Texas Law of Contracts Unit 9

A document that protects against hidden risks, such as forgeries and loss due to defects in the title, and is subject to specific exceptions is called A) a title insurance policy. B) an abstract of title. C) a chain of title. D) a certificate of title.

A) a title insurance policy. explanation: Although a certificate of title is used as evidence of ownership, it does not protect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.

A buyer took delivery of the deed to a new house, but neither recorded the deed nor took possession of the property. Under these circumstances, the A) buyer's interest is not fully protected against third parties. B) transfer of the property from the seller is ineffective. C) deed is invalid after 90 days. D) deed is invalid after six months.

A) buyer's interest is not fully protected against third parties. explanation: Constructive notice to the public of interest in a parcel of real estate is served when the deed is recorded and physical possession of the property is taken. Without this, an owner's interests could be jeopardized.

A sells a portion of property to B. B promptly records the deed in the appropriate county office. If A tries to sell the same portion of property to C, which of the following statements is TRUE? A. C has been given actual notice of the prior sale because B promptly recorded the deed. B. C has been given actual notice of the prior sale because B promptly recorded the deed. C. Because C's purchase of the property is the more recent, it will have priority over B's interest, regardless of when B recorded the deed. D. Because C purchased the property from its rightful owner, C is presumed by law to be aware of B's prior interest.

A. C has been given actual notice of the prior sale because B promptly recorded the deed. - Properly recorded documents provide constructive notice to the world of one person's rights to a property. Purchaser C should have made a title search prior to purchasing A's property.

Open, notorious, continuous, hostile and adverse use of another's property for prescriptive period.

Adverse possession

All of the following may be used to prove ownership EXCEPT A) title insurance. B) a deed. C) a Torrens certificate. D) a certificate of title.

B) a deed. explanation: Proof of ownership is evidence that title is marketable. A deed by itself is not considered sufficient evidence of ownership. Even though a warranty deed conveys the grantor's interest, it contains no proof of the condition of the grantor's title at the time of the conveyance. The grantee needs some assurance that ownership is actually being acquired and that the title is marketable. A certificate of title, title insurance, or a Torrens certificate is commonly used to prove ownership.

Which type of deed merely implies but does NOT specifically warrant that the grantor holds good title to the property? A. Special warranty B. Bargain and sale C. Quitclaim D. Trust deed

B. Bargain and sale - A bargain and sale deed contains no express warranties, but it does imply that the grantor holds title to the property. The purchaser has limited legal recourse if defects in the title come up later.

The grantee receives greatest protection with what type of deed? A. Quitclaim B. General warranty C. Bargain and sale with covenant D. Executor's

B. General warranty - A general warranty deed provides the covenants of seisin, against encumbrances, quiet enjoyment, further assurance, and warranty forever. The grantor even defends the title on behalf of everyone who has held title in the past. (In most cases, a purchaser will still choose to have further protection by purchasing a title insurance policy.)

Which of the following are traditionally covered by a standard title insurance policy? A. Unrecorded rights of persons in possession B. Improperly delivered goods C. Changes in land use due to zoning ordinances D. Unrecorded liens not known to the policyholder.

B. Improperly delivered goods - In addition to what is found in the public records, a standard title insurance policy insures against forged documents, conveyance by incompetent grantors, incorrect marital statements, and improperly delivered deeds.

Which of the following is TRUE regarding a transfer tax in Texas? A) The tax is payable at the time the deed is recorded. B) The taxpayer purchases tax stamps from the county clerk's office in the county in which the deed is recorded. C) Texas does not have a transfer tax. D) The transfer tax may be paid by either the buyer or seller.

C) Texas does not have a transfer tax. explanation: Texas does not have a transfer tax, but many states have enacted laws providing for a state transfer tax on conveyances of real estate. In these states, the tax is usually payable when the deed is recorded.

An examination of all of the public records to determine whether any defects exist in the chain of title is A) an abstract of title. B) a title report. C) a title search. D) an attorney's opinion of title.

C) a title search. explanation: A title search is an examination of all of the public records to determine whether any defects exist in the chain of title. The records of the conveyances of ownership are examined, beginning with the present owner. Then the title is traced backward to its origin (or 40 to 60 years or some definite period, depending on state statute).

The date and time a document was recorded helps to establish A) abstract of title. B) marketable title. C) priority. D) subrogation.

C) priority. explanation: Priority is established by the time and date a document is recorded. Recording uses the principle of "first in time, first in right."

