Conveying Real Property Interests

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Presentation transcript:

Conveying Real Property Interests Chapter 3: Conveying Real Property Interests Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Complications in Conveying Real Estate Real property is a complex bundle of rights Rights to land are enduring: Rights available today depend on transactions long ago Land is a continuous surface Boundaries not obvious or natural Boundary errors always hurt someone Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

So, with no title certificates, how do we convey real property? Deeds Recorded documents and constructive notice Title search Chain of title Evidence of title May still not work Title insurance Need for adequate property descriptions Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Deeds: The Principal Conveyance of Real Property Deed: A special, written contract for conveying a permanent interest in real property Fee simple absolute Life estate Conditional fee Easement Oil, mineral, or water rights Must be in writing to be upheld by a court Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Requirements of a Deed Grantor (with signature) and grantee Recital of consideration Words of conveyance Covenants Habendum clause Exceptions and reservations clause Description of land Acknowledgment Delivery Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Grantor and Grantee Grantor: Person or entity conveying real property Must be of legal age Must be legally competent Must sign deed Grantee: Recipient of real property No need to be of legal of age No need to be competent Only needs to be identifiable Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Recital of Consideration and Words of Conveyance Recital of consideration: A minimal statement suffices: “For 10 dollars and other good and valuable consideration…” Words of conveyance typically: “Does hereby grant, bargain, sell and convey…” Functions: Affirms intention to convey real property Determines type of deed Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Covenants Covenants: Legally binding promises Three main covenants: Covenant of seizin: Grantor has good title and right to convey it Covenant against encumbrances: No encumbrances except as noted in deed (liens, easements) Covenant of quiet enjoyment: No one with a better claim to title Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Habendum Clause Defines interest being conveyed “for use as” implies easement “so long as” implies conditional fee with reverter “and his/her heirs and assigns forever” implies fee simple absolute Requires drafting by a knowledgeable legal professional “Don’t try this at home!” Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Exceptions and Reservations Clause Deed restrictions Clauses withholding mineral or oil rights Creation of an easement Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Describing Real Property Property descriptions Must be unambiguous and enduring Three methods acceptable for public records: Metes and bounds Plat lot and block number Government rectangular survey Unacceptable descriptions include street address and tax parcel number Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Acknowledgment and Delivery Acknowledgment: Confirmation that grantor acted voluntarily Notarized or equivalent (some states require witnesses) Delivery: Observable, verifiable intent that deed is to be given to grantee Examples of failure of delivery: Deed found in a desk/safety deposit box and handed to named grantee Grantor’s attorney hands deed to named grantee without explicit instructions to do so Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

How Deeds Differ Key point: No deed conveys rights that grantor does not have Deeds differ by number of covenants Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Types of Deeds General warranty deed: All three covenants; seizing, no encumbrances, and quiet enjoyment Special warranty deed: All three covenants but “no encumbrances” limited to grantor’s ownership Deed of bargain and sale: No covenants, but still is regarded as implying ownership Quitclaim deed: No covenants and makes no assertions about grantor’s interest Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Review of Deeds Covenants by Grantor Type of Deed Quiet Enjoyment: No Encumbrances: Seizen: Will defend grantee against claims of others No undisclosed restrictions or conflicting claims Has valid title Type of Deed General Warranty* Yes! Yes! Yes! Special Warranty Yes! Yes! Ltd! ? ? Bargain and Sale Implied Quitclaim No! No! No! Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

The Significance of Covenants Covenants do not assure that a grantor can deliver property as described. The give the grantee a legal basis to sue the grantor if there is failure to deliver. Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

It’s Hard to Know What You Are Getting! Complex bundle of rights Long history of ownership Problem of accurate boundary description PLUS! Multiple ways that title may have transferred, some with no record Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Modes of Conveying Real Property Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Ways Title Can Transfer Voluntary conveyance by deed Ordinary sale and transfer of title Involuntary conveyance by deed Probate (distribution of estate) Bankruptcy Divorce settlement Condemnation Foreclosure Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Ways Title Can Transfer (continued) Voluntary conveyances without a deed (easements only) Implied easement Easement by prior use or necessity Easement by estoppel Involuntary conveyance without deed Easement by prescription Title by adverse possession Action of water (accretion, reliction) Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Questions Why can a single document – a “title” – never serve as proof of real property ownership? If no single document can confirm title, what do we mean by “title”? Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Doctrine of Constructive Notice If you are able to know of a deed or other real property conveyance, you must accept it. Any such document placed in public records and freely available to you or your knowledgeable representative, is considered to be knowable. This is true even if you never look at the document. Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Public Records, Notice and Real Property Conveyance Doctrine of constructive notice: Cannot be bound by what you cannot know Statute of Frauds: Contract must be written to be enforceable Recording statutes: A contract recorded in public records is considered known Actual notice: Open, continuous, actual possession of property Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Creating Evidence of Title Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

