Title and Vesting - Part 1 - Chapters 18-20

Question 1

Identify the components a deed needs to contain to convey an interest in real estate

Answer 1

The individual conveying real estate is called the grantor. The individual acquiring title is called the grantee.

The transfer of title to real estate contained in writing is called a grant or conveyance. To be valid, a deed needs to:

• be in writing
• identify the grantor and the grantee
• contain a granting clause stating the intention to convey
• adequately describe the real estate so it may be reasonably located
• be signed by the grantor or signed on behalf of the grantor by the grantor’s agent
• be handed to and accepted by the grantee.

Question 2

Understnad the exceptions to the requirement for a signed writing to transfer an interest in real estate

Answer 2

A transfer of ownership needs to be in writing to be valid, except for:

• An estate at will
• A lease not exceeding one year
• An executed oral agreement in which the buyer takes possession of the property
• Adverse possession of the property.

An executed oral agreement for the transfer of real estate ownership is enforced either under the doctrines of SPECIFIC PERFORMANCE or ESTOPPEL. The application about doctrines is unaffected by whether the property is sold under an oral agreement to a buyer for consideration, or given to a donee by a gift.

Question 3

Determine who is capable of conveying and receiving an interest in real estate

Answer 3

A grant deed is used to pass a fee estate from the grantor to another individual, unless a lesser interest is stated in the deed. A quitclaim deed conveys whatever interest, if any, the grantor may hold in the real estate.

A grantor of property needs to be capable of conveying an interest in real estate at the time the deed is signed for the deed to be enforceable. To be capable, the grantor at the time the deed is signed needs to:

• be of sound mind
• possess their civil rights
• be an adult at least 18 years of age.

However an exception exists to the “18 or over” age qualification. An emancipated minor is considered an adult capable of transferring an interest in real estate.

Additionally a temporary conservator may be appointed by the court to manage the affairs of a property owner who is deemed incapable of conveying an interest they hold in real estate

Partnerships, limited liability corporations (LLC’s) , corporations and real estate investment trusts (REITs) are entities which may acquire title to California real estate when they are established or qualified under California law to conduct business in the state.

Question 4

grant

Answer 4

A GRANT is a transfer of an interest in title to real estate. Real estate is conveyed when Title is transferred from one individual to another. The transfer of an interest in title to real estate contained in a writing is called a grant or conveyance, no matter the form of writing. A deed is itself the grant with transfers title to property. Title by deed passes either:

• voluntarily by agreement with the owner, such as in the sale on the open market or foreclosure on a trust deed or
• involuntarily without agreement, such as the enforcer of a creditors judgment or tax lien.

Question 5

fee estate

Answer 5

A FEE ESTATE is an indefinite, exclusive an absolute legal ownership interest in a parcel of Real Estate. A fee estate is presumed to pass by a grant of real estate, unless a lesser possessory interest is stated, such as an easement, life estate or leasehold interest.

Ownership of possessory interests in real estate includes:

• a fee estate, also known as fee simple ownership
• a life estate
• at leasehold estate
• an estate at will

Question 6

adverse possession

Answer 6

ADVERSE POSSESSION is a method of acquiring title to real estate owned by another by openly maintaining exclusive possession of the property for a period of 5 years and paying all property taxes. To establish Title by adverse possession, an occupant needs to show:

• their possession is based on a claim of right or color of title
• they have occupied the property in an open and notorious way which constitutes reasonable notice to the record owner
• they’re occupancy is hostile and inconsistent with the owner’s title
• they have been in possession for a continuous and uninterrupted periods of at least five years
• they have paid all taxes assessed against the property during their occupancy.

Question 7

grantor

Answer 7

A GRANTOR is an individual capable of conveying an interest in real estate. The grant provision in a deed needs to identify each person who is conveying an interest in the property in the grant provision of the deed. When A conveyance such as a deed is signed by a person who is not named as a grantor, the deed does not convey that person’s interest in the property.

