Chapter 8: Deeds and Ownership

Clouds on the Title

A claim, encumbrance, or defect that makes the title to real property unmarketable.

Requirements: Competent Grantor's Signature

A competent grantor is a person wishing to grant or convey land, who is of sound mind for the purposes of entering a contract, and who has reached the age of majority (18 years of age in Ohio). A competent grantor's signature (and the grantor's spouse, if married) is vital for a valid deed to transfer title. In order for a deed to be binding and valid, there must be a grantor who can be bound by the deed. There are five possible problem areas: - Mental Capacity. The term "competent grantor" presumes a sound mind. The test for mental capacity in Ohio is whether the grantor can formulate an intention to convey his property. This capacity is measured at the time of signing the deed. Capacity is presumed to exist, and the burden of proof falls on the one trying to invalidate a deed on this ground. The signing of a deed by a mentally incapable grantor results in a transaction voidable at the option of the incapacitated person, or the person's representatives. - Minors. The term "competent grantor" also refers to the legal ability of a person to enter into a valid contract. In Ohio, a person must be at least 18 years old, the age of majority, to enter a legally binding contract. A person younger than 18 is referred to as a minor and a deed executed by a minor results in a voidable transaction at the option of the minor, within a reasonable period of time after reaching the age of majority. - Married Persons. A married grantor must be joined by his or her spouse in signing the deed to release the dower interest that the law allows the spouse. Without this release, marketable title is severely compromised. - Corporations. A corporation is a competent grantor, and the deed must recite the grantor's corporate status on its face. However, it is imperative that the person representing the corporation has the power and authority to carry out the transaction. Prior to listing corporately-owned property, the listing broker must get a copy of the corporate resolution allowing the corporation to list and sell the asset. This resolution should appoint the broker as agent and grant authority to one of the officers or directors to sign the purchase agreement and deed. - Partnerships. A partnership is also a competent grantor, and the deed must recite the status of partnership on its face. Again, agents need to make sure that they are dealing with the correct person who has the power and authority to complete the transaction. The issue of dower interest in partnership property is unclear so the safe course is to obtain dower releases from the partners' spouses.

Deed vs. Title

A deed is an instrument that conveys the grantor's interest, if any, in the real property. The deed is the document used by the owner of real property to transfer all or part of his interest in the property to another. A deed is evidence of title. Title is the actual lawful ownership of real property and refers to holding the bundle of rights conveyed. Title is not a document but rather a theory dealing with ownership. The deed is written proof of the rights conveyed to the buyer; having title to the land means the person actually owns it. This distinction is important because, although rare, it is possible to have a deed to property, yet not have title to that property. Suppose the seller (grantor) does not own the land. The grantor may think he owns a piece of land as part of a larger tract, or may have already conveyed part of the land to someone else in a prior transaction and forgot. In this case, the grantor cannot pass good title by merely giving the buyer (grantee) a deed to the land. Later in this chapter, we will discuss other ways in which a deed may be invalid.

Requirements: Acknowledgement

Acknowledgment is when a party signs a document before a notary public, stating it was signed voluntarily. In the case of a deed, the grantor acknowledges before the notary public that the act of selling the land is an act of free will. After a formal declaration before an authorized official (the notary), the official then certifies the signature is voluntary and genuine. Note: As previously mentioned, some states (but not Ohio) require attestation of a deed. Attestation is the act of signing a document (e.g., deed, will) in front of two witnesses to affirm that the parties' signatures are real.

Requirements: Identifiable Grantee

An identifiable grantee is the person to whom the interest in real property is to be conveyed; identified in such a way so as to reasonably separate this person from all others in the world. This would include getting proper and complete full names of the grantee(s), as well as any generational designations (e.g., Jr., Sr.). Furthermore, a deed must name an identifiable grantee in existence at the time of conveyance. For Example: A conveyance to an unincorporated business reciting corporate status would fail for lack of a grantee in existence at the time of conveyance. Since the burden of grantee identification often falls to the agent on the buying side of the transaction, it is important to get the correct information to the person preparing the deed. Any unclear situations or peculiarities should be investigated first.

Deed

An instrument that conveys the grantor's interest, if any, in the real property.

Donative Intent

An intent to transfer a grantor's interest in the real property immediately and unconditionally.

Equitable Title

An interest created in property upon the execution of a valid sales contract, whereby actual title will be transferred by deed at a future date (closing).Also, the vendee's (buyer's) interest in property under a land contract. Also called an Equitable Interest.

