Chapter 8 Legal and Equitable Title

Laws of descent

-Involuntary alienation occurs when a title-holder dies without a valid will. The state's statutes of descent and distribution identify heirs and the respective shares of the estate they will receive. -In the absence of heirs, title transfers to the state or county by escheat. Abandonment -Property that has been abandoned for a statutory period may also escheat to the state or county.

To claim legal title, the adverse possessor must:

-be able to show a claim of right or color of title as reason for the possession have notorious possession- which is possession without concealment -maintain a consistent claim of hostile possession- a claim to ownership and possession regardless of the owner's claims or consent -occupy the property continuously for a statutory period of time and in in some states pay taxes

Statutory Deed: Special warranty deed

-the grantor warrants only against title defects or encumbrances not noted on the deed that may have occurred during the grantor's period of ownership or trusteeship. -often used by trustees and grantors who acquired the property through a tax sale. (The overall special warranty covenant is: "I own and will defend against my acts only.")

Statutory Deeds: General warranty deed

-the most commonly used deed, contains the fullest possible assurances of good title and protection for the grantee. -deed is technically a bargain and sale deed in which the grantor promises to defend against any and all claims to the title. (The overall general warranty covenant is: "I own and will defend.")

quiet title suit

-the owner may file if a party responsible for encumbering title refuses to quitclaim the interest, -suit requires the lienor to prove the validity of an interest. If the defendant is unable to do so, the court removes the cloud by decree. (The overall quit claim covenant is: "I may or may not own, and I won't defend.")

heir or devisee

A beneficiary of a will . The property transferred by the will is the devise.

Types of Will: Nuncupative

made orally, and written down by a witness; generally not valid for the transfer of real property

Validity of Transfer- Recording

not necessary to make a deed valid but is in the grantee's best interests to do so. Recording the deed gives the public constructive notice of the grantee's ownership

Types of Will Approved

on pre-printed forms meeting the requirements of state law

Equitable Title

the interest or right to obtain legal title to a property in accordance with a sale or mortgage contract between the legal owner and a buyer or creditor

Foreclosure

A property owner who fails to fulfill loan obligations or pay taxes may lose an estate through foreclosure.

Title Search

Before issuing a title insurance policy, a title company conducts a title search to uncover defects in title or unrecorded breaks in the chain of title.

Torrens System

Certain states and counties use, differs from other title recording systems in that title passes only when the conveyance has been duly registered on the title certificate itself. Encumbrances likewise have no legal effect until they are recorded. In effect, the Torrens title record is the title itself.

Intestate proceeding with heirs

If the decedent died without a valid will, the estate passes to lawful heirs according to the state's laws of descent and distribution, or succession. (For example, John Astor dies intestate, leaving a wife and four children. The laws of descent in his state provide that the surviving spouse receives one-third of the estate, and the four children receive equal shares of the remaining two thirds. )

Recording system

There are no federal recording standards. Each state prescribes procedures and requirements for recording in public title records: forms, proper execution, acknowledgment, and witnessing.

Alienation

Transfer of title to real estate, occurs voluntarily and involuntarily. When the transfer uses a written instrument, the transfer is called a conveyance.

Eminent domain

Various government and public entities can transfer private property to the public sphere by the power of eminent domain. possession- State laws may allow a real property owner to lose legal title to an adverse prossessor

four principal forms of evidence to support assurances:

a Torrens certificate a title insurance policy an attorney's opinion of the title abstracta title certificate

Probate

a court proceeding; generally settles a decedent's estate, whether the person has died testate (having left a valid will) or intestate (having failed to do so).

title plant

a duplicate set of records of a property copied from public records and maintained by a private company, such as a title company.

Deed

a legal instrument

Will (last will and testament)

a legal instrument for the voluntary transfer of real and personal property after the owner's death. It describes how the maker of the will, called the testator or devisor, wants the property distributed.

Title Record Purpose: clouded title

a missing link in the chronology of owners, or a defective conveyance, the chain is said to be broken. To remove the cloud, an owner may need to initiate a suit to quiet title, which clears the title record of any unrecorded claims.

Actual Notice

a person provides by producing direct evidence, such as by showing a valid will. party receives by seeing direct evidence, such as by reviewing the deed, reading title records, or physically visiting the property to see who is in possession.

a title marketable title to a buyer

a seller must show that the title is free of doubts about the identity of the current owner; defects, such as an erroneous legal description; claims that could affect value; undisclosed or unacceptable encumbrances

Involuntary alienation

a transfer of title to real property without the owner's consent, occurs primarily by the processes of descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel.

