Chapter 10 - How Ownership is Acquired & Conveyed

three means of public dedication

(1) common law dedication, (2) statutory dedication (3) deed.

List five types of deeds commonly used for private grants.

General warranty deeds, special warranty deeds, grant deeds, bargain and sale deeds, quitclaim and special use deeds, and transfer-on-death deeds

Reasons to Choose a Trust Instead of a Will

Tell how and when assets are distributed after death Distribute assets to heirs efficiently without the cost and publicity of probate court (probate can cost 5% to 7% of an estate) Better protect assets from creditors and lawsuits Reduce estate and gift taxes

Actual notice

The buyer has acquired actual knowledge either by word of mouth or by seeing the possession of property that a previous transfer of ownership has occurred.

Constructive notice

The buyer has constructive knowledge when the prior conveyance has been recorded because the buyer can easily look it up. Since recording a document gives constructive notice to any subsequent buyer, it is important to record deeds as soon as possible.

Inquiry notice

The buyer knows of some fact that would put a reasonable person on notice and would prompt them to investigate the matter further.

devisor

The decedent

Two Implied Warranties of Grant Deed

The grantor of a grant deed impliedly promises that he or she has not conveyed the property to anyone other than the grantee under that deed. The grantor has not encumbered the property, other than those identified by the grantor at the time of the conveyance

Probate Process

The will is filed with the court and judged for its validity. A person is appointed to be responsible for administering the estate. The person would be an executor if named in the will or an administrator if the person died intestate. A listing of the property belonging to the decedent's estate is reported. If the person died intestate, the court makes a formal determination as to the identity of the heirs. Creditors are given the opportunity to file claims and seek repayment. The remaining assets after payment of debts and expenses are distributed to either the beneficiaries listed in the will or the heirs determined by the court. Any disputes over the assets will be heard by the court and resolved.

after-acquired title

This means that if the grantor later obtains title to the property—even if he or she did not have it at the time of the conveyance—then it will be conveyed to the grantee should the grantor later obtain it.

Order of Payment for Proceeds from Sale of the Property

Trustee's fees, costs, and expenses of the sale Any tax and assessment liens that are due and owing Deeds of trust, mortgages, and mechanic's liens in their order of priority Defaulting borrower

partition action

a court proceeding to settle a dispute between co-owners (joint tenants or tenants in common) about dividing their interests in real property. A partition action may be available to terminate the interest of one co-owner (a partial interest) or to terminate the entire ownership through physical division or sale. To initiate a partition action, a complaint is filed in the county where the property is located. Once the complaint is filed, a Notice of Pendency is recorded with the county recorder's office to notify anyone interested in the property that a legal action is in process. The judge will make a determination on the merits of the partition request. If the request is upheld, the court will appoint a referee to physically divide the property or sell it and divide the money derived from its sale.

grant deed

a deed in which the covenants are created by statute and are contained in the deed merely by using the word "grant."

special warranty deed

a deed in which the grantor only warrants the title to the property during the time of the grantor's ownership. Due to this limitation, the special warranty deed offers the grantee less protection than the general warranty deed. This deed is used frequently by trustees, executors of estates, and relocation companies.

bargain and sale deed / deed without warranty

a deed that does not contain any covenant of warranty. A deed without warranty transfers all rights, title, and interest of the grantor at the time of its execution. The grantor states that he or she owns the property, but there are no stated warranties as in the general warranty deed. If the grantor uses this type of deed, the grantee would probably require the seller to purchase a title insurance policy.

deed

a formal transfer by a party as in a gift deed in which there is no consideration.

bequest or legacy

a gift of money or personal property by will. Personal property includes all tangible personal property owned by the decedent. The term includes a motor vehicle, motor home, motorboat, or other similar property that requires a formal transfer of title.

devise

a gift of real property by will.

race-notice statute

a later buyer who pays fair value, does not have notice of any other earlier conflicting interests, AND records first, "wins" and will have priority over any later recordings In a race-notice state, if the same property is sold to two parties, and the second party knows of the first sale (actual notice) and is aware of the fraud intended by the seller, the original sale is valid, even if it was not recorded first. In addition, if a deed is not recorded, but the buyer moves in giving notice, that sale has priority over later recorded deeds.