Co-Ownership by Individuals

Co-ownership between individuals is any form of ownership in which two or more people share title to real property. This is also called co-tenancy or concurrent ownership. Undivided interest gives each co-owner the right to possession of the whole property, not just a fraction of it. Under the law, any number of people may join in the ownership of realty, but the relationship these people share depends on the deed language, which is evidence of their right to title to the land. Legal title to real estate is held by more than one person in one of the following ways: - Tenancy in common - Statutory survivorship tenancy - Joint tenancy - Tenancy by the entireties

Condominiums

Condominiums are properties developed for co-ownership, where each co-owner has a separate interest in an individual unit and an undivided interest in the common areas of the property. Office buildings and retail centers can be developed as condominiums but most condominiums are designed for residential use. Typical condominiums look like apartment buildings (homes separated by a common wall under one roof), but condominiums are not owned by landlords who rent units to tenants. Instead, residents own their units. Each resident (or family of residents) usually has exclusive ownership of one unit in severalty or co-ownership. The other parts of the property—the grounds, the recreational facilities, the building's lobby, and hallways—are called the common areas. These are owned by all of the residents as tenants in common. Thus, each condominium owner owns his unit in severalty and has an undivided interest in the common areas. There are common areas and limited common areas. A limited common area is part of the condominium project owned by all of the members but used exclusively by one member. For Example: A porch outside of a unit may be in the common grounds area owned by all members but may be limited exclusively in use to the member whose property it adjoins. Another example would be designated parking spaces. The words "designated" or "assigned" will inform the client that he has this space exclusively for his use, even though all the owners own the land. Condominium residents must follow the bylaws filed and recorded by the condominium developers for the unit owners association. These bylaws are the rules that govern the condominium association and owners. Encumbrance and Transfer Each owner may give a lender a mortgage on his unit and his accompanying undivided interest in common areas. Each owner's creditors can claim a lien against an individual's unit and undivided interest in the common areas. If a lien holder forecloses, only that unit and its undivided interest are affected. A lien holder cannot foreclose on the entire condominium complex. Property taxes are also levied against each unit separately, so a tax lien foreclosure will not affect the whole property. When a condominium unit is sold, an undivided interest in common areas and membership in the owners association are automatically transferred, too. An owner cannot sell his unit without transferring his interest in the common areas, or sell his interest in the common areas separately from his unit.

Cooperatives

Cooperatives are buildings owned by corporations. Residents are shareholders in the corporation and each shareholder receives a proprietary lease on an individual unit in the cooperative building and the right to use the common areas. Title to a cooperative building is held by a corporation formed for that purpose (owned in severalty). A person who wants to live in the building buys shares in the corporation, instead of renting or buying a unit, and is given a proprietary lease for a unit in the building. The proprietary lease has a longer term than most ordinary leases and gives the shareholder more rights than an ordinary tenant would have. A cooperative shareholder pays a prorated share of the building's expenses and property taxes. If any resident fails to pay his share of the expenses, the entire cooperative may be threatened with foreclosure. To transfer an interest in a cooperative, a shareholder conveys his stock and assigns the proprietary lease to the new shareholder. Since financial instability of one person can jeopardize the whole cooperative, an agreement may provide that a shareholder cannot transfer an interest in the cooperative without the other shareholders' consent.

Deeds

Deeds are important real estate documents with which real estate licensees must be familiar. Deeds are the means by which a person transfers his interest in real property, if any, to another. However, a deed to property does not necessarily prove ownership of the property. It is important for agents to know in their practice of real estate that much of the discussion in this chapter involves the practice of law and is out of bounds as far as advising their clients or customers. It is necessary, however, for their professional development and overall knowledge that they read and understand the contents of this chapter, since the culmination of a real estate transaction is the delivery and acceptance of a properly-drafted deed.

