Real Estate Chapter 3 - Conveying Real Property Interests

Voluntary Conveyance by a deed

Great majority are voluntary. Private transfers. The transfer may result from a sale and purchase, a gift, or an exchange.

Which clause in a deed defines or limits the interest being conveyed?

Habendum

Which of these statements best characterizes the doctrine of constructive notice?

If it is possible to know about a claim it is enforceable.

Description of Land

The important requirement for the land description is that it be unambiguous. These "legal descriptions" are metes and bounds, subdivision plat lot and block number, and government rectangular survey

The general warranty deed imposes the highest financial responsibility of any deed for the grantor to have good title. This is because the deed has

The maximum number of covenants

Conveyance without a Deed

There are multiple ways an easement can arise incidental to a voluntary conveyance of property. These include variations of implied easements and easement by estoppel.

Dedication

When a developer creates a subdivision, it is common to dedicate (convey to the local government) the street rights-of-way and perhaps open spaces such as parks, school sites, or retention ponds. Frequently, this is done simply through statements in a subdivision plat map (discussed later in this chapter), and no deed is involved.

The primary means of satisfying the doctrine notice is by recording

any document conveying a real property interest

Deeds

are the primary means of conveying interests in real property. They are a special form of contract, distinguished by a group of clauses that determine the exact property interest being conveyed. Deeds vary in "quality" by the strength of covenants (i.e., promises) they contain. Under some circumstances, however, property can transfer to a new owner without a deed and even with no explicit document at all. Grantor (with signature) and grantee. Recital of consideration. Words of conveyance. Covenants. Habendum clause. Exceptions and reservations clause (if any). Description of land. Acknowledgment. Delivery. Unlike most contracts in which both parties must be legally competent and of legal majority age, only the grantor must meet these conditions for a deed

Exceptions and Reservations Clause

can contain a wide variety of limits on the property interest conveyed. This clause may contain any "deed restriction" the grantor wishes to impose on the use of the property.

The south one-half of the southeast one-fourth of the northwest one fourth of the northwest one-fourth of a certain section would contain ___ acres

5 acres

A square mile contains ____ acres, and each acre contains ___ square feet

640, 43560

Easement of necessity

A created implied right of use that allows the owner of a landlocked parcel the right to use a path across another property for ingress and egress Trouble can arise with these implied easements when the servient parcel bearing the easement subsequently passes to a new owner. There will be no indication of the easement in public records, even though it must exist.

Chain of title

A set of deeds and other documents that traces the conveyance of the fee, and any interests that could limit it, down from the earliest time to the current owner.

To establish title for real property the most important considerations are

Actual notice, all recorded evidence

Required conditions for successful acquisition of property through adverse possession are that possession must be

Actual use, continuous, hostile to the owner's interest, open and notorious, exclusive

A quitclaim deed commonly would be used for

Adding a spouse to a property title Clearing a conflicting claim to title

Devised

Conveyance or distribution of a decedent's real property though a will.

Accurate statements about metes and bounds land descriptions include:

In the direction N 39 degrees 15 minutes W, W refers to the direction of rotation from north, each compass degree is divided into 60 minutes, in the direction N 39 degrees 15 minutes W, N indicates to start by finding north.

Covenants

Legally bound promises for which the grantor becomes liable

The order of steps from first to last in creating a chain of title are:

Locating all recorded documents relevant to the property, evaluating each relevant document for possible conveyance of title, reconstructing the sequence of fee holders down to the present owner, identifying any possible flaws in the sequence of ownership transmission

The first, and historically the most challenging step in a metes and bounds description is

Locating the point of beginning

Involuntary Conveyance by a Deed

Several kinds of conveyances result from events beyond control of the grantor. These include probate proceedings to settle the grantor's estate, sale of property in bankruptcy proceedings, divorce settlement, condemnation proceedings, and foreclosure.

Land descriptions

Since land parcels are defined on a continuous surface, adjacent everywhere to other land parcels, description is challenging. It cannot be accomplished, for example, by a bar code. Errors in a land description must imply a loss to some landowner that could be substantial. Three methods: Metes and Bounds Subdivision Play Lot and Block Number Government Rectangular Survey

Doctrine of constructive notice

The common law tradition is that a person cannot be bound by claims or rules he or she has no means of knowing. The corollary is that once a person is capable of knowing about a claim or rule, he or she can be bound by it. The importance of the doctrine here is that the public need not actually be aware of contracts conveying interests in real property for the contracts to be valid and enforceable. The public merely has to be able to know about the contracts.