codicil

a later document that supplements or affects the validity or dispositions of an earlier will. A codicil can be used to add to a prior will, revoke or partially revoke a prior will, revive a previously revoked will, or validate an invalid will. holographic wills and attested wills can have codicils

Escheat

a legal process in which property (both real and personal) reverts to the state because the deceased owner left no will and has no legal heirs.

intestate succession

a person inherits property because someone dies without a will

bona fide purchaser

a person who in good faith pays valuable consideration for property without notice of prior claims.

deficiency judgment

a personal judgment against a borrower for the balance of a debt owed when the security for the loan is insufficient to pay the debt.

common law dedication

a property owner implies through his or her conduct the intent that the public use the land. In order to be effective, the dedication must be accepted by public use or local ordinance.

acknowledgment

a statutory procedure whereby persons signing a document declare their action before a qualified person, usually a notary public

trust

a three-party relationship in which one party, known as the trustor or settlor, places property into the possession and control of another party, known as a trustee, for the benefit of a third party, known as a beneficiary.

A holographic will

a will written entirely in the deceased's handwriting and signed by the testator. Holographic wills do not have to be witnessed. Some states will accept holographic wills to varying degrees if the holographic will meets specific requirements. Typically, the minimal requirements for most states are proof that the testator wrote the will, evidence that the testator had the mental capacity to write the will, and the will must contain the testator's wish to disburse personal property to beneficiaries.

deed

a written instrument, which, when properly executed and delivered, conveys title to real property from a grantor (person or entity) to a grantee (person or entity).

power-of-sale clause

allow the lender (or the lender's loan servicer) to initiate the foreclosure process.

deed in lieu of foreclosure (mortgage release)

allows borrowers to voluntarily transfer the ownership of their property to the current noteholder of the loan in exchange for a release from the loan. Although this might work well for the defaulting borrower, the lender loses some advantages by accommodating the borrower. The lender cannot obtain a deficiency judgment and cannot take advantage of any FHA insurance or VA guarantees if they are available. In addition, a deed in lieu of foreclosure does not extinguish any junior liens that a foreclosure would eliminate.

transfer

an act of the parties or law, title is conveyed from one person to another by means of a written document, such as a deed. The transfer may be voluntary, such as the sale of a home, or involuntary by an act of law, such as a foreclosure sale.

operation of law or court action

an involuntary transfer involving foreclosure or is the result of a judgment or some other lien against the title. Frequently, courts establish legal title regardless of the desires of the record owners. Involuntary transfers by operation of law include foreclosures, partition actions, bankruptcy, quiet title actions, tax sales, execution sales, and condemnation proceedings under eminent domain.

cloud on title

any condition that affects the clear title of real property or minor defect in the chain of title, which needs to be removed.

executor's deed

convey the title of real property to a grantee when a person dies testate (with a will).

quitclaim deed

conveys whatever interest the grantor currently has in the property (if any) to the grantee. It does not claim to transfer the property itself but only whatever interest the grantor may have in the property. A quitclaim deed contains no warranties and transfers any interest the grantor may have at the time the deed is signed. used to transfer interests between husband and wife or to terminate an easement

will

disposes of property after death. The person who has died, known as the decedent, can leave written instructions usually in the form of a will (testamentary instrument) explaining how that person wanted his or her property (estate) to be disposed of. If the will is properly prepared, the law requires that the decedent's wishes expressed in the will are carried out.

Living trusts (inter vivos trusts)

established while the settlor is still alive and can be managed by the settlor himself or herself until he or she dies.

Title vesting

evidence that the owner of land is in lawful possession; it is the proof of ownership.

Types of Deeds

general warranty deeds, special warranty deeds, grant deeds, bargain and sale deeds, quitclaim and special use deeds, and transfer-on-death deeds.

sheriff's deed

given to the successful bidder at an execution sale held to satisfy a judgment that has been obtained against the owner of the property.

legal capacity to contract

grantor must be able to understand the nature of the act of signing the deed and consequences of doing so, as well as have the intention to convey the property.