Deeds without Warranties

Deeds without warranties can also transfer title to real property, but with them, the grantor makes no warranties regarding title, nor does the grantor guarantee that he even has the right to convey title. There are three kinds of deeds without warranties: Quitclaim Deeds Quitclaim deeds convey any interest in real property the grantor has at the time the deed is executed. A quitclaim deed makes no warranties regarding the title, if any, held by the grantor. It conveys whatever right, title, or interest the grantor holds in the property without representation that there is any interest at all. Often, quitclaims are used to clear up problems with the title, known as clouds on the title. For Example: A spouse may use a quitclaim deed to release any dower interest he may have in conveyed property. It may also be used in the case of a life estate to deed the remainder interest to the life tenant, thus creating marketable title by merger. Bargain and Sale Deeds Bargain and sale deeds imply the grantor owns the property and has a right to convey it, but there are no warranties that go with it. This type of deed is rarely used in Ohio. Fiduciary Deeds Fiduciary deeds are executed by a trustee, executor, or other fiduciary, conveying the property that the fiduciary does not own but is authorized to manage; also known as Trustee's Deeds and Fiduciary Deeds. A fiduciary is one in an appointed position of trust acting on another's behalf. The fiduciary cannot give general warranty provisions, since the fiduciary is merely acting on behalf of someone else. The only warranties fiduciaries can give, by law, involve their role as fiduciaries, not the state of the title to land. Fiduciaries warrant that they have been duly appointed by a court of competent jurisdiction as fiduciaries and that the act of selling the subject land falls within their duties, as outlined, in their fiduciary relationships.

Requirements: Description

Description of the property being conveyed should be thorough and complete and based upon one of the following: - Rectangular survey method - Metes and bounds method - Lot and block method using a recorded plat The test of a valid description of property is the ability to identify and distinguish that property from any and all other parcels of land.

Equitable Title

Equitable title is an interest in property created on the execution of a valid sales contract, whereby actual title will be transferred by deed at a future date (closing). This is not the same as having title, but the person who holds equitable title still enjoys certain rights and privileges (e.g., the benefit of minerals found on land after a valid sales contract is signed and completed, but before the closing and passage of actual title to the new owner). Also note that land contracts pass equitable title even though actual title is not transferred until all, or a specified portion of, payments have been made.

Requirements: Delivery and Acceptance

Even when a deed has been properly executed, it has no legal effect until: - Delivery—The grantor actually places the document in the grantee's possession, or gives it to a third party with instructions to turn it over to the grantee. - Acceptance by the grantee—The law presumes the deed has been accepted as long as the grant is beneficial to the grantee. Once a deed has been effectively delivered, the grantee holds title to the land, and it cannot be reconveyed simply by destroying the deed or returning it to the grantor. The grantee would have to execute a new deed transferring title back to the original grantor. A deed must also be delivered to the grantee while the grantor is alive, or it has no legal effect. Donative intent is intent by the grantor to transfer title immediately and unconditionally. This is also vital for a valid deed. Even when a deed is given to the grantee while the grantor is alive, it is not effective unless the grantor intends to surrender control of the property and transfer title immediately. If the grantor retains any power to recall the deed, or intends for it to take effect only under certain conditions or at some other time in the future, the deed does not transfer title to the grantee.

Warranty Deeds: General

General warranty deeds are deeds in which the grantor warrants the title against defects that might have arisen before or during his period of ownership. They are also called standard warranty deeds or simply warranty deeds. A general warranty deed gives the grantee the broadest possible protection. Most real estate transfers in Ohio are carried out with a general warranty deed. With this type of deed, the grantor specifically guarantees the following covenants: - Covenant of seizen—The grantor warrants that he owns the estate conveyed and has the right to convey. - Covenant against encumbrances—The grantor warrants that the property is free of all encumbrances not recited as exceptions in the deed. - Covenant of quiet enjoyment—The grantor warrants that the grantee shall possess the land undisturbed by claims of title from others. - Covenant of warranty forever—The grantor warrants that he shall defend the grantee's interest against all lawful claims of title.

Timesharing

In a timesharing arrangement, co-owners have the exclusive right to possession of the property for specified periods each year. Each timeshare owner purchases an interest for a fraction of the total cost of the unit. A timesharing arrangement could be developed for any kind of housing, but it is most commonly used for resort condominiums.

Inquiry Notice

In addition to actual notice and constructive notice, there is inquiry notice. A person is said to have inquiry notice when there is some indication of a claim or other circumstance that would lead a reasonable person to be alerted to a possible problem, and cause further inquiry into the condition of the title. If a person does not find out about the claim because he fails to investigate any further, he may still be held to have inquiry notice of the claim. When someone is in possession of the property, a buyer is held to have inquiry notice of the possessor's claim—even if the buyer never visited the property. This is why it is a bad idea to buy real estate sight unseen.

