Unit 10

Suit To Quiet Title

A court action intended to establish or settle the title to a particular property, especially when there is a cloud on the title.

Title Insurance

A policy insuring the owner or the mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters specifically excluded by the policy.

Certificate Of Title

A statement of opinion on the status of the title to a parcel of real property based on an examination of specified public records.

Attorney's Opinion Of Title

An abstract of title that an attorney has examined and has certified to be, in the attorney's opinion, an accurate statement of the facts concerning the property ownership.

Not Covered by Either Policy

Defects and liens listed in policy Defects known to buyer Changes in land use brought about by zoning ordinances

Standard Coverage

Defects found in public records Forged documents Incompetent grantors Incorrect marital statements Improperly delivered deeds

Actual Notice

Express information or fact; that which is known; direct knowledge.

Marketable Title

Good or clear title, reasonably free from the risk of litigation over possible defects

The Uniform Commercial Code (UCC)

Is a commercial law statute that has been adopted to some extent in all 50 states. The UCC applies to personal property transactions; it does not apply to real estate. The UCC governs the documents when personal property is used as security for a loan.

Constructive Notice

Notice given to the world by recorded documents. All people are charged with knowledge of such documents and their contents, whether or not they have actually examined them. Possession of property is also considered constructive notice that the person in possession has an interest in the property.

Extended Coverage

Standard coverage plus defects discoverable through the following: Property inspection, including unrecorded rights of persons in possession Examination of survey Unrecorded liens not known of by policyholder

Recording

The act of documenting or entering documents affecting or conveying interests in real estate in the recorder's office established in each county. Until it is recorded, a deed or mortgage ordinarily is not effective against subsequent purchasers or mortgagees.

The body of law that covers topics such as security agreements, financing statements, and bulk transfers is the A) Statute of Limitations. B) American Land Title Association. C) Parol Evidence Rule. D) Uniform Commercial Code.

The answer is Uniform Commercial Code. The Uniform Commercial Code (UCC) is a commercial law statute that applies to personal property transactions; it does not apply to real estate. The UCC governs the documents when personal property is used as security for a loan.

Chain of title is MOST accurately defined as A) 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. B) a report of the contents of the public record regarding a particular property. C) a record of the property's ownership. D) a summary or history of all instruments and legal proceedings affecting a specific parcel of land.

The answer is a record of the property's ownership. The term chain of title refers to the record of a property's ownership over a period of time. Each owner is linked to the next, and then to the next, and so on, so that a "chain" is formed.

When a title insurance policy is being issued, the public records are searched and the title company's record of title is continued to date. When the title examination is complete, the title company notifies the parties in writing of the condition of the title. This notification is called A) a certificate of title. B) an abstract. C) a chain of title. D) a report of title or commitment for title insurance.

The answer is a report of title or commitment for title insurance. After examining public records, the title insurance company issues what may be called a preliminary report of title or a commitment to issue a title policy.

Which of the following would be used to clear a defect from the title records? A) An estoppel certificate B) A suit to quiet title C) A lis pendens D) A writ of attachment

The answer is a suit to quiet title. If ownership cannot be traced through an unbroken chain, a gap or cloud in the chain of title is said to exist. In these cases, the cloud on the title makes it necessary to establish ownership by a court action called a suit to quiet title.

Which of the following is acceptable as the evidence of marketable title? A) An affidavit B) A warranty deed C) A trust deed D) A title insurance policy

The answer is a title insurance policy. A deed by itself is not considered sufficient evidence of ownership. Title insurance is a contract under which the policyholder is protected from losses arising from defects in the title and is considered the best defense of title.

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

The answer is a title insurance policy. Title insurance is a contract under which the policyholder is protected from losses arising from defects in the title and is considered the best defense of title.

To be eligible for recording in Pennsylvania, a document must be in writing, properly executed and A) acknowledged. B) countersigned. C) the signature verified. D) witnessed.

The answer is acknowledged. To be eligible for recording in Pennsylvania, a document must be in writing, properly executed (signed), and acknowledged before a notary public.

A title search of the public records may be conducted by A) anyone who obtains a court order under the Freedom of Information Act. B) attorneys and abstractors only. C) anyone. D) attorneys, abstractors, and real estate licensees only.

The answer is anyone. By entering documents into the public record, the information becomes available to anyone who may be interested in researching the title to a parcel of real estate. Access to public records is unlimited.

At what point in the transaction should a buyer raise concerns about any defects in the title? A) At settlement B) At the time the contract is created C) After title has passed D) Before acceptance of the deed

The answer is before acceptance of the deed. While a buyer cannot be forced to accept a conveyance that is materially different from the one bargained for in the sales contract, the buyer (or the buyer's attorney) must raise questions of marketable title before acceptance of the deed. Once a buyer has accepted a deed with unmarketable title, the only available legal recourse is to sue the seller under any covenants of warranty contained in the deed.