Question 8

grantee

Answer 8

A GRANTEE is an individual acquiring an interest in title to real estate. While the grantor needs to have the capacity to convey title, any existing person (individual or entity) may take and hold title to real estate as a grantee. A child or incompetent person has the capacity to receive and hold title as a grantee even though that person does not have the legal capacity to convey the same property. Unless a deed identifies the grantee, the deed is void.

Question 9

quitclaim deed

Answer 9

A QUITCLAIM deed is a document used to convey whatever interest, if any, the grantor May hold in the real estate. The words of conveyance historically used in a quitclaim deed are remise, release and otherwise quitclaim. The word grant is NOT used in a quitclaim deed since no implied warranties are included with a conveyance under a quitclaim deed. Note however the parties in a quitclaim are still referred to as a grantor and the grantee.

A quitclaim deed affects ownership and the name on the deed, not the mortgage. Because quitclaim deeds expose the grantee to certain risks, they are most often used between family members and where there is no exchange of money. … Quitclaim deeds transfer title but do not affect mortgages.

Question 10

common description

Answer 10

A COMMON DESCRIPTION is the description of real estate by its street address also known as a common address.

Question 11

legal description

Answer 11

A LEGAL DESCRIPTION is the description of real estate in a deed by its parcel or Lot number, or containing the properties metes and bounds description. The best method of ensuring certainty of the parcel being conveyed is to include the property legal description or map designation, such as a parcel or Lot number, which contains the metes and Bounds description.

Question 12

amanuensis

Answer 12

An AMANUENSIS is an individual who has the oral authority of the grantor to sign a grant deed by their own hand on behalf of the grantor.

Note When the grantor’s agent is authorized in writing to convey a property on the grantor’s behalf, the agent is called an attorney-in-fact and is operating under a written power of attorney. Unlike an attorney-in-fact, who is an agent with discretionary authority to determine whether they are to enter into a deed without prior approval from the grantor, and amanuensis has a purely ministerial duty. The amanuensis sign the document as instructed by the grantor whose name they signed without exercising personal discretion or judgment.

Question 13

Understand the use of a grant deed to pass a fee simple interest in real estate

Answer 13

Two types of Deeds are used nearly exclusively to convey a real estate interest:

• grant deeds and
• quitclaim deeds.

A grant deed is used to pass a fee simple interest in real estate from the grantor to another individual, unless a lesser interest is stated in the deed.

A quitclaim deed terminates any interest in the real estate described in the deed which may be held by the named person (grantor) signing and delivering the quitclaim deed.

The covenants, sometimes called warranties, implied in a grant deed include:

• the interest conveyed in the real estate has not been previously conveyed to another, except as disclosed in the grant deed and
• the grantor has not further encumbered the real estate, except as disclosed in the grant deed.

Question 14

Identify the implied covenants of grant deeds

Answer 14

To avoid liability arising out of the Implied Covenant in a grant deed, the deed needs to state the title conditions (encumbrances) created by the seller during their ownership. These buyers may or may not have agreed to these conditions in the purchase agreement.

Implied covenants are only for the personal benefit of a buyer, not future owners, referred to as remote grantees. The Implied Covenants in a seller’s grant deed to a buyer do not impose a condition on title and do not run with the land. For a covenant to run with the land and affect all remote grantees, the seller creating the Covenant needs to state in they’re conveyance that successors are bound by the covenants and restrictions imposed on the property as contained in the deed.

Question 15

Determine when implied covenants in a grant deed run with the land and affect all later grantees/owners

Answer 15

Title conditions bargained for and agreed to in the buyers purchase agreement are merged into the grant deed accepted by the buyer on closing. Thus, when the title condition, such as a reservation of an easement by a seller, is agreed to in the purchase agreement, it needs to be restated in the grant deed before the condition becomes enforceable by the seller.

Covenants running with the land, such a CCRs and easements, bind all future owners of the property whether they take title by deed or court order, as covenants running with the land affect title.

For a covenant to run with the land and affect all remote grantees, the seller creating the covenant needs to state in they’re conveyance that successors are bound by the covenants and restrictions imposed on the property as contained in the deed.