Requirements for a Valid Deed

In order for a deed to be valid in Ohio, the deed must be in writing and contain necessary information on its face. These requirements include: - Competent grantor's signature - Last recorded instrument number - Identifiable grantee to whom title will pass, named in such a way so as to reasonably separate this person from all others - Words of conveyance stating the grantor's intent to convey the land - Description of the property being conveyed that is adequate enough to distinguish it from all other parcels of land - Good consideration recited to prove that a sale of land took place - Acknowledgment of the grantor before a notary public, stating that the sale of the land is a free and voluntary act - Delivery and acceptance of the deed during the grantor's life Once the deed is valid, delivery and acceptance of the deed, during the grantor's life, will transfer the grantor's interest from the grantor to the grantee. Note: Deeds do not need to be recorded to be valid, but recording a deed ensures that it is valid as to third parties. Also, in many other states (but not Ohio), a grantor must also sign the deed in front of two witnesses (this is known as attestation, which is discussed later in this chapter).

Chain of Title

It is possible, however, for a recorded document to fall outside the chain of title. The chain of title is the chain of deeds (or other documents) passing title for a property from one owner to the next, as disclosed in the public records. A deed outside the chain of title is said to be a wild deed and buyers and lenders are not held to have constructive notice of it. For Example: Lisa buys a house and records her deed. Later, she sells the house to Scott, but Scott does not record his deed. Scott sells the land to Cecil, and Cecil records his deed promptly. Now, there is a break in the chain of title: The record shows only Lisa's deed and Cecil's deed, but the link between them (Scott's deed) is missing. That makes Cecil's deed a wild deed. Lisa is aware that Scott never recorded his deed, and she decides to sell the same property a second time. This time she sells it to Matt. Matt does not know about Scott or Cecil, so he has no reason to look up those names in the grantee/grantor index. He looks up Lisa's name in the grantor/grantee index and, as far as he can tell from the record, she still owns the property. So, Matt goes ahead with the purchase. Matt does not have constructive notice of Cecil's interest in the property because Cecil's deed was outside the chain of title. Thus, a court would probably determine that Matt is the owner of the property since he had neither actual nor constructive notice of the other deeds.

Co-Ownership by Individuals: Joint Tenancy

Joint tenancy is not as well established in Ohio as in other states. It is very similar to a statutory survivorship tenancy: Each joint tenant has an equal undivided interest in the property and the right of survivorship, but when a joint tenant conveys his interest, it simply terminates the right of survivorship as to that interest. The new co-owner is a tenant in common in relation to the others. For Example: A, B, and C co-own a property as joint tenants. C conveys his interest to D. D will be a tenant in common while A and B will still be joint tenants. D's interest will go to his heirs upon his death while A and B's interest will go to the survivor of the two of them upon one of their deaths. For joint tenancy, all four unities, sometimes referred to as the equalities, must be present (can be remembered as PITT): - Unity of Possession - Unity of Interest - Unity of Time - Unity of Title

Co-Ownership by Individuals: Statutory Survivorship Tenancy

Statutory survivorship tenancy is a form of co-ownership in which each co-tenant has an equal undivided interest in real property, and the right of survivorship. This is also called joint tenancy with the right of survivorship. This is the other main form of co-ownership used in Ohio. Statutory survivorship tenancy represents a completely different set of legal relationships than those found in a tenancy in common. The chief feature to the statutory survivorship tenancy allows the co-tenants to take the ownership share of a deceased co-tenant without having to go through the probate process. Since survivors take ownership equally and simultaneously, a person cannot will or inherit a survivorship estate.

Co-Ownership by Individuals: Tenancy in Common

Tenancy in common is a form of co-ownership in which two or more persons each have an undivided interest in the entire property, but no right of survivorship. Tenancy in common is the most common form of co-ownership. A court will set up a tenancy in common if there is no wording in the deed regarding the intent of the parties. No special words or terms are necessary to create a tenancy in common. Each tenant in common may own equal shares or shares of different proportions; it does not matter. The deed must show the fractional interests of the parties. If the deed is silent as to the interests of the parties, the shares will be equal. Remember: - Tenancy in common is the only co-ownership that does not have the right of survivorship. - Tenancy in common is the only co-ownership that can be owned in unequal portions. - Tenancy in common is the form of co-ownership that Ohio law presumes (defaults to). - In tenancy in common, each owner owns their share in severalty (solely).

