Unit 9: Key Points

These are the most important points for you to remember.

Concept of Title

• The bundle of rights that evidence ownership of real property are called the title.
• In a contract to sell and purchase real property, but before the title is transferred, the seller has legal title to the property and the buyer has equitable title.

Methods of Transferring Real Property

Alienation

• Voluntary alienation-deeds and wills
  • A deed is a written document transferring title of property to another person.
  • A will is made by a person that directs how title to property is to be distributed after the testator’s death.
  • A person who dies without a will dies intestate.
• Involuntary Alienation-descent, escheat, adverse possession, eminent domain
  • Descent is the process used to distribute property of a person who died intestate.
  • Escheat—when an unmarried person dies intestate without being survived by any relative, the property escheats to the state. 
  • Adverse possession, sometimes called “squatter’s rights” allows a person to gain title to property by openly moving on to the property for seven years under a claim of title based on a recorded written instrument or a judgment.
  • Eminent domain is the power of the government to take private property for public use by paying the owner a fair price.

Notice to Legal Title

• Transfers of real estate must be written and signed.
• There are two methods of giving notice to title– actual and constructive
  • Actual notice is direct knowledge of ownership, or by physical possession of the property.
  • Constructive notice is given by recording (filing the deed with the clerk of the court in the county where the property is located.)
• Acknowledgment is the statement by the signer, before a notary public that he has signed voluntarily. Before a document can be recorded, it must be acknowledged.
• A lis pendens is recorded notice that there is legal action pending against the real property.

Protection of Title

• A chain of title is the successive history of conveyances affecting a particular property.
• An abstract is a summary of the recorded documents and provides a history of the property.
• An opinion of title is an attorney’s professional opinion of the condition of title, based on examination of the recorded documents pertaining to the property.
• Title insurance is protection from adverse claims on the title of property, and will pay for any defect in title not specifically excepted in the policy.
  • A standard coverage policy normally insures the title based on a search of the public records.
  • An extended coverage policy, such as an American Land Title Association (ALTA) policy, gives more coverage.
• The two types of title insurance are
  • owner’s policy—not transferable, and
  • lender’s policy—transferable.
• A municipal lien search protects against code violations, building permits that have not been closed properly, and structures that were not properly permitted.

Deeds

• A deed is a written instrument that transfers some type of ownership.
• Title to property passes instantly when the deed is voluntarily delivered and voluntarily accepted.
• If the deed is later lost or destroyed, it will not affect the ownership of the property.
• If a deed has been signed but not delivered, title has not yet passed. If the grantor dies, title does not transfer.
• A deed does not have to be recorded in order to transfer title.
• The 7 essentials of a deed
  • Consideration (either “valuable” or “good”).
  • Execution by a competent grantor and two witnesses.
  • Description of the property—must be shown in a manner that allows a surveyor to locate the boundaries.
  • Delivery and acceptance—title to the property is not legally transferred until the deed has been voluntarily delivered by the grantor and accepted by the grantee.
  • Interest (estate being conveyed).
  • Names of a competent grantor, and a grantee (not necessarily competent).
  • Granting and other appropriate clauses.
• Deed clauses
  • Seisin, promising that the seller owns and can legally convey title to the property.
  • Encumbrances, stating that no encumbrances exist that are not specifically shown in the deed.
  • Quiet enjoyment, meaning that the grantee can live in peace, undisturbed by others claiming to own the property.
  • Further assurance, means the grantor must act in every way to protect the title.  
  • Warranty forever, no time limit for protecting the grantee’s title to the property. 
• Types of statutory deeds
  • General warranty—most common and the best protection.
  • Special warranty—warrants only against the acts of the grantor.
  • Bargain and sale—has only 4 clauses: premises, granting, habendum and seisen.
  • Quitclaim—has no warranties.
• A deed must be acknowledged (notarized) and a certificate must be given to the clerk by the buyer stating the actual amount paid for the property.

Ownership Limitations and Restrictions

Government Restrictions

• Police power– includes zoning, and building codes.
• Eminent domain—allows government to take private property for public use by paying the owner a fair price.
• Taxation.
• Escheat—if an owner dies with no will and has no heirs, the state will take the property.

Private Restrictions-deed restrictions, easements, leases and liens

• Deed restrictions describe how a property may be used.
• Easements run with the land and give rights to others for some specific use of the property. Encroachments are the unauthorized use of another person’s land by placing a structure (or tree) on part of that land.
• Leases— An unwritten lease for one year or less is enforceable, but leases for more than one year must be written to be enforceable.  
• Liens secure the payment of a debt.
  •  Voluntary liens include mortgage liens and vendor’s liens.
  •  Involuntary liens include judgment liens, estate tax liens, and property tax liens.
• Liens are also categorized based on whether they attach to all a person’s property or to only a specific parcel.
  • General liens attach to all the property owned by a person.
  • Specific liens attach only to certain real property in the county where the lien is recorded.
• Property tax liens are based on the property value and have the highest priority.
• Special assessment liens are second in priority only to property tax liens. They are a one-time charge for costs of construction on properties that have been improved by the government, like sidewalks. 
• A mortgage lien is the pledge of property as collateral for a loan.
• A vendor’s lien protects a seller when the full amount of the purchase price has not been paid.
• A construction lien allows a laborer (or a material supplier) to place a lien on property for non-payment when their work or material has improved it.