If a property has encumbrances, it A) can be sold if a buyer agrees to take it, subject to the encumbrances. B) cannot be sold. C) can be sold only if title insurance is provided. D) cannot have a deed recorded without a survey.

The answer is can be sold if a buyer agrees to take it, subject to the encumbrances. An encumbrance is a right, claim, or interest held by someone other than the landowner. The fact that title is encumbered does not prevent that title from being transferred, but the new owner's title would be subject to those existing encumbrances.

Which of the following would NOT be acceptable evidence of ownership? A) Abstract B) Attorney's opinion C) Deed signed by the last seller D) Title insurance policy

The answer is deed signed by the last seller. A deed is not acceptable evidence of ownership because it does not contain other encumbrances such as liens, judgments, taxes, assessments, and more. Attorney's opinion, title insurance policy, and/or an abstract are acceptable.

A couple is frantic because they cannot find their deed and now want to sell the property. They A) do not need the original deed in order to sell, if it was recorded. B) may need to file a suit to quiet title. C) should execute a replacement deed to themselves. D) will have to buy title insurance.

The answer is do not need the original deed in order to sell, if it was recorded. If the deed had been recorded when the couple took title, their interest is a matter of public record. They do not need the original document in order to transfer title to a purchaser.

The part of the title insurance policy that sets forth all the encumbrances and defects that will not be insured against is called A) a schedule of defects. B) a nonexclusionary clause. C) a citation clause. D) exclusions.

The answer is exclusions. The policy generally names certain uninsurable losses, called exclusions. These include zoning ordinances, restrictive covenants, easements, certain water rights, current taxes, and special assessments.

To give notice of a security interest in personal property items, a lienholder must record which of the following? A) Security agreement B) Chattel agreement C) Quitclaim deed D) Financing statement

The answer is financing statement. For a lender to create a security interest in personal property, the Uniform Commercial Code (UCC) requires the borrower to sign a security agreement. A short notice of this agreement, called a financing statement or UCC-1, must be filed with the recorder of deeds.

Documents affecting real estate are recorded or filed with the county in which the property is located in order to A) comply with the terms of the statute of frauds. B) satisfy the legal requirements for recording. C) give constructive notice of the real estate interest. D) prove the execution of the document.

The answer is give constructive notice of the real estate interest. Constructive notice is the legal presumption that information is available and can be obtained by an individual through diligent inquiry.

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

The answer is improperly delivered deeds. A standard title insurance policy usually covers improperly delivered deeds, defects found in public records, forged documents, incompetent grantors, and incorrect marital statements.

A seller delivered title to a buyer at closing. A title search had disclosed no serious defects, and the title did not appear to be based on doubtful questions of law or fact or to expose the buyer to possible litigation. The seller's title did not appear to present a threat to the buyer's quiet enjoyment, and the title insurance policy provided was sufficient to convince a reasonably well-informed person that the property could be resold. The title conveyed would commonly be called A) an abstract of title. B) an attorney's opinion of title. C) a marketable title. D) a certificate of title.

The answer is marketable title. A marketable title is one that does not have serious defects, will not expose the purchaser to litigation, and should convince a reasonably well-informed and prudent buyer that the property could be sold or mortgaged later.

Evidence of the kind of estate and all liens against a parcel of real estate can usually be proven by A) a court suit for specific performance. B) one of the forms of proof of ownership. C) a foreclosure suit. D) a recorded deed.

The answer is one of the forms of proof of ownership. Proof of ownership is evidence that title to the property is marketable. The grantor's interest in the property, as well as proof of the condition of the grantor's interest at the time of conveyance, can be ascertained by a certificate of title or title insurance. Both are used as proof of ownership.

The date and time a document was recorded establishes which of the following? A) Priority of rights B) Marketable title C) Chain of title D) Subrogation

The answer is priority of rights. Priority refers to the order of rights in time. The date and time a document is recorded establishes the priority of the right or interest.

What is the effect of recording a warranty deed? A) Protects the interests of the grantee B) Guarantees ownership C) Allows claims of parties in possession D) Provides defense against adverse possession

The answer is protects the interests of the grantee. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does taking physical possession of a property.

A title insurance policy with standard coverage generally covers all of the following EXCEPT A) incorrect marital statements. B) forged documents. C) incompetent grantors. D) rights of parties in possession.

The answer is rights of parties in possession. A standard coverage title insurance policy normally insures the title as it is known from public records. This coverage does not include the rights of the parties in possession, but it does include such defects as forged documents, conveyances by incompetent grantors, incorrect marital statements, and improperly delivered deeds.

hen a claim is settled by a title insurance company, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is called A) abstract of title. B) escrow. C) subordination. D) subrogation.

