Unit 9

Question 1

NOTICE to LEGAL TITLE.
Actual Notice and
Constructive Notice

Answer 1

1) Actual Notice is direct knowledge acquired in the course of a transaction. An example would be witnessing a seller, giving a piece of land or a twig from the property to the buyer, or witnessing the seller verbally telling the buyer of a problem with the property.
2) Constructive notice (also called Legal Notice) is accomplished by recording a document in the public records. When the pool company records a construction lien on the property for the unpaid repair job, it gives the world a constructive notice of the lien.

Question 2

PROTECTION Of TITLE.
Title Insurance
1) Owner’s Policy
2) Lender’s Policy

Answer 2

1) The Owner’s Policy is issued for the total purchase price of the property. It helps to protect the new owner (or the owners heirs) against unexpected risks such as forged deed signatures and damages for any defects in the title (unless listed as an exception in the policy). A one-time premium is paid when the policy is issued. The policy is not transferable to another owner.
2) The Lender’s Policy is issued for the unpaid mortgage amount. The lenders policy or mortgage policy protects the lender against title defects. Unlike the owner’s title insurance, the lender’s title insurance is transferable. If the mortgage lender sells the mortgage to another investor the title insurance is assignable to the new lender. The lender policy will protect the new owner of the mortgage up to the unpaid balance of the mortgage loan. Most lenders require lenders title insurance as a condition of issuing a mortgage loan..

Question 3

DEEDS.

Answer 3

There are 2 parties to a deed.The grantor (owner giving title) and the grantee (new owner receiving title). Title passes at the time of voluntary delivery and acceptance- when the grantor delivers a valid deed that is accepted by the grantee.

Question 4

TYPES OF STATUTORY DEEDS.
Quitclaim Deed

Answer 4

A quitclaim deed provides the least protection to the grantee. A quitclaim deed contains a premises section with a granting clause that conveys what interest if any the grantor may have when the deed is delivered. The grantor makes no warranties about the quality or extent of the title being conveyed. Quitclaim deeds are used to clear existing or potential clouds on the title. To clear the title of possible trouble spots and defects , the grantor releases any claim or interest in the property. Words of conveyances used in a quitclaim deed are remiss, release, and quitclaim.

Question 5

Leases.
Net Lease

Answer 5

In a net release, the tenant (lessee) pays fixed rent plus property costs such as maintenance and operating expenses, taxes, insurance, and utilities. Net leases are typically used on commercial property. The terms net, net-net, and triple-net are often used in commercial real estate. The number of “nets” indicates that the tenant is assuming more and more of the expenses. In a triple-net lease, the tenant pays all operating and other expenses in addition to the fixed rent. These expenses include taxes, insurance assessments, maintenance utilities, and other charges associated with the property.

Question 6

Variable (Index) Lease Formula

Answer 6

(New Index÷Old Index) × Original Rental Rate = New Rental Rate.

Question 7

Vendor’s Lien

Answer 7

A vendor’s lien is when a buyer can not pay all of the money (down payment) required at closing. The seller frequently will allow a purchase money mortgage to make up the amount of money the buyer is unable to produce. This is an equitable lien of the seller on the land conveyed in the amount of the unpaid purchase price. A vendor’s lien is enforceable only against the party obtaining title from the vendor. It does not apply against later purchasers unless a written mortgage has been executed and placed in the public records. A valid vendor’s lien is inforcible by foreclosure. Priority is established by the recording date of the purchase money mortgage.