A deed of conveyance: Warrant of quiet enjoyment

assures that the grantee will not be disturbed by third party title disputes

A deed of conveyance: Warranty forever; warranty of title

assures that the grantee will receive good title, and that grantor will assist in defending any claims to the contrary

A deed of conveyance: Warrant of seisin

assures that the grantor owns the estate to be conveyed, and has the right to do so

A deed of conveyance: Warrant of further assurance

assures that the grantor will assist in clearing any title problems discovered later

A deed of conveyance: Warrant of encumbrances

assures that there are no encumbrances on the property except those expressly named

documentary stamp tax on a conveyance of real property-

based on the actual price of the property conveyed, thus enabling taxing authorities to ascertain current market value for ad valorem tax purposes. Payment of the tax is evidenced on the deed.

claim of right

based on the adverse possessor's occupying and maintaining the property as if he or she were the legal owner.

Title Records

contain a history of every parcel of real estate in the county, including names of previous owners, liens, easements, and other encumbrances that have been recorded. Deeds, mortgages, liens, easements, and sale contracts are among the documents that must be recorded .

Statutory Deeds

covenants that are defined in law and do not need to be fully stated in the deed.

Validity of Transfer- Include Consideration

deed must be accompanied by valuable (monetary) or good (love and affection) consideration, but the amount need not reflect the actual price in most cases

Validity of Transfer- Be signed by the Grantor

deed must be signed by the grantor, but need not be signed by the grantee unless the deed contains special provisions requiring the grantee's acceptance. Grantors may give power of attorney to other parties, authorizing them to execute deeds on their behalf. The power of attorney authorization should be recorded to ensure a valid conveyance.

Conveyance clauses

describe the details of the transfer. principal clauses are: Granting clause, or premises clause (the only required clause; contains the conveyance intentions; names the parties; describes the property; indicates nominal consideration)

Habendum clause

describes the type of estate being conveyed (fee simple, life, etc.)

Notorious possession and hostile possession

give constructive notice to the public, including the legal owner, that a party other than the legal owner is occupying and claiming to own the property

Validity of Transfer- Be Acknowledged

grantor must declare before a notary or other authorized person that the grantor's identity and signature are genuine, and that the deed execution was a free, voluntary act. The grantor then receives a certificate of acknowledgment signed by the notary. Some states require acknowledgment to complete a valid conveyance. Most states require it before they will record the deed. A deed without an acknowledgement, therefore, tends to endanger one's claim to a property.

Tenendum clause

identifies property being conveyed in addition to land

Types of Will: Holographic

in the testator's handwriting, dated and signed

Types of Will: Witnessed

in writing and witnessed by two people

Deed Delivery and acceptance

it is necessary for a deed to be delivered to and accepted by the grantee for title to pass

Validity of a Will

law generally requires that: the testator be of legal age and mentally competent, the testator indicate that the will is the "last will and testament", the will be signed, the completion of the will be witnessed and signed by the witnesses, and the will be completed voluntarily, without duress or coercion

Deed of conveyance, or Deed

living owner makes a private grant that occurs when the owner dies is a transfer by will.

Constructive notice

or legal notice, is knowledge that a person could have or should have obtained by recordation of ownership documents in public records, specifically, title records. Since public records are open to everyone, the law generally presumes that when evidence of ownership is recorded, the public at large has received constructive notice of ownership

Avoiding adverse possession

owner can avert the danger by periodically inspecting the property within statutory deadlines and evicting any trespassers found. The owner may also sue to quiet title, which would eliminate the threat of the adverse possessor's claim to legal title.

Legal Title

owning complete bundle of rights that attach to the property including the right to possession. someone who possesses all ownership interests owns legal title to the property

Covenant, warrant, conveyance clause

present the grantor's assurances to the grantee.

Estoppel

prevents a person from claiming a right or interest that is inconsistent with the person's previous statements or acts. -disallows the grantor's claim because of the prior conveyance action. -The grantee remains legal owner and benefits from the cleared title as well.

Title Records Purpose: Buyer protection

protect the buyer by revealing whether a property has marketable title, one free of undesirable encumbrances. -The buyer is legally responsible for knowing the condition of title, since it is a matter of public record. -Recording a transaction also protects a buyer by replacing the deed as evidence of ownership.

Title Records Purpose: Lienholder protection

protect the lienholder by putting the public on notice that the lien exists, and that it may be the basis for a foreclosure action. Recording also establishes the lien's priority.