Question 16

Distinguish when a quitclaim deed is to be used to terminate any interest in real estate described in the deed which may be held by the grantor

Answer 16

A quitclaim deed passes whatever title, legal or Equitable, the grantor possesses on execution (signing and delivering) of the quitclaim deed.

Unlike a grant deed, a quitclaim deed does not also pass the grantor’s after-acquired title to the real estate described in the quitclaim deed. The quitclaim deed is a release of the grantor’s interest in the real estate at the time it is signed and delivered.

Question 17

implied covenant

Answer 17

An IMPLIED COVENANT is an implied warranty the grantor has not previously conveyed or encumbered their interest in the real estate.

Question 18

grant deed

Answer 18

A GRANT DEED is a document used to pass a fee simple interest in real estate from the grantor to another individual, unless a lesser interest is stated.

Question 19

encumbrance

Answer 19

An ENCUMBRANCE is a claim or lien on title to a parcel of real estate, such as property taxes, assessment bonds, trust Deeds, easements and Covenants, conditions and restrictions. Encumbrances are the subject of the implied warranty in the grant deed, since they burden title and depreciate its value. Real estate encumbrances include all liens, voluntary or involuntary attached to the real estate. Examples of real estate encumbrances include:

• taxes and assessments
• CCRs such as covenants and use restrictions running with the land
• building restrictions
• a reservation of a right-of-way
• an easement or encroachment
• a lease
• a pendency of condemnation action

Question 20

remote grantee

Answer 20

A REMOTE GRANTEE is a future owner of real estate who later takes title to a property, also known as a successor.

Question 21

subrogation

Answer 21

SUBROGATION is the replacement of one person with another in regard to a legal right or obligation.

Question 22

reformation

Answer 22

REFORMATION is a legal process to correct an omission error in a grant deed by court action. Once the grant deed is corrected to include the omitted title condition or other item, the condition is then enforceable since it is present in the grant deed.

Question 23

quitclaim deed

Answer 23

A QUITCLAIM DEED is a document used to convey whatever interest, if any, the grantor may hold in the real estate. A quick claim deed terminate any interest in the real estate described in the deed which may be held by the named person (grantor) signing and delivering the quitclaim deed.

Unlike a grant deed, a quitclaim deed operates to release to the grantee all interest the grantor may hold in the property. A quitclaim deed passes whatever title, legal or Equitable, the grantor possessed on execution (signing and delivering) of the quitclaim deed.

While a quitclaim deed is not intended to assure the conveyance transfers a fee simple ownership, the named grantor who holds the title and signs and delivers a quitclaim deed conveys fee simple ownership of the property, and all the benefits holding fee simple title.

Remember the quitclaim deed is a release of the grantor’s interest in the real estate at the time it is signed and delivered. The individual signing and delivering a quitclaim deed does not promise to convey an interest in the real estate, much less agree they received it and have not previously conveyed or encumbered it.

Question 24

Identify the acts and conditions which constitute the delivery and acceptance of a deed

Answer 24

A deed conveys real estate from the grantor to the grantee when the deed is delivered. Delivery is based on:

• the grantor’s intent to convey title and
• the grantees acceptance of the grant deed as an immediately effective conveyance.

The grant deed does not need to be recorded to deliver title. Recording simply puts future buyer’s or encumbrances on notice of the transfer. Once recorded, a deed constitutes a change of ownership which may subject the property to reassessment.

The delivery of a deed is inferred when the grantee has possession of the deed. Constructive delivery occurs when:

• the deed is understood by the grantor and the grantee to be delivered by an agreement when the grantor signs the deed
• the deed is delivered to a third party for the benefit of the grantee and the grantee or an agent of the grantee demonstrates the grantees acceptance of the deed.

A grantee is presumed to have accepted a deed if:

• the deed is beneficial to the grantee
• the deed is physically handed to the grantee
• the deed is recorded by the grantee
• the deed is in the grantees possession.