Title

indicates rights of ownership and possession of particular property. With real estate, title is evidenced by a deed (or sometimes, another document) recorded in the county recorder office.

notary

is a licensed public officer who takes or witnesses the acknowledgment.

oral will

is spoken, not written. Nuncupative wills come from an oral tradition before written documents were common and required for legal validity. An oral will sometimes is called a deathbed will because they are often made when a person is sick or injured and is confined to a hospital or care situation with little time expected to live.

tax deed

issued when a property is sold for delinquent taxes.

notice statute

later buyer who pays fair value for the property (subsequent bona fide purchaser) and DOES NOT HAVE NOTICE that there were any other earlier conflicting interests, "wins" and will have priority over any later recordings.

Voluntary alienation

legal term for the voluntary conveyance of title. The person who owns the property decides to transfer ownership to someone else or perhaps to a corporation, usually (although not always) in exchange for some kind of compensation. The common methods to transfer property voluntarily are by deeds and wills.

covenants

legally binding promises

granting clause

must contain words that demonstrate the intention of the grantor to transfer a present interest from the grantor to the grantee. Words stating that the grantor "grants," "conveys," "transfers," or "sells" the interest described in the deed to the grantee are sufficient. The granting clause can transfer the entire fee simple estate, or it can limit the scope of the estate that is being granted. In the absence of some restriction—such as conveying the property only for life—the deed conveys a fee simple absolute.

Recording Process

n order to record a document, it must be signed in front of and acknowledged by a notary. For a deed to be recorded (or registered), the grantor's signature must be properly acknowledged or witnessed. Acknowledgment acts as a safeguard against forgery and once acknowledged, a document is accepted as prima facie (on its face) evidence in court. To be valid, documents must be recorded by the county recorder in the county within which the property is located. However, if the tract extends into more than one county, the deed may be recorded in any county where part of the property is located. When the recorder receives a document to be filed, he or she marks the original document as "filed for record," stamps it with the proper time and date of recording, and returns to the person who requested the recording. The instrument to be recorded is copied into the proper index, and filed in alphabetical order, under the names of the parties.

Alienation

the act of transferring or conveying real property to another—voluntarily or involuntarily the transfer of the title to real property and possession of lands, tenements, or other things, from one person to another

race statute / "race to the courthouse."

the document that is recorded first "wins" and will have priority over any later recordings. States that follow the race statute include Delaware, Louisiana, and North Carolina.

Probate

the formal process that handles the distribution of the assets of a deceased person. Because the probate process is determined by state law, the procedures for probate will differ from state to state.

Foreclosure

the legal procedure lenders use to terminate the trustor or mortgagor's rights, title, and interest in real property by selling the property and using the sale proceeds to satisfy the liens of creditors

Succession

the legal transfer of a person's interests in real and personal property under the laws of descent and distribution

Priority

the order in which deeds or other documents are recorded. Whether it is a deed, deed of trust, or some other evidence of a lien or encumbrance, the priority is determined by the date stamped in the upper right-hand corner of the document by the county recorder.

grantee

the person to whom it is conveyed

judicial foreclosure

the procedure a lender uses to sell a mortgaged property with the involvement of a court. The process of judicial foreclosure is commonly used when foreclosing mortgages rather than deeds of trust. To foreclose in accordance with judicial procedure, a lender must prove that the borrower is in default. Once the lender has exhausted its attempts to resolve the default with the homeowner, the next step is to contact an attorney to pursue court action. An attorney files a lawsuit on behalf of the lender in court to foreclose the property. The borrower is sent a copy of the complaint (or petition) and is given a certain number of days to respond. If the court confirms that the debt is in default, the court will issue a decree of foreclosure in favor of the lender and set a sale date. After publication and posting of the sale notice, the court-appointed commissioner sells the property to the highest bidder and gives the buyer a sheriff's deed.

trustee's sale

the quickest and easiest method taking at the minimum two months. First, the beneficiary (lender) notifies the trustor (borrower) of default and requests the trustee to record a Notice of Default. Typically, the borrower has a certain number of days in which to cure the default. Foreclosure sales are conducted at the county courthouse (or a designated nearby location) in the county in which the property is located. The borrower must be notified of the proposed sale 3 to 4 weeks before the scheduled sale.