Title abstract

The compilation of all documents summarizing the chain of title into chronological volume and then given to an attorney for final interpretation.

Title Search

The task of examining the evidence of title in the public records.

For real property the best definition of title is

a collection of documents and other evidence pointing to some person(s) or entity as holding the fee, or titled, interest

Covenant of seizin

a promise that the grantor truly has good title and the right to convey it

Covenant against encumbrances

a promise that the property is not encumbered with leins, easements, or other such limitations as noted in the deed.

Covenant of quiet enjoyment

a promise that the property will not be claimed by someone with a better claim to title.

Encroachments

intrusions on the property by structures from adjacent land.

Special Warranty Deed

is identical to the general warranty deed, except that it limits the time of the grantor's warranties to her time of ownership.

Implied Easements

is not created by an explicit deed or an explicit clause in a deed. It often is created when a subdivision map is placed in the public records. On the map will be utility easements and possibly easements of access such as bike paths or footpaths that do not appear in any specific deed.

Judicial Deeds and Trustee's Deeds

is one issued as a result of court-ordered proceedings. It may include deeds issued by administrators of condemnation proceedings or administrators of foreclosure sales. Trustee: is issued by the trustee in a court-supervised disposition of property—for example, by an executor and administrator of an estate, a guardian of a minor, a bankruptcy trustee, or an attorney in divorce proceedings.

The description of land by subdivision play lot and block number

is the simplest form of description for most property owners to interpret.

Actual Notice

recording statutes cannot assure complete knowledge of real property interests. is considered to have the same force as constructive notice. The obvious implication of actual notice is that property should never be acquired until it has been inspected. By the same token, when the validity of title is being examined, as discussed below, part of the process must be to inspect the property.

Delivery

refers to an observable, verifiable intent that the deed is to be given to the grantee. Normally, this is accomplished when the grantor hands the deed to the grantee at closing. However, it also may occur through third parties, such as the attorney of either party.

In the township third north and second west from the intersection of the principal meridian and base line, the section in the southwest corner would be described as

section 31, range 2W, tier 3N

Evidence of Title

substantiation that demonstrates that good and marketable title is being conveyed as part of a real estate transaction The seller traditionally can meet this requirement in one of two ways: Title abstract, together with an attorney's opinion of title. (Note that the abstract alone is not sufficient.) Title insurance commitment. (is deemed equivalent to the traditional abstract and opinion of title)

Probate

t the death of a property owner, the property will convey in one of two modes: testate—in accordance with a will, or intestate—without a will. where the property is located will govern the disposition procedure.

Two conveyances of real property that likely would be revealed only by actual notice are

Adverse possession, an implied easement of access.

Easement by Prescription

An easement acquired by continuous, open, and hostile use of the property for the period of time prescribed by state law.

Easement by prior use

An implied right of use that allows the owner of a landlocked parcel the right to use a previously existing path across another property for access and egress

Involuntary Conveyance Without a Deed

An owner of land may involuntarily and unknowingly give up rights to land. The interest sacrificed can be either an easement, called an easement by prescription, or title to the land, called title by adverse possession. This can occur if others use the property and their use meets five conditions, which must be: Hostile to the owner's interests, and under claim of right (i.e., without the owner's permission and acting like an owner). Actual—the land must be employed in some natural or normal use. (This may be only seasonal or occasional when appropriate to the use.) Open and notorious—there can be no effort to disguise or hide the use from the owner or neighbors. Continuous—possession must be uninterrupted byPage 54 a period specified by state law; this period can be as short as 5 years or as long as 20 years. Exclusive—the claimant cannot share possession with the owner, neighbors, or others.

plat lot and block number

An unambiguous means to provide a description of property that identifies each parcel in a surveyed map of a subdivision. The recorded plat map contains other important information as well. It usually shows the location of various easements such as utilities, drainage, storm water retention, and bicycle paths. In addition, it may contain a list of restrictive covenants, though it is more common in current practice to record the restrictions in an associated declaration.

The basic grid the government rectangular survey of land description includes.

Baseline running east and west, principal median running north and south

Condemnation

By the power of eminent domain, government can take private property for public purpose through due process, and with just compensation.

Under the doctrine of constructive notice, if people ___ a claim it is enforceable.

