Title and Vesting - Part 1 - Chapters 46-48

Question 1

Describe the component a deed needs to contain to convey an interest in real estate

Answer 1

The transfer of title to real estate contained in writing is called a GRANT or CONVEYANCE, no matter the form of writing. A DEED is itself the GRANT which transfers title to property.

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 can be reasonably located
• be signed by the grantor or signed on behalf of the grantor or the grantor’s Agent
• be handed to an accepted by the grantee

Question 2

Understand the exceptions to the requirement for a signed writing to transfer and 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

Question 3

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

Answer 3

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 an enforceable conveyance.

To be capable, the grantor, at the time the deed is signed for needs to:

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

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

A child or an 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.

Question 4

adverse possession

Answer 4

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 period of at least five years
• they have paid all taxes assessed against the property during their occupancy

Essentially the occupant is a trespasser until their conduct on the property, time in possession, and payment of all property taxes meet the requirements for them to obtain a court-ordered transfer of Title by adverse possession.

Question 5

common description

Answer 5

A Common Description is the description of real estate by its street address. Also knows as a common address. 967 Pearl Drive.

Question 6

fee simple

Answer 6

A FEE SIMPLE ownership is presumed to pass by a grant of real estate unless a lesser possessory interest is stated, such an an easement, life estate or leasehold interest.

A fee simple interest in real estate is the absolute ownership of the possessory rights in the real estate for an indefinite duration. Our Pearl Home

Question 7

grant

Answer 7

A Grant is the transfer of an interest in title to real estate. A deed is itself the GRANT which transfers title to property. Title by deed passes either:

• Voluntarily by agreement with the owner as in a sale in the open market or foreclosure on a trust deed or assessment bond
• Involuntarily without agreement such as the enforcement of a creditor’s judgment or tax lien

Question 8

grant deed

Answer 8

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.

Question 9

grantee

Answer 9

A Grantee is an individual acquiring an interest in title to real estate.

Question 10

grantor

Answer 10

A Grantor is an individual capable of conveying an interest in real estate.

Question 11

legal description

Answer 11

A legal description is the description used to locate and set boundaries for a parcel of Real Estate. The deed best include the property’s legal description or a map designation, such as a parcel or lot number, which contains the metes and bounds description needed to locate with certainty the parcel being conveyed.

Question 12

quitclaim deed

Answer 12

A QUITCLAIM DEED conveys whatever interest, if any, the grantor may hold in the real estate.

Question 13

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

Answer 13

Grant deeds and quitclaim deeds are commonly used to convey a real estate interest.

Grant deeds contain implied covenants. The implied covenants in a grant deed warrant:

• the interest conveyed in the real estate has not previously been conveyed to another
• the real estate has not been further encumbered by the grantor

To pass a FEE SIMPLE interest in real estate, only the word GRANT needs to be used in the conveyance. No other precise words of conveyance are necessary in a deed to convey a fee simple ownership.

The word GRANT contained in the conveyance provision in a grant deed, indicates the conveyance of a fee simple interest to another individual, unless the deed states a lesser interest is conveyed.

Question 14

Recognize the implied covenants of grant deeds

Answer 14

To convey real estate with covenants relating to the interest conveyed, a grant deed is used.

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
• the real estate has not been further encumbered by the grantor except as disclosed in the grant deed

To avoid liability arising out of the implied covenants in a grant deed, the deed needs to state the encumbrances on title created by the grantor (seller) during their ownership. These encumbrances are or are not agreed to by the grantee (buyer) in the purchase agreement.

Implied covenants are only for the personal benefit of a buyer and are not binding on future owners, known as remote grantees. Thus, implied covenants do not impose a condition on the title and do not run with the land. For a convent to run wit the land and affect all future owners, the grantor must state in their conveyance that successors are bound by the restrictions imposed on the property.

Title conditions agreed to in the purchase agreement are merged into the grant deed accepted by the buyer on closing. If a title condition or restriction is agreed to in the purchase agreement but erroneously omitted form the grant deed, the deed can be corrected by a court and then enforced.

Grant deeds contain implied covenants. Thus, they are not separately bargained for as provisions to be included in the grant deed conveyance.

If a grant deed Covenant is breached by a grantor (seller), the grantee (buyer) may recover their money losses from the grantor for the breach of the implied Covenant, as though the Covenant had been written into the grant deed.

Question 15

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

Answer 15

Covenants running with the land, such as CCnRs and easements, bind all future owners (remote grantees) of the property. Covenants running with the land are binding on future owners 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 their conveyance that successors (remote grantees) 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 possessed when signing and delivering the quitclaim deed. Thus, unlike a grant deed, a quitclaim deed does not carry with it the implied covenants contained in a grant deed.