Involuntary alienation

the transfer of real property by law against the wishes of the owner. Title may be transferred involuntarily by operation of law, government action, adverse possession, intestacy, foreclosure, or even by physical changes in the land itself.

gift deed

used to make a gift of property to a grantee, usually a close friend or relative.

transfer-on-death deed (TOD) or beneficiary deed

used to transfer ownership of real property from the grantor to the grantee outside of probate at the time of the grantor's death. This type of deed results from the passage of the 2009 Uniform Real Property Transfer on Death Act (URPTODA). An owner may transfer real property to a beneficiary at the owner's death simply, directly, and without probate by executing and recording a TOD deed. Additionally, the URPTODA allows the owner to retain all ownership rights in the property while living, including the right to sell the property, revoke the deed, or name a different beneficiary.

dies testate

with a will

dies intestate

without a will

State Recording Acts: Notice Statute

A buyer should always check that no one, who might have a prior claim, is living on or using the property

Elements for a Valid Deed: Delivery and Acceptance

A deed is not effective until it is delivered by the grantor and accepted by the grantee. It must be the intention of the grantor that the deed is delivered and title be transferred during his or her lifetime. For example, a deed would not be valid if signed and put in a safe place without being recorded until the death of the grantor.

Elements for a Valid Deed: Competent Grantor/Identifiable Grantee

A deed must have an identifiable grantee. If it does not, it is void—not voidable. If the deed does not mean to transfer ownership of property to any particular grantee, it is not a conveyance. The grantee must be a legal entity.

What is the difference between a devise and a bequest?

A devise is a gift of real property by will. A bequest or legacy is a gift of money or personal property by will.

testator

A person who prepares a will

2 ways to revoke a will

A testator can revoke a will by a subsequent writing or by a physical act. A previous will can be revoked in writing in the new will. A testator can also revoke a will by destroying it. In this case, all copies should be destroyed. With a holographic will, certain provisions can be partially revoked by drawing lines through them or adding new provisions. This is not possible with an attested will.

Name the three parties in a trust.

A trust is a three-party relationship: trustor or settlor, trustee, and beneficiary.

Reasons Not to Use a Trust for Estate Planning

A will is simpler and easier to prepare The up-front cost of preparing a trust is likely to be higher than for a will A trust is only as good as the integrity of the person selected to administer it

Covenants and Warranties of a General Warranty Deed

Covenant of seizen. The grantor promises that he or she is the rightful owner and holds valid title to and possession of the property. Covenant of right to convey. The grantor promises that he or she has the legal right to convey title to the grantee. The grantee may recover damages up to the full purchase price if broken. Covenant against encumbrances. The grantor guarantees that the property is free from any undisclosed encumbrances. If breached, the grantee can sue for the cost to cure. Covenant of quiet enjoyment. The grantor ensures that the property's title can stand up to third-party claimants that take action to establish superior title. If the grantee's title does not withstand, he or she may sue for damages. Covenant of further assurance. The grantor ensures delivery of any instrument required to remove clouds on the title. Covenant of warranty forever. It guarantees the quality of the title against any future failure. If title does indeed fail, the grantor is liable.

Which real estate deed provides the most protection to the buyer?

General warranty deeds

Requirements for Adverse Possession

Hostile (meaning without permission, though the definition can vary by state); Actual (meaning physical occupation); Open and notorious (meaning the possession is obvious to onlookers); and Exclusive and continuous for a certain period of time.

Elements Required for a Valid Deed

In writing Competent grantor and identifiable grantee Adequate description of the property Granting clause Signed by the grantor Delivery by the grantor and acceptance by the grantee

Name the common law elements required for a valid deed to accomplish the transfer of title.

In writingCompetent grantor and identifiable granteeAdequate description of the propertyGranting clauseSigned by the grantor Delivery by the grantor and acceptance by the grantee

Name four involuntary transfers by operation of law.