Marketable Title Act

The Marketable Title Act is intended to improve the marketability of title and simplify the title search process by extinguishing certain old, dormant claims against a title. The Marketable Title Act usually makes it unnecessary to search back much further than 40 years. Under the Act, an owner with an unbroken chain of recorded titles going back at least 40 years has a marketable record title. The root of title is the deed (or other document of transfer) that, 40 years ago, was the most recently recorded. When an owner establishes a marketable record title, any claims that arose before the root of title are extinguished, unless they have been preserved. An easement, use restriction, or other interest is preserved if it is specifically mentioned in a deed (or other transfer document) recorded after the root of title. Even if none of the deeds mentioned the easement, it would be preserved if the easement holder recorded a notice preserving it, within 40 years after the root of title. The notice must: - Be in the form of an affidavit (a sworn statement). - Include a full description of all property affected by the preserved interest. - State the names of the property's current owners. The easement would be extinguished if no transfer document recorded since the root of title specifically mentioned the easement and no affidavit was filed. (A general reference in a deed, such as "Subject to all easements and restrictions of record," is not enough to preserve those interests. The reference must be specific.) Once an interest is extinguished, it is gone for good. It cannot be revived by recording an affidavit after the 40-year deadline has passed.

The Torrens System

The Torrens system of title registration is an alternative to the recording system. To use the Torrens system: - A landowner registers her property with the state Torrens registrar. - A careful title search and survey of the property are performed. - The registrar issues a Torrens certificate; the original is kept in the registrar's office and the property owner receives a duplicate certificate. - When the owner sells the property, she must surrender the duplicate certificate to the registrar. Once the property has been registered ("Torrenized"), no deed, mortgage, lien, easement, or other encumbrance pertaining to it can be legally effective unless it is registered with the Torrens registrar. If someone has a lien against the property recorded instead of registered, the lien will have no effect. A prospective buyer or lender can determine the status of the title by consulting the Torrens register, without having to search the public record. Despite its convenience, the Torrens system is rarely used, primarily because the initial registration process is expensive. Al will share a little insight on this system before we wrap up this chapter.

Legal Description: Government Survey

The government survey system (also called the rectangular survey system) is a legal description for land referencing principal meridians and base lines designated throughout the country. A particular piece of land is identified by directions and coordinates, which count from these lines as reference points. Additional north-south lines, called range lines, run parallel to principal meridians at six-mile intervals. Additional east-west lines, called township lines, run parallel to base lines at six-mile intervals. This divides land into six mile by six mile squares called townships. The 36 square miles of a township are subdivided into 36 sections. A section is one square mile (640 acres). Each section in a township is numbered sequentially so a person can locate her land by referring to the section number, and subsequent references to half and quarter sections with compass points. Any portion of land that cannot be divided into equal fractional lots is designated as a government lot. A typical parcel of land is located within a section. A legal description from this method would use directions and quadrants. A legal description might read: N 1/2, NE 1/4 of NW 1/4. Always start from the end of the description and work backwards. We are talking about the NW 1/4, so look at the upper left corner of the section, and then read the rest of the description to determine what part of the NW 1/4 is being talked about. For the real estate prelicensing exam, in addition to being able to locate a parcel of land within a section, students will also need to know how to calculate the land acreage for a given parcel of land. With the government survey system, calculating acreage is rather easy. Again, start from the end of the legal description and work backwards from right to left. Since an entire section of land in the government survey system always equals 640 acres, take 640 and divide by the denominators (the bottom number) for each fractional part. For Example: For the S 1/2 of NW 1/4, the calculation is 640 ÷ 4 ÷ 2 = 80 acres For the NE 1/4 of NW 1/4, the calculation is 640 ÷ 4 ÷ 4 = 40 acres For the N1/2, NE 1/4, of NW 1/4, the calculation is 640 ÷ 4 ÷ 4 ÷ 2 = 20 acres

Legal Description: Metes and Bounds

The metes and bounds description is a legal description that starts at an easily identifiable point of beginning (POB), then describes the property's boundaries in terms of courses (compass directions) and distances, ultimately returning to the POB. A legal description may also refer to monuments or markers, which are fixed physical objects used as reference points. Often, the safest marker is a pin, which is simply a rod that is driven into the ground.