Can learn about

For a deed, identify the requirements of a grantee

Clearly identifiable

Real Property Complexity and Public Records

Clearly, therefore, within the property rights system that we have described, the only way to be certain what rights are obtainable for a parcel of land, and from whom, is to be able to account for the complete legal history of the property.7 Thus, our society has established a framework of laws, public record systems, and procedures to preserve this real property history. We describe this system in the sections below.

The covenant in a deed that promises the grantor actually holds title is the

Covenant of seizin

Under the Statue of Frauds, which of these must be in writing to be enforceable.

Deed of more than one year.

Habendum Clause

Defines or limits the type of interest being conveyed. The legal tradition recognizes certain words and phrases as signals of various real property interests

words of conveyance

Early in the deed will be words such as "does hereby grant, bargain, sell, and convey unto ..." they assure that the grantor clearly intends to convey an interest in real property. they indicate the type of deed offered by the grantor.

Modes of real property conveyance of easements where no deed is involved include

Easement of necessity Easement by estoppel Easement by prior use

Covenants in a deed are important because they

Enable the grantee to sue for damages for misrepresentations about title Bind the grantor to legal promises about title not encumbered with liens and easements

Government Rectangular Survey

For each region a baseline, running east and west, and a principal meridian, running north and south, were established as reference lines. From these lines a grid system was surveyed involving checks (24 miles square), townships (6 miles square), and sections (1 mile square). The numbering begins in the northeast corner of the township and ends in the southeast corner, going back and forth horizontally in between. Note that a section is not simply any one-square-mile area. It is a specifically surveyed and identified square mile within the framework of the rectangular survey system. A section (which contains 640 acres) is subdivided, as necessary, according to a set of simple rules. It typically is quartered (160 acres), and each quarter section can again be quartered (40 acres), and so on. Sections can be halved without ambiguity (e.g., north one-half, west one-half), but a description never uses the term "middle" because it is ambiguous. Exhibit 3-8 displays a number of sample subdivisions for a typical section. Note that halves and quarters can be combined to form L-shaped or other block-like properties.

Which of these modes of title conveyance is most likely to cause conflicts or "clouds" to title

Foreclosure Foreclosure is a complicated procedure, typically arising from legally messy circumstances. Therefore, the title obtained at foreclosure sale usually has significantly more risks than normal.

Which of these events can affect the chain of title for real estate?

Foreclosures, marriages, deeds, and estate settlements.

Types of Deeds

General Warranty Deed Special Warranty Deed Quitclaim Deed Deed of Bargain and Sale Judicial Deeds and Trustee's Deeds

Law of Decent

If there is no will, the property is conveyed by the law of descent. The law of descent for the state containing the property determines its distribution among the heirs, and these laws vary significantly among the states.

Bankruptcy

In a bankruptcy proceeding, real property of the debtor, unless preempted by a defaulted mortgage, may be included in other assets to be liquidated on behalf of the creditors. The court will appoint a trustee to conduct the liquidation, and the property will be conveyed by a trustee's deed. If the trustee follows requisite procedures, including obtaining permission of the court, sale of the property can be straightforward. However, since more things can go wrong than in a voluntary conveyance, the buyer has at least some additional risk, which is best alleviated through title insurance

Divorce Settlement

In a divorce settlement, real property may transfer by a "final judgment of dissolution," instead of a deed. Often the disposition will be directed by a "property settlement agreement." It may award the property directly through the final judgment, or it may call for a trustee's deed

General Warranty Deed

Includes the full set of legal promises the grantor can make (see the covenants above). Effectively, it warrants against any and all competing claims that may arise from the chain of title that are not spelled out in the deed, or from unidentified physical conflicts such as easements or encroachments (intrusions on the property by structures from adjacent land). Thus, it is considered the "highest-quality" deed and affords the maximum basis for suit by the grantee in case the title is defective.

Title Insurance

Insurance paying monetary damages for loss of property from unexpected superior legal claims or for litigation to protect title. Deemed superior to the traditional abstract with opinion as evidence of title since it offers insurance, in addition. Title insurance has become the predominant type of evidence of title because the tradition of abstract with attorney's opinion, even if executed perfectly, cannot guard against certain risks. First, it is not hazard insurance; that is, it does not protect the owner from the threat of physical damage to the property. It only protects against legal attack on the owner's title arising from either a competing claim to title by someone else or a claim that diminishes the owner's rights of use

Title

It is clear from the complexity and length of ownership history that no single document can prove ownership of land; that is, there is no single document that we can meaningfully refer to as the "title." Rather, title must be a collection of evidence. This evidence must point to some person (or entity) as the holder of the fee (titled) interest.