Involuntary transfers by operation of law include foreclosures, partition actions, bankruptcy, quiet title actions, tax sales, execution sales, and condemnation proceedings under eminent domain.

Which co-owners might have a property dispute resolved with a partition action?

Joint tenants or tenants in common

In what two ways can real property be foreclosed?

Judicial foreclosure and non-judicial foreclosure

Methods of Foreclosure

Judicial foreclosure—requires court-ordered sale Non-judicial foreclosure—requires power of sale

Elements for a Valid Deed: In Writing

Most deeds are completed on printed forms. However, there is no legal requirement to use a specific form as long as the essential elements are included.

Most states have adopted which recording method?

Most states have adopted the race-notice method.

license

One of the conditions of obtaining adverse possession is that the use is hostile. If an owner grants the user permission to use the land, the user cannot be "hostile" or an adverse user.

What is the common use of a quiet title action?

Quiet title action is a court proceeding used to clear a cloud on the title of real property.

The process of recording allows documents that affect title to real property to be filed. Name the three types of state recording acts.

Race statute Notice statute Race-notice statute

Common Uses for Quit Claim Deeds:

Real estate transfers between family members Adding or removing a spouse from title Owner name changes Transferring real estate to a trust, LLC, or corporation Transferring real estate to a trust As with corporate transfers of real estate, transfers to a trust are equally common Family planning that deals with property meant to carry on through generations often involves an initial transfer from a family member into a trust Removing a cloud on title for title insurance

What is the difference between reliction and avulsion?

Reliction is the process of land adjacent to a watercourse covered by water becoming uncovered because of receding water. Avulsion is the process by which the action of water causes a sudden, perceptible loss of or addition to land.

What proof of purchase does a person receive who buys property at a tax sale?

Tax deed

Elements for a Valid Deed: Description

The deed must adequately describe the real property and be clear about which parcel of land is being conveyed. However, it is preferable (and required in most states) to use the legal description of the property.

__________ is the legal term for when the party who owns the property decides to transfer ownership to someone else or perhaps to a corporation, usually in exchange for some kind of compensation.

Voluntary alienation

Quiet title action

a court proceeding to establish an individual's right to ownership of real property against one or more adverse claimants. It is used to clear a cloud on the title of real property, such as titles based on adverse possession or the seller's title under a forfeited, recorded land contract. An action for quiet title requires a description of the property, the names of anyone who might have an interest in the property (i.e., descendants of prior owners), and the legal basis for the claim of title. Notice must be given to all potentially interested parties by publication. The court may grant a quiet title judgment. When recorded, the quiet title judgment removes the cloud on title and provides good legal title.

statutory dedication

a dedication made by a private individual to the public. Developers commonly use a statutory dedication to dedicate streets and common areas to the public.

patent

a document used by the government to transfer title to land instead of using a deed.

Adverse possession

a means of involuntary transfer in which the original owner loses possession when he or she fails to use land, and another individual, the claimant, makes use of the land for a prescribed period. Somewhat ironically, adverse possession converts what would legally be a trespass into ownership of the land that the adverse possessor occupies.

Transfer Title by Natural Causes

accession, accretion, alluvion, reliction, erosion, avulsion, and subsidence.

love and affection

consideration in a gift deed

administrator's deed

convey the title of real property to a grantee when a person dies intestate (without a will).

The most common method of transferring real property is with a:

deed

Testamentary trusts

established by will. This avoids any possible concern that the trustee will fail to carry out the decedent's wishes, because a testamentary trust, like the probate of a will, is overseen by the court and can have a non-institutional trustee. However, testamentary trusts share the same disadvantages with probating the estate directly via will—the lack of financial privacy and probate costs.

Just compensation

is fair and reasonable payment due to a private property owner when his or her property is condemned under eminent domain.

Testate

means that the decedent left proper instructions for the disposition of his or her estate.

of sound mind

means that the testator has sufficient ability to understand the business in which he or she is engaged.

Intestate

means the person died without having prepared a will or a trust.

