
the ademption doctrine does not apply to the proceeds of a contract for sale of land that was executory at the time of the testator’s death.
These statutes take precedence over the equitable conversion doctrine. In addition, ademption does not apply when the contract is entered into by the representative of an incompetent testator.
other proceeds not subject to ademption
When property is damaged or destroyed before the testator’s death
but the casualty insurance proceeds are not paid until after the testator’s
death, ademption does not usually apply. The beneficiary of the specific bequest takes the insurance proceeds. Similarly, ademption
usually does not apply to property condemned by the government where the taking was before death but the condemnation award was paid after death.
Exoneration
At CL, the devisee of specific property is entitled to have the land “exonerated” by the payment of liens and mortgages from teh testator’s residuary estate.
However, a majority of states have statutorily abolished the exoneration doctrine, requiring the will to expressly provide for payoff.
Lapse and Anti-Lapse Statutes
A lapse occurs when the beneficiary of a gift in a will dies before the testator. Under the CL, if a lapse occurred, the gift was void. However, nearly all states now have statutes that prevent lapse by permitting the gift to pass to the predeceasing beneficiary’s living descendants under certain circumstances.
Abatement
If the estate assets are not sufficient to pay all claims against the estate and satisfy all devises and bequests, teh gifts are abated (that is, reduced). Absent a contrary will provision, estates in most states abate int eh following order:
- property passing by intestacy
- the residuary estate
- general legacies, and
- specific devises and bequests
Conflict of Laws Issues
To the extent that a will disposes of real property, its validity and effect are determined by the law of the state where the property is located.
With respect to dispositions of personal property, the law of the testator’s domicile at the time of their death controls the validity and effect of the will.