Marketable Title Act Exceptions

There are several exceptions to the Marketable Title Act. An easement cannot be extinguished if there is clearly observable physical evidence of its use or if it involves pipes, cables, or other physical objects on or embedded in the land. Furthermore, none of these interests can be extinguished under the Act: - A lessor's right to possession at the end of a lease - A railroad or public utility easement - Any interest in coal - A mortgage - Any interest held by the federal, state, or local government

Race/Notice Rule

What happens when an owner sells property to one person and then sells the same property to another person? Ohio follows the race/notice rule. Figuratively speaking, the two grantees race each other to the recorder's office and whoever records a deed first wins. The first to record the deed has title to the property, unless he had notice of an earlier conveyance. If a couple buys land and does not have notice of another buyer before them (like Matt in our previous example), they are not deemed to have constructive notice of the unrecorded deed. The later grantees are subsequent good faith purchasers without notice, and they have valid title to the land even if someone else bought it first. They may have to pay damages but cannot be forced to give up possession. The race/notice rule only protects subsequent good faith purchasers. If gift recipients do not record their deeds, they lose their interest in the land. Note: Ohio does not apply the race/notice rule to mortgages. A recorded mortgage has priority over all unrecorded or subsequently recorded interests, even if the mortgagee had actual notice of those interests. With mortgages, Ohio follows a pure race rule: Notice does not matter; winning the race is all that counts.

Notice

When two people have conflicting claims, sometimes their rights and liabilities depend on whether one had notice of the other's claim: - One has actual notice of something if he actually knows about it. - One has constructive notice of something he ought to know about, even though he does not actually know about it. - One has inquiry notice when they know a fact or circumstance that would cause a reasonable party to inquire further or if that person has possession of a means of knowing a particular fact. The law holds that everyone has constructive notice of recorded documents. Even if someone did not know about a particular recorded document, he could have found it by searching the public record. The law expects a buyer or lender to take that step for his own protection. The law will not look after a buyer or lender who does not bother to check. For Example: Tom grants an easement across his land to Deb, so Deb records the easement document. Tom then sells his land to Jasmine. Jasmine claims she does not have to honor the easement because she could not tell that it existed simply by looking at the property and Tom never told her about it. However, the easement is still valid because Jasmine is deemed to have constructive notice of it. Even though she did not have actual notice, she could have found out about the easement granted to Deb by checking the public records.

Types of Deeds

There are three general classifications of deeds in Ohio: Warranty deeds Deeds without warranties Transfer on death deeds

Government Survey System

A legal description for land referencing principal meridians and baselines designated throughout the country. Also called government rectangular survey or rectangular survey system.

Metes and Bounds Description

A legal description that starts at an easily identifiable point of beginning (POB), then describes the property's boundaries in terms of courses (compass directions) and distances, ultimately returning to the point of beginning.

Lot and Block Description

A legal description used for platted property. The description states only the property's lot number and block number in a particular subdivision. To find the exact location of the property's boundaries, the plat map for that subdivision must be consulted at the county recorder's office.

Co-Ownership

Any form of ownership in which two or more people share title to property, holding undivided interests. Also called co-tenancy or Concurrent Ownership.

Condominiums and Cooperatives

As cities have grown more crowded, single-family homes are harder to find and more expensive to buy and maintain. Condominiums and other multi-family housing have become popular ownership alternatives. They are structured (physically and legally) to combine individual ownership with co-ownership.