Witnessed (attested) wills

must be in writing and signed by the testator in person or by another person for the testator (in the testator's presence). Two or more credible witnesses who are of sound mind must attest the will. The witnesses should be disinterested parties, which means that that they are not beneficiaries of the will.

executed

signed by the grantor or grantors if the property is owned by more than one person. The grantor's name must be in the same form that the grantor received title to the property or provide an explanation for using a different name.

recording act

state statute that establishes the keeping of official county records to track public land ownership. Recording acts help settle conflicts of ownership in real property by prioritizing documents of ownership. However, the order of priority depends on the type of statute that the state has adopted: race, notice, or race-notice. Most states have adopted the race-notice method.

Recording

the act of putting documents that affect title to real property into the official records at the County Recorders or Recorder of Deeds Office. The types of documents include deeds, mortgages and deeds of trust, easements, judgments, liens, foreclosures, or requests for notice of default. The recording process allows, rather than requires, these documents to be recorded with the recorder's office in the county where the real estate is located. Obviously, whenever an interest in real property is transferred voluntarily or involuntarily, the new owner should record the deed to protect his or her legal interests.

Bankruptcy

the court proceeding to relieve a person or company's financial insolvency. A person whose debts exceed assets and who is unable to pay current liabilities is financially insolvent. In a liquidation bankruptcy, title to all of the debtor's real property is vested in a court-appointed trustee. The debtor lists (schedules) all of the debts he or she owes. The bankruptcy judge may discharge the debts or may sell the debtor's property to satisfy the claims of the creditors. Creditors' claims are discharged as of the date of the filing. Although most of the person or company's debts are forgiven, not all debts can be discharged through bankruptcy. Non-dischargeable debts include income taxes, child support, alimony, student loans, gambling debts, and criminal fines.

execution sale

the forced sale of property through court action under a writ of execution The proceeds of the sale satisfy a judgment for money or foreclosure of a mortgage. Often, property involved in a mortgage foreclosure is sold at a sheriff's sale. The person that buys the property at the sheriff's sale receives a sheriff's deed.

tax sale

the forced sale of real property (usually via an auction) by a taxing authority (usually the county) to satisfy delinquent ad valorem property taxes along with any penalties and costs. Persons who buy property at a tax sale receive a tax deed.

Accretion

the gradual and imperceptible addition of land to a parcel by the natural deposition and accumulation of alluvium (or alluvion) upon the bank of a stream or river.

Erosion

the gradual wearing away of land by the natural processes of water, wind, or glacial ice. In this context, erosion is the opposite of accretion. It is the owner's responsibility to improve and protect his or her shoreline from erosion. If this is not possible, over time, the entire parcel may be lost to erosion.

devisee

the heir

grantor

the person conveying the property

eminent domain

the power of the government to take private property for public use. The "Takings Clause" as it is known, actually imposes two requirements on the government: first that the "taking" be for a "public use"; and second, that the public entity pay "just" (fair) compensation to the owner of the property for the land that has been taken.

non-judicial foreclosure (trustee's sale or power of sale)

the procedure a lender uses to sell a property without the involvement of a court

Avulsion

the process by which the action of water causes a sudden, perceptible loss of or addition to land. A large quantity of land is suddenly removed from the land of one person and added to the shore of another person—usually caused by flood or a change in the stream.

Condemnation

the process by which the government acquires private property for public use, under its right of eminent domain

Reliction

the process of land adjacent to a watercourse covered by water becoming uncovered because of receding water. It is a slow and imperceptible recession, and the recession must be permanent. In both instances, the landowner acquires title to the newly formed or exposed land on the bank.

Accession

the property owner's right to anything (even personal property) that is added to the real estate by the efforts of man or natural forces. The land itself can be enlarged or reduced by natural forces—gradually through accretion and reliction or quickly through avulsion.

Public grant

the transfer of title by the government to a private individual.

trustee's deed

when a property is purchased at a foreclosure sale.

inverse condemnation

which a private party can argue that activity by a public entity has effectively caused a "taking." Public entities do not always go through a public process to obtain title to land, even if it can be shown later that governmental activity has taken or damaged the land.