Title Records Purpose: Public notice

protect the public by giving all concerned parties constructive notice of the condition of a property's legal title: who owns the property, who maintains claims and encumbrances against the property.

Extended coverage

protects against liabilities that may not be of public record, including fraud, unrecorded ownership claims, unintentional recording errors, and unrecorded liens. Extended coverage may also protect against adverse possessors, boundary disputes, and prescriptive easements.

Standard coverage

protects against title defects such as incompetent grantors, invalid deeds, fraudulent transaction documents, and defects in the chain of title.

Reddendum clause, or reserving clause

recites restrictions and limitations to the estate being conveyed, e.g., deed restrictions, liens, easements, encroachments, etc.

Title Records Purpose: Chain of title

refers to the succession of property owners of record dating back to the original grant of title from the state to a private party.

Color of title

results when a grantee has obtained a defective title, or received title by defective means, but occupies the property as if he or she were the legal owner. -A court may hold that a claim of right or a claim of colored title is a valid reason for the possession.

adverse possessor

someone who enters, occupies, and uses another's property without the knowledge or consent of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time.

Attorney's opinion of abstract

states that the attorney has examined a title abstract, and gives the attorney's opinion of the condition and marketability of the title. (an opinion is not a proof or guarantee of clear title. Further, it offers no protection in the event title turns out to be defective.)

Warranty against grantor's acts

states the assurance of a trustee, acting as grantor on behalf of the owner, that nothing has been done to impair title during the fiduciary period

Title certificate

summary of the condition of title as of the date of the certificate, based on a search of public records by an abstractor or title analyst. The certificate does not guarantee clear title against defects, unrecorded encumbrances or encroachments.

Statutory Deeds: Special purpose deeds

tailored to the requirements of specific parties, properties, and purposes.

Intestate proceeding with no heirs

the estate escheats, or reverts, to the state or county after all claims and debts have been validated and settled.

Statutory Deeds: Bargain and sale deed

the grantor covenants that the title is valid but may or may not warrant against encumbrances or promise to defend against claims by other parties. (The overall bargain and sale covenant is: "I own, but won't defend.")

Title Record Purpose: Title search

title abstractor or title company analyst conducts the search of public records. Insurers and lenders generally require the search to identify title defects and ascertain the current status of encumbrances.

Statutory Deed: Quitclaim deed

transfers real and potential interests in a property, whether an interest is known to exist or not. The grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee. typically used to clear title rather than convey it, where there is a possibility that prior errors in deeds or other recorded documents might cloud (encumber) the title, the relevant parties execute a quitclaim deed to convey "any and all" interest to the grantee.

Torrens System

type of title that passes only when the deed has been registered on the certificate of title and a transfer certificate has been issued to the new owner. (used in some states)

Voluntary alienation

unforced transfer of title by sale or gift from an owner to another party. If the transferor is a government entity and the recipient is a private party, the conveyance is a public grant. If the transferor is a private party, the conveyance is a private grant.

Personal representative's deed: Guardian's deed

used by a court-appointed guardian to transfer property of minors or mentally incompetent persons

Personal representative's deed

used by an executor to convey a decedent's estate; also called an executor's deed

Partition deed

used to convey co-owned property in compliance with a court order resulting from a partition suit; partition suit terminates an estate when one or more co-owners want to dissolve their relationship and are unable to do so without the assistance of a court.

Personal representative's deed: Sheriff's deed

used to convey foreclosed property sold at public auction

Master deed

used to convey land to a condominium developer; accompanied by the condominium declaration when recorded

Tax deed

used to convey property sold at a tax sale

Personal representative's deed: Deed of trust-

used to convey property to a third party trustee as collateral for a loan; on satisfaction of the loan terms, the trustee uses a reconveyance deed to convey the property back to the borrower

Deed in trust

used to convey property to the trustee of a land trust. not to be confused with deed of trust

Patent deed

used to transfer government property to private parties

Grantor

uses deed to transfer title to real estate voluntarily to another party, the grantee.

Title Record Purpose: Abstract of Title

written, chronological summary of the property's title records and other public records affecting rights and interests in the property. -includes the property's chain of title and all current recorded liens and encumbrances, by date of filing.

Testate proceeding

If the decedent died with a valid will, the court hears the claims of lienors and creditors and determines their validity. First in line are the superior liens: those for real estate taxes, assessment taxes, federal estate taxes, and state inheritance taxes. If the estate's liquid assets are insufficient to pay all obligations, the court may order the sale of personal or real property to satisfy the obligations.