Ownership by Associations

Associations include businesses, non-profit groups, and other organizations. Depending on its form, an association may be: - A legal entity separate from its individual members or owners (e.g., a corporation where property is owned by the corporation in severalty). - Informal (e.g., a general partnership where partnership property is co-owned by the partners). Title to property can be held in an association's name. Corporations A corporation is a legal entity in which individuals hold ownership shares of stock. A corporation is regarded by the law as an artificial person, separate from the individual stockholders. When a corporation owns property, it owns it in severalty, just like a natural person. The shareholders do not own the corporation's property and are not personally liable for the corporation's debts. A shareholder's spouse has no dower rights in property owned by the corporation. General Partnerships A general partnership is simply an association of two or more individuals as co-owners of a business run for profit. It does not have to be formally organized like a corporation. For most purposes, the law does not recognize a general partnership as an entity independent from the individual partners, so the general partners would own the partnership property as tenants in partnership. This is a form of co-ownership giving each partner an equal, undivided interest in the property. A married partner's spouse does not have dower rights in partnership property. Limited Partnerships A limited partnership, like a general partnership, is an association of two or more persons as co-owners of a business. A limited partnership differs from a general partnership in that a limited partnership has one or more general partners plus one or more limited (silent) partners. The rights and duties of general partners in a limited partnership are the same as in a general partnership. Limited partners, however, have limited liability for partnership debts and a limited role in management of the business. The partners' liability is limited to their original investment. Limited Liability Companies A limited liability company (LLC)is a form of association used in Ohio. It is structured similarly to a corporation, thus the limited liability, but has tax benefits of a partnership (e.g., no double taxation of profits). Real Estate Investment Trust (REIT) A real estate investment trust (REIT) is a real estate investment business, with at least 100 investors, organized as a trust. In a trust, one or more trustees manage property for the benefit of the beneficiaries. A trust document vests title to the property in the trustees who have only those powers expressly granted to them in the trust document. The beneficiaries have no legal interest in the property; they have only the power to enforce performance of the trust. REITs can transact real estate business in Ohio only if a special report has been filed in the Secretary of State's Office. The report includes the names and addresses of the trustees and a copy of the trust document. Title to property may be held in the REIT's name or in the name of one of the trustees.- Syndicates A syndicate is not a recognized legal entity. Like "company," the term "syndicate" can refer to almost any business organization. For Example: The XYZ Syndicate may be a corporation, partnership, or REIT, and can hold title to property accordingly.

Requirements: Consideration

Consideration is anything of value (e.g., money, goods, services, promises) given to induce another person to enter into a contract. Consideration recited on the deed is necessary to prove that a sale of land took place and that the transfer was not a gift, since a gift may be attacked by creditors as a fraudulent transfer of assets. The actual price paid need not be recited, but the full consideration must be stated in cases involving public sale (e.g., at foreclosure).

Warranty Deeds: Limited

Limited warranty deeds are deeds in which the grantor warrants the title only against defects arising during the time that he owned the property, and not against defects arising before that time. They are also called special warranty deeds. This type of deed is not so broad. With this type of deed, the grantor guarantees only the following covenants: - Grantor guarantees there are not any encumbrances he created. - Grantor promises to defend title against anyone claiming under him.

Ownership in Severalty

Ownership by a single individual, as opposed to co-ownership.

Co-Ownership by Individuals: Tenancy by the Entireties

Tenancy by the entireties was abolished by the Ohio General Assembly in 1985 because some of the court decisions interpreting the statute were controversial. However, many of the tenancies by the entireties that were created between 1971 and 1985 still exist, so a real estate agent should be familiar with the concept. A tenancy by the entireties was a form of co-ownership in which a married couple owned the property with the right of survivorship, and neither spouse could convey or encumber his or her interest without the consent of the other spouse. As previously stated, tenancy by the entireties created before 1985 may still exist, but any co-ownership created after 1985 will have to be either tenancy in common or joint tenancy with the right of survivorship.

Attestation

The act of signing a document (e.g., a deed or will) in front of two witnesses to affirm that the parties' signatures are real. Note: Attestation of a deed is not required in Ohio, but it may be required in other states. Attestation is not the same as Acknowledgement in front of a notary public.

Chain of Title

The chain of deeds (or other documents) showing transfer of title of real property from one person to the next, as disclosed in the public records.

Title

The lawful ownership of real property.

Legal Description: Lot and Block

The lot and block description is a type of legal description used for platted property. Platted property is any property that has been subdivided from a large tract into smaller lots. These lots are numbered, first with a block number for the area, then individually with each lot receiving its own number. The lot and block description states only the property's lot number and block number in a particular subdivision. To find the exact location of property boundaries, the plat or plat map for that subdivision must be consulted at the county recorder's office. A plat map is a detailed survey map of a subdivision or other grouped lots of land, recorded in the county where the land is located. This type of map is used by developers.

The Recorder's Office: Index

The recorder keeps an index of all recorded documents. Counties using the index system usually divide the index into two parts: 1. The direct index (also called grantor/grantee index) lists all documents alphabetically by the grantor's last name. 2. The reverse index (also called grantee/grantor index) lists all documents by the grantee's last name. The index lists the volume and page where the document is located in the public record. A person can then look at the document and obtain a copy, if needed. The recorder may also maintain a sectional index (also called a tract index), which lists documents under the tax parcel number of the property they apply to. In that way, it groups together all recorded documents affecting a particular property. Many counties have now moved to a single index system, called an official index, in which all documents are recorded and accessible by computer.