The Meaning of “Title” Title: Collection of evidence indicating a particular person(s) as holder of the “fee” Title search: Examining public records to construct “chain of title” Chain of title: the sequence of conveyances passing ownership down through time Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Possible Breaks in the Chain of Title Conveyance of only a partial interest? Cloud to Title Conveyance by adverse possession? Inconsistent property descriptions? Fraudulent documents? Inferior deed? Faulty separation of mineral or water rights? Missing spousal signature? Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Evidence of Title Evidence of title: Assurance of a good or marketable title Marketable title: Claim to title is regarded as free from reasonable doubt Two main forms of “evidence of title” Title abstract with attorney’s opinion: Summary of all records in chain of title reviewed by an attorney for completeness Title insurance commitment: Indemnifies grantee if challenge to title arises Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Title Insurance Protects a grantee (or mortgage lender) against a flaw in title, or the loss of title Covers litigation cost and loss of value Covers no other hazards Cannot restore rights that do not exist Unusual form of insurance: single up-front premium for “lifetime” coverage Controversy about cost and coverage Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

But how far back do title risks really go? The earlier the event the more likely it has been settled. More recent transactions are the greater risk. Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Marketable Title Laws State laws to shorten necessary title search Root of title: Most recent title conveyance (deed) being a minimum number of years old To be enforceable certain interests may need to be reasserted by documents no older than root of title Restrictive covenants Some easements Title unbroken back to its root is normally regarded as marketable Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

“Legal” Land Descriptions Metes and Bounds Oldest form Directed distances (a trip around the property) Government Rectangular survey Covers “newer” parts of the US (post Revolution) Mostly for rural and undeveloped land Plat lot and block number Most urban property (any property in a sub-division) Preferred choice. Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Methods of Land Description: Metes and Bounds A sequence of directed distances: Compass directed “walk around property” Establishing point of beginning is critical Oldest form of acceptable land description Most flexible form Most difficult to interpret Should be made or interpreted only by surveyors Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Metes and Bounds Description: Example Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Methods of Land Description: Subdivision Plat Lot and Block Number Subdivision survey map in public records identifies lot by block and lot number Lot and block number sufficient to describe parcel Dominant form of urban land description Map shows numerous features Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Subdivision Plat Lot and Block: Example Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Methods of Land Description: Government Rectangular Survey Basic reference points Baseline Principal meridian Measures of distance Range lines Tier lines Units Township Section Check Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Baselines and Principal Meridians of the United States Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Township Identification Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

A Township Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Tallahassee Jacksonville Township: Range 27 E, Tier 24 S Orlando Tallahassee Principal Meridian Tallahassee R 26 E 27 2 1 W T 2 N Jacksonville Base Line T 1 N T 1 S T 2 S Township: Range 27 E, Tier 24 S R 2 E 1 W Orlando 6 1 2 3 4 5 7 8 9 11 10 12 18 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 T 23 S T 24 S NW 1/4 of NE 1/4 NW 1/4 SW SE Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Subdividing a Section Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Benchmark Numbers for Real Estate Section: Described square mile within government rectangular survey 640 acres Acre 43,560 square feet Area of a football field from one goal line to the opposite 10 yard line Size of the public area of large supermarkets. Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Why not street address or tax parcel number? Many inaccuracies in street address and tax parcel number They don’t give boundaries, only a point Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summing up Three challenges to overcome in conveying real property: Complexity of the “bundle” of rights History of ownership Boundaries Deeds as central Role of covenants – general warranty, special warranty, bargain and sale, quitclaim Cannot prove ownership Doctrine of constructive notice and recording statutes Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summing up still more Title search and chain of title “Clouds to title” Marketable title Evidence of title Interests can convey without a deed Title insurance Property descriptions Metes and bounds Subdivision plat lot and block Government rectangular survey Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

End of Chapter 3 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.