Question 25

Avoid the improper practice of using a grant deed in place of a trust deed as a security device to assure repayment of a debt

Answer 25

When a grant deed is intended to convey title to a lender as security for the repayment of a debt, the grant deed becomes a mortgage-in-fact and transfers no right of ownership to the lender.

Brokers and their agents who arrange loans are to use a TRUST DEED as the security device which attaches the debt as a lien on real estate. Using a GRANT DEED as a security device is IMPROPER PRACTICE.

A grant deed is usually equated to the grantor’s intend to convey all rights and title in the property to a named grantee. A trust deed does not convey any ownership rights in the property to a lender. Rather, a trust deed imposes a lien on the property in favor of the lender to secure the owners performance of a money obligation, typically evidence by a promissory note. On executing a trust deed, the owner retains all ownership rights on the secured property, which is not the case when using a grant deed for its intended purpose.

Question 26

Understand the purpose for recording a grant deed

Answer 26

The grant deed does not need to be recorded to deliver title to a new owner (or to alter a vesting between two or more persons). However, recording perfects the ownership received against third parties, including existing but unknown off record interests.

Question 27

Distinguish between a void deed and a voidable deed

Answer 27

Void Deeds are unenforceable at all times and never convey an interest in real estate.

Voidable Deeds are valid and enforceable until it is challenged due to a defect and a court order declares the deed invalid.

Question 28

constructive delivery

Answer 28

Constructive delivery is the delivery of a deed occurring when the deed is understood by the grantor and the grantee to be delivered by agreement, or when the deed is accepted by a third party for the benefit of the grantee.

Question 29

revocable transfer on dead deed

Answer 29

A revocable transfer on death deed (RTDD) is any document created to transfer Real Estate without Covenant or warranty of title to a beneficiary upon the owner’s death. The RTDD is revocable until the owner dies. To create an RTDD, the owner needs to:

• have the capacity to contract
• name the beneficiary as a grantee
• sign and date the RTDD in the presence of a notary
• record the RTDD within 60 days of its signing before a notary

Note RTDD’s are only effective when recorded before January 1st, 2021.

Question 30

security

Answer 30

SECURITY is the collateral for a debt in the form of a lien imposed on property. A grant deed given to provide a creditor with the property as security, also known as collateral, is a mortgage in fact. Thus, a lien is imposed on the property in favor of the lender when receiving a grant deed, similar in purpose to a trust deed lien.

Question 31

documentary transfer tax

Answer 31

A DOCUMENTARY TRANSFER TAX is a tax imposed on a recorded document when Real Estate is transferred. The deed submitted for recording needs to also include the amount of the documentary transfer tax to be paid. The deed will not be recorded by the recorder unless the documentary transfer tax is paid at the time of the recording.

Question 32

void deed

Answer 32

A VOID DEED is a deed that is unenforceable and conveys no interest in real estate. Void Deeds are unenforceable at all times and never convey an interest in real estate. When Title is claimed under a void deed, any claim of ownership based on the deed fails – even if a further grantee purchases the property in good faith without any notice of a defect in title or in the deed held by the grantor. Examples of a void deed include:

• a deed handed directly to the grantee, not a third-party, with the intent it is not to be effective until the owner’s death.
• a deed signed and delivered by a seller under the age of 18 who is not emancipated
• a deed materially altered without the grantor’s consent or
• a forged deed.

Question 33

voidable deed

Answer 33

A VOIDABLE DEED is a deed that is valid and enforceable until it is challenged due to a defect and declared invalid by a court order. Examples of a voidable deed include:

• a deed obtained through false representation
• a deed obtained through undue influence or threat
• a deed from a grantor of unsound mind, but not entirely without understanding, made before the grantor’s and competency to convey has been adjudicated.

Adjudication is the act of judging a case, competition, or argument, or of making a formal decision about something: The legality of the transaction is still under adjudication (= being decided) in the courts. His adjudication was later found to be faulty.

Unlike void deeds, a voidable deed is enforceable by a bona fide purchaser (BFP) or encumbrancer who acquires an interest in the property in reliance on the title held by the grantee under a deed which is voidable but has not at the time of the further conveyance been challenged as invalid.