Recording

The recording system makes it possible to determine who holds an interest in any property. In doing so, the recording system protects real estate buyers and lenders against secret conveyances and encumbrances. Any legal document that affects title to real estate can be recorded, and most should be, including: - Deeds - Easements - Restrictive covenants - Court orders - Long-term leases Certain documents have no legal effect unless they are recorded (e.g., mortgages, mechanics' liens). Other documents are binding on the parties even if they are not recorded. For Example: A deed does not have to be recorded in order for title to transfer from the grantor to the grantee. The purpose of recording the deed is to provide notice to others.

The Recorder's Office

There are different kinds of notice, and different rights and responsibilities that go along with each but, basically, the concept of notice with regard to deeds is to announce to the world that the grantee now owns the property. The importance of notice will be explained later in this chapter, but first let's take a brief look at the mechanics of the recording process. To have a document recorded, a person must file it at the county recorder's office and pay the recording fee. The document is said to be "filed for record." The recorder then places the document in the public record. Today, many counties utilize electronic systems to scan, or digitize, documents for storage as pictures or text documents. These images can be viewed and printed from computers in the recorder's office or online. If the document is not online, it can be found on microfilm or microfiche at the recorder's office. The documents are scanned in the order they were filed for record. This is extremely important, since deed or lien priority often depends upon when the documents were filed. Each document is numbered so it can be located in the public record.

Ownership

There are two basic kinds of ownership of real property: - Ownership in severalty—Ownership by a single individual or corporation, where one person's interests are severed (cut) from the interests of all others. - Co-ownership—Any form of ownership in which two or more people share title to real property. Ownership in severalty and co-ownership can also be further categorized into ownership by associations or by individuals. We'll look at ownership by associations first.

Marketable Record

Title Under the Marketable Title Act, an unbroken chain of recorded title going back at least 40 years.

Transfer on Death Deed or Affidavit

Transfer on Death Deed or Affidavit A transfer on death deed (now called a Transfer in Death Designation of Beneficiary Affidavit), established in Ohio law in 2000, can be a deed/affidavit with or without a warranty and works like a payable on death bank account (avoiding probate). One present owner of the real property may designate one or more death beneficiaries and may also name contingent beneficiaries. The beneficiary may be a person, trust, charity, business, or other entity, but must be specifically named, For Example: To list a beneficiary on a transfer on death deed as "my grandson" is not sufficient; it must read: "my grandson, Kevin Smith." The named beneficiary or contingent beneficiary has only a future interest in the property, not a present interest. Therefore, the property owner may change the transfer on death deed beneficiary at any time while the owner is alive, but the original transfer on death and any subsequent deeds must be recorded to establish transfer of the property on death. The sale or other conveyance of the property terminates the transfer on death provision. Additionally, a lien or foreclosure action may be taken against the present property owner, not against the beneficiary's interest.

Warranty Deeds

Warranty deeds carry warranties of clear title and the grantor's right to convey title. They transfer title in real property with the grantor making certain guarantees (also called warranties or covenants) to the grantee regarding status of the title. For Example: If the grantor is married and fails to obtain a dower release from his spouse, that is a breach of warranty under a warranty deed. The guarantees that go with a deed differ depending on whether a general warranty deed or a limited warranty deed is used. The Ohio legislature created a statutory form for both types of warranty deeds. If the statutory form is followed, it is not necessary to actually state the warranties on the face of the deed. Instead, the warranties are incorporated into the deed by reference to the statute. When a warranty is breached, the grantee has the right to sue the grantor for compensation. But the grantor may have left the jurisdiction, or may be judgment-proof, so the grantee cannot collect. Title insurance protects the grantee much more reliably than deed warranties.

Acknowledgment

When a party signing a document formally declares to an authorized official (usually a notary public) that he signed voluntarily. The official certifies that the signature is voluntary and genuine.

Requirements: Words of Conveyance

Words of conveyance is a clause in the deed that states the grantor intends to convey title to the land. Also called the granting clause, these words identify the document as one that involves the transfer of interest from one person to another. The wording of the deed must communicate a definite and clear intent by the grantor to part with the subject land. The words "give," "grant," "bargain," "sell," and "convey" leave no doubt as to the intent of the grantor. Following this is the habendum clause, included after the granting clause in many deeds, beginning with "to have and to hold" and describing the type of estate granted.