Land descriptions are special concern with real property, as compared to personal property because

Land descriptions must endure longer than descriptions for personal property, any error harms at least one owner or another, land can be extremely costly, and error in description can be very costly, because land is a continuous surface, descriptions must define boundaries.

Metes and Bounds

Oldest form. metes referred to measures, and bounds referred to the identifiable boundaries of surrounding parcels of land. The point of beginning, always critical, had to be defined in terms of any existing reference points available. Thus, the best the surveyor could do was to make good use of trees, large rocks, and identifiable boundaries of neighboring properties. Now is very precise. Use GPS. Do a walk around. In early times the point of beginning might be a notable feature of the land, such as a large oak tree or a boulder. However, because such "permanent" features of land have a way of changing through time, modern practice is to install a steel or concrete marker as the point of beginning. A metes and bounds description is the most flexible of descriptions, and is capable of describing even the most irregular of parcels. However, it should neither be created nor interpreted except by a trained surveyor.

The primary difference between the two main forms of "evidence of title," abstract and attorney's opinion vs title insurance commitment, is:

Only one compensates for any legal costs or loss from attack on title (insurance)

Which of the conveyances of a real property interest listed below probably would be detected only by actual notice?

Prescriptive easement, easement by estoppel

The conveyance of real estate is uniquely complicated because

Real property interests have a long history Real property interests are complex Real estate must be described on a continuous surface.

Patent

Special type of deed that conveys title to real property owned by government to a private property

Marketable Title Laws

State laws intended to limit the number of years that title search must "reach back" through the title "chain" These laws set limits on how far back a title search must go. The "root of title" conveyance is the last conveyance of the property that is at least a certain number of years old (typically 30 to 40 years)

Adverse Possession

The actual, open, notorious, hostile, and continuous possession of another's land under a claim of title. Possession for a statutory period may be a means of acquiring title.

Recording Statues

These laws require that a document conveying an interest in real property must be placed in the public records if it is to achieve constructive notice. When a grantee receives a deed, or when a lender receives a mortgage, it is important to record it as soon as possible since priority of real property claims generally is by chronology of recording

Easement by Estoppel

can occur if a landowner gives an adjacent landowner permission to rely on sewer access or drainage across his or her land. Courts may subsequently enforce that claim against the landowner (estop any attempt to deny access), or against subsequent purchasers of the burdened land, acting on behalf of the benefiting (dominant) parcel.

A deed is a special form of ____ to convey a the exact property interest

contract They are a special form of contract, distinguished by a group of clauses that determine the exact property interest being conveyed. Deeds vary in "quality" by the strength of covenants (i.e., promises) they contain. Under some circumstances, however, property can transfer to a new owner without a deed and even with no explicit document at all.

Marketable title Laws

define a "root of title," as the last conveyance of the property that is at least a certain number of years old. Can cause restrictions or easements in deeds from before the root of title to disappear. Generally restrict required title search to the years following of title.

Statue of Frauds

enacting a law requiring any contract conveying a real property interest to be in writing. Thus, deeds, leases with a term of more than one year, and mortgages must be in writing to be enforceable.

Foreclosure

foreclosure can be either judicial or power of sale (nonjudicial). In both cases the foreclosed property, with few exceptions, is disposed of by public sale.5 In judicial foreclosure, however, the process is administered by a court

Deed of Bargain and Sale

has none of the covenants of a warranty deed. But unlike the quitclaim deed, it purports to convey the real property and appears to imply claim to ownership. It commonly is used by businesses to convey property because, while implying ownership, it commits the business to no additional covenants, which are sources of liability.

Quitclaim Deed

has none of the covenants of the warranty deed. Also, its words of conveyance read something like "I ... hereby quitclaim. ..." as opposed to "I ... hereby grant or convey ..." Thus, a quitclaim deed is worded to imply no claim to title, only to convey what interest the grantor actually has, if any One use of a quitclaim deed is within a family, to add a spouse to title or remove a divorcing spouse. Another use is to extinguish ambiguous interests in a property as a means of removing clouds or threats to a marketable title

The general warranty deed is considered the highest quality deed because it

has the most covenants

study

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Acknowledgement

is to confirm that the deed is, in fact, the intention and action of the grantor. It is accomplished by having the grantor's signature notarized, or the equivalent.

The first, and historically the most challenging step in metes and bounds description is

locating the point of beginning.

Marketable Title

one that is free of reasonable doubt.