The answer is subrogation. Subrogation is used by title insurance companies to acquire from the insured party the rights to initiate legal action to recover any claims that have been paid to the insured.

When the title insurance company settles a claim, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is known as A) subordination. B) subrogation. C) surety bonding. D) caveat emptor.

The answer is subrogation. When a title company makes a payment to settle a claim covered by a policy, the company generally acquires the right to any remedy or damages available to the insured. This right is called subrogation.

A purchaser went to the county building to check the records, which showed that that the seller was the grantee in the last recorded deed and that no mortgage was on record against the property. The purchaser may assume which of the following? A) All taxes are paid and no judgments are outstanding. B) The seller did not mortgage the property. C) No one else is occupying the property. D) The seller has good title.

The answer is the seller did not mortgage the property. Recording a mortgage serves constructive notice of the claim to the property by the mortgage holder. Because there was no mortgage in the public record, the purchaser may assume that the seller did not mortgage the property.

The document(s) called title evidence include A) abstract of title. B) warranty deeds. C) security agreements. D) title insurance.

The answer is title insurance. Title evidence establishes proof of ownership. In Pennsylvania, a certificate of title or title insurance is used as proof of ownership.

The BEST reason for a buyer to obtain title insurance is A) to ensure that the seller can deliver marketable title. B) to pay future liens that may be filed. C) that the mortgage lender requires it. D) to ensure that the abstractor has prepared a complete summary of title.

The answer is to ensure that the seller can deliver marketable title. Title insurance is considered the best defense of title; the title insurance company will defend any lawsuit based on an insurable defect and pay claims if the title proves to be defective.

The person who prepares an abstract of title for a parcel of real estate A) issues a certificate of title. B) inspects the property. C) writes a brief history of the title after inspecting the county records for documents affecting the title. D) insures the condition of the title.

The answer is writes a brief history of the title after inspecting the county records for documents affecting the title. An abstractor examines public records in the recorder of deeds and other government offices. Following the search, the abstractor prepares a summary report of events and proceedings throughout the title's history. This report is an abstract of title.

Title Search

The examination of public records relating to real estate to determine the current state of the ownership.

Priority

The order of position or time. The priority of liens is generally determined by the chronological order in which the lien documents are recorded; tax liens, however, have priority even over previously recorded liens.

Once a buyer has accepted a deed with unmarketable title, the only available legal recourse is to sue the title company under any covenants of warranty contained in the deed. True or False?

The statement is false. A buyer cannot be forced to accept a conveyance that is materially different from the one bargained for in the sales contract. However, questions of marketable title must be raised by a buyer (or the buyer's attorney) before acceptance of the deed. Once a buyer has accepted a deed with unmarketable title, the only available legal recourse is to sue the seller under any covenants of warranty contained in the deed.

Deeds and mortgages can serve constructive notice whether or not they are recorded. true or False?

The statement is false. Deeds and mortgages that are not recorded cannot serve constructive notice. Although these documents are not necessarily void, they may not be effective on future owners, according to Pennsylvania law, unless they have been recorded.

The county recorder of deeds maintains MOST of the public records that affect title to real property in Pennsylvania. True or False?

The statement is true. Public records contain detailed information about each parcel of real estate. The real estate recording system includes written documents that affect title such as deeds and mortgages. In Pennsylvania, the county recorder of deeds maintains most of the public records that affect title to real property.

Subrogation

The substitution of one creditor for another, with the substituted person succeeding to the legal rights and claims of the original claimant. Subrogation is used by title insurers to acquire from the injured party rights to sue in order to recover any claims they have paid.

A standard coverage policy insures against such hidden defects as conveyances by incompetent grantors and improperly delivered deeds. True or False?

This statement is true. A standard coverage policy normally insures the title as it is known from the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements, and improperly delivered deeds.

Customarily, in Pennsylvania, a

a certificate of title or title insurance is used as proof of ownership.

To be marketable, a title must

disclose no serious defects and not depend on doubtful questions of law or fact to prove its validity; not expose a purchaser to the hazard of litigation or threaten the quiet enjoyment of the property; convince a reasonably well-informed and prudent person, acting on business principles and with knowledge of the facts and their legal significance, that she could sell or mortgage the property at a later time; and be insurable by a reputable title insurance company at ordinary rates.

In Pennsylvania

o be eligible for recording in Pennsylvania, a document must be in writing and properly executed (signed).

An abstract of title is

summary report of what the title search found in the public record. The person who prepares this report is called an abstractor

Chain of title is

the record of a property's ownership over a period of time. Beginning with the earliest or original owner, title may pass to many individuals. Each owner is linked to the next so that a chain is formed.