A quitclaim deed terminates any interest in the real estate described in the deed which may be held by the grantor.

However, a Quitclaim deed does not carry with it the implied Covenants like those contained in a Grant deed. A Quitclaim deed operates to “release to the grantee all interest” the grantor may hold in the property.

Thus, a Quitclaim deed passes whatever title, legal or equitable, the grantor possessed when signing and delivering the quitclaim deed activity, known as execution.

Question 17

encumbrance

Answer 17

An Encumbrance is a claim or lien on title to a parcel of real estate, such as:

• property taxes
• assessment bonds
• trust deeds
• easements
• convents, conditions, and restrictions (CCnRs)

Encumbrances are the subject of the ‘implied warranties against encumbrances’ contained in grant deeds, since they burden title and depreciate its value.

Encumbrances include:

• CCnRs
• building restrictions
• a reservation of a right of way
• an easement
• an encroachment
• a lease
• a pending condemnation action

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

implied covenant

Answer 19

An IMPLIED Covenant is an implied warranty/promise that the grantor has not previously conveyed/given or encumbered their interest in the real estate.

Question 20

quitclaim deed

Answer 20

A QUITCLAIM deed is a document used to convey whatever interest, if any, the grantor may hold in the real estate.

Question 21

reformation

Answer 21

If a title condition, covenant or CCnR is agreed to in the purchase agreement, but is erroneously omitted when escrow prepares the grant deed, the grant deed can be ordered corrected by a court, which is a legal process called REFORMATION.

Question 22

remote grantee = successor

Answer 22

A remote grantee is a future owner of real estate who later takes title to a property also known as a successor.

Question 23

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

Answer 23

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
• the grantees acceptance of the grant deed as an immediately effective conveyance

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 considered ‘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 grant 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 24

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

Answer 24

When a grant deed is intended to convey title to a lender as security for the repayment of debt, the grant deed becomes a MORTGAGE IN FACT and transfers no right of ownership to the lender.

Brokers and their agents who arrange mortgages are to use a TRUST DEED as the security device which attaches the debt as the lien on real estate.

**Using a GRANT deed as a security device is IMPROPER practice. A grant deed is generally equated to the grantor’s intent to convey all rights and title in the property to the named grantee and should not be used as a security device.

A TRUST deed should be used because it does not convey any ownership rights in the property to the 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. On executing a trust deed, the owner retains all ownership rights to the secured property (which is not the case when using a grant deed for its intended purpose.)

Question 25

Understand the purpose for recording a grant deed

Answer 25

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.

Question 26

Distinguish between a void deed and a voidable deed

Answer 26

VOID deeds are unenforceable at all times and never convey an interest in real estate. It is void from the start and is unenforceable. However, a VOIDABLE deed is valid for the current time being, and enforceable, until it is challenged due to a defect and a court order declares the deed invalid.

Examples of VOID deeds 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 (like example in book)
• a deed signed and delivered by a seller under the age of 18
• a deed materially altered without the grantor’s consent
• a forged deed

Examples of VOIDABLE deeds include:

• a deed obtained through false representations
• 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 incompetency to convey has been adjudicated.

Question 27

constructive delivery

Answer 27

The delivery of a deed is inferred when the grantee receives or has possession of the deed.

The deed may also be considered delivered without the grantee having or holding actual possession of the deed. When a grantee is not physically handed the deed, a CONSTRUCTIVE DELIVERY of the deed may still have taken place.

Constructive delivery is the delivery of a deed occurring when:

• the deed is understood by the grantor and a grantee to be delivered by agreement
• when the deed is accepted by a third party for the benefit of the grantee

Question 28

documentary transfer tax

Answer 28

A documentary transfer tax is a tax imposed on a recorded document when Real Estate is transferred. The deed submitted for recording needs to 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 29

security

Answer 29

A grant deed given to provide a creditor with the property as security, also known as collateral, is a mortgage-in-fact. SECURITY is collateral for a debt in the form of a lien imposed on property.

Question 30

void deed

Answer 30

VOID deeds are unenforceable at all times and never convey an interest in real estate. It is void from the start and is unenforceable. Examples of VOID deeds 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 (like example in book)
• a deed signed and delivered by a seller under the age of 18
• a deed materially altered without the grantor’s consent
• a forged deed

Question 31

voidable deed

Answer 31

A VOIDABLE deed is valid for the current time being, and enforceable, until it is challenged due to a defect and a court order declares the deed invalid. Examples of VOIDABLE deeds include:

• a deed obtained through false representations
• 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 incompetency to convey has been adjudicated.