The mortgagee received a title insurance policy on the property a buyer is pledging as security for the mortgage loan. Which of the following is TRUE? A. The policy is issued for the benefit of the buyer. B. The policy guarantees that the buyer's equity will be protected C. The amount of coverage is commensurate with the loan amount. D. The amount of coverage increases as the borrower's equity increase.

C. The amount of coverage is commensurate with the loan amount. - A lender requires a borrower to obtain a title insurance policy in an amount that will cover the amount of the mortgage loan. If the purchaser wants additional coverage, an owner's policy may be added.

Generally, a probate proceeding involving real property takes place A. only in the country in which the property is located. B. only in the country in which the descendent resided. C. in both the country where the descendent resided and the country in which the property is located D. in the country in which the executor or the beneficiary resides.

C. in both the country where the descendent resided and the country in which the property is located - The purpose of probate is to determine that a will is processed correctly. Probate proceedings take place in the country or city where the descendent resided and also in the country or city where real property is located. Probate procedures are governed by law.

A person who has died without a will has died A. testate. B. in valid conveyance. C. intestate. D. under the acknowledgement clause.

C. intestate. - An individual who dies "testate" has a will indicating how property is to be distribute; to die "intestate" means to died without a will, which passes real and personal property to the decedent's heirs according to state law.

Warrants the property is free from liens, unless expressly stated

Covenant against encumbrances

The grantor's promise to obtain any other document necessary to convey good title

Covenant of further assurance

Makes the grantor liable for damages if the grantee's title is found to be inferior

Covenant of quiet enjoyment

Warrants the grantor has the right to convey title

Covenant of seisin

The grantor's promise to compensate the grantee if title fails at any future

Covenant of warranty forever

Where are probate proceedings to take place? A) As determined by the probate judge B) By the election of the trustee C) As stated in the will D) In the county in which the decedent resided

D) In the county in which the decedent resided explanation: If the decedent owned real estate in another county, probate would occur in that county as well.

The process of probate is A) the reading of the will. B) able to be bypassed if the person died testate. C) the due diligence of the executor. D) a formal judicial process.

D) a formal judicial process. explanation: Probate is a legal procedure for verifying the validity of a will and accounting for the decedent's assets. The process can take several months to complete.

Extended coverage in an owner's title insurance policy would NOT cover A) forged documents. B) unrecorded liens not known by the policyholder. C) defects found in public records. D) changes in land use brought about by zoning ordinances.

D) changes in land use brought about by zoning ordinances. explanation: Extended coverage in an owner's title insurance policy would cover standard coverage plus defects discoverable through the property inspection, which includes unrecorded rights of persons in possession, an examination of a survey, and unrecorded liens not known by the policyholder.

Land is considered adequately described when the A) buyer stipulates how the buyer wants the description to read. B) seller discloses the address. C) broker gives the description to the title company for the Closing Disclosure. D) professional surveyor can locate the property.

D) professional surveyor can locate the property. explanation: Land is considered adequately described if a professional surveyor can locate the property using the description. The address of the property is not sufficient.

A will can be altered by the A) heirs. B) devisees. C) executor. D) testator.

D) testator. explanation: While the testator is alive, he may change the will as often as he would like.

Chain of title is MOST accurately defined as A. A summary or history of all documents and legal proceedings affecting a specific parcel of land. B. A report of the contents of the public record regarding a particular property. C. An instrument or document that protects the insured parties (subject to specific exceptions) against defects in the examination of the record and hidden risks such as forgeries, undisclosed heirs, errors in the public records, and so forth. D. A record of a property's ownership.

D. A record of a property's ownership. - The chain of title is the record of ownership going back at least 60 years in the public records. Any gap in the chain of title will be addressed as a "cloud on the title."

Under the covenant of quiet enjoyment, the grantor A. promises to obtain and deliver any instrument needed to make the title good. B. guarantees to compensate the grantee if the title fails in the future. C. warrants that he is the owner and has the right to convey title to the property. D. ensures that the title will be good against the title claims of third parties.

D. ensures that the title will be good against the title claims of third parties. - The covenant of quiet enjoyment has nothing to do with noisy neighbors; the seller is ensuring that there will be no future claims against the title to the property.

Eminent domain and escheat are two examples of A. voluntary alienation. B. adverse possession. C. transfers of title by descent. D. involuntary alienation

D. involuntary alienation - Eminent domain and escheat are both cases of involuntary alienation of property. The owner does not choose to have the state take over the property either for public use (eminent domain) or when there are no heirs (escheat).

Land needed for public use

Eminent domain

Person dies intestate with no heirs

Escheat

Nonpayment of a debt secured by real property

Foreclosure