Chapter 6

Georgia Real Estate An Introduction to the Profession Eighth Edition Chapter 6 Recordation, Abstracts and Title Insurance

Key Terms abstract of title acknowledgment actual notice chain of title constructive notice inquiry notice marketable title public recorder’s office quiet title suit title insurance © 2015 OnCourse Learning

Constructive Notice There are two ways a person can give notice of a claim or right to land: One is by recording documents in the public record. The other is by visibly occupying or otherwise making use of the land. © 2015 OnCourse Learning

Constructive Notice Constructive notice is the knowledge that is available by making a diligent search. By recording documents at the county courthouse, a person with rights to the property provides constructive notice to the world of their interest. © 2015 OnCourse Learning

Inquiry Notice A person interested in a property is held to be responsible for making further inquiry of anyone giving visible or recorded notice. Ignorance is not a legal defense. © 2015 OnCourse Learning

Actual Notice Actual notice is knowledge that one has gained based on what one has seen, heard, read or observed. If you go to the property and see someone in possession, you have actual notice of that person’s claim to be there. © 2015 OnCourse Learning

Recording Acts Each county has a public recorder’s office. Each public recorder’s office will record documents submitted to it that pertain to real property in that county. © 2015 OnCourse Learning

Recording Acts © 2015 OnCourse Learning

Recording Acts If it is not recorded, a deed, mortgage or other instrument affecting real estate is not effective as far as subsequent purchasers and lenders are concerned. © 2015 OnCourse Learning

Recording Acts Prospective purchasers, lenders and the public are presumed notified when a document is recorded. © 2015 OnCourse Learning

Unrecorded Interests Lesser rights are rarely recorded. Month-to-month rentals and leases for a year or less would probably not be recorded. © 2015 OnCourse Learning

Summary If you are a prospective purchaser, you are presumed by law to have inspected both the land itself and the public records to determine the present rights and interests of others. If you receive a deed or mortgage, record it immediately in the county in which the land is located. © 2015 OnCourse Learning

Requirements for Recording All states require that a document be acknowledged before it is eligible to be recorded. This is done to reduce the possibility that forged or fraudulently induced documents will enter the public records. © 2015 OnCourse Learning

Witnesses The person executing the document signs in the presence of at least two witnesses. © 2015 OnCourse Learning

Acknowledgment An acknowledgment is a formal declaration by a person signing a document that he did, in fact, sign the document. © 2015 OnCourse Learning

Public Records Organization Each document brought to a public recorder’s office is copied and then returned to its owner. The copy is placed in chronological order with copies of other documents. These are stamped with consecutive page numbers and bound into a book. © 2015 OnCourse Learning

Public Records Organization Filing incoming documents in chronological order is necessary to establish the chronological priority of documents. Recording offices have developed systems of indexing. © 2015 OnCourse Learning

Tract Index The tract index is the simplest to use. One page is allocated to either a single parcel of land or to a group of parcels, called a tract. On that page, you will find all recorded deeds and mortgages related to that parcel, along with the book and page where the copy of the document can be found. © 2015 OnCourse Learning

Grantor and Grantee Index The grantor index lists in alphabetical order all the grantors named in the documents recorded that year. The grantee index is arranged by the grantee name. © 2015 OnCourse Learning

Chain of Title A chain of title shows the linkage of property ownership that connects the present owner to the original source of title. In Georgia, a 50-year title search is considered to be sufficient. © 2015 OnCourse Learning

Chain of Title © 2015 OnCourse Learning

Chain of Title The chain must be complete from the original source of the title to the present owner. If there is a missing link, the current “owner” does not have valid title to the property. © 2015 OnCourse Learning

Chain of Title A search must be made for grantors, grantees, outstanding mortgages, judgments, actions pending, liens and unpaid taxes that may affect the title. © 2015 OnCourse Learning

Chain of Title There may be lawsuits pending that might later affect title. This information is found on the lis pendens index at the county clerk’s office. Lis pendens means pending lawsuits. © 2015 OnCourse Learning

Abstract of Title Full-scale title searching should be left to professionals. An abstract of title is a complete historical summary of all recorded documents affecting the title of a property. © 2015 OnCourse Learning

Abstract of Title The abstract is sent to an attorney who renders an opinion of title as to who the fee owner is, and names anyone else with a legitimate right or interest to the property. This opinion is known as a certificate of title. © 2015 OnCourse Learning

“What Ifs” There is no guarantee that the abstract, or its certification, is completely accurate. What if a recorded deed is a forgery? What if a deed was executed by a minor? What if a deed contained an erroneous land description? © 2015 OnCourse Learning

“What Ifs” The recorder’s office is responsible only for verifying that is shows an acceptable acknowledgment. The recorder’s office is not responsible for verifying the contents of a deed. © 2015 OnCourse Learning

Title Insurance Title insurance is available to anyone wishing to purchase it. It is the custom to purchase it from a title company that combines the search and policy in one fee. © 2015 OnCourse Learning

Title Commitment A title company first examines the public records. An attorney reviews the findings and renders an opinion. This information becomes the title commitment. © 2015 OnCourse Learning

Title Commitment A title commitment is a snapshot that shows the condition of title at a specific moment in time. It only tells who the current owner is. It does not list all mortgage loans ever made, but only those that have not been removed. © 2015 OnCourse Learning

Title Commitment The buyer is responsible for making the on-site inspection and for hiring a surveyor the boundaries are uncertain. It is also the buyer’s responsibility to check the zoning of the land. © 2015 OnCourse Learning

Title Commitment Title insurance may be purchased at any time, it is most often purchased when real estate is originally bought. © 2015 OnCourse Learning

Policy Premium In Georgia, the cost of title insurance to protect the lender is included in the lender’s quoted closing costs. Title insurance to protect the buyer is available. © 2015 OnCourse Learning

Policy Premium The buyer will obtain an insurance policy protecting their interest in an amount equal to the purchase price. This insurance remains effective as long as the buyer or heirs have an interest in the property. © 2015 OnCourse Learning

Policy Premium The premium is a single payment. Each time the property is sold, a new policy must be purchased. The old policy cannot be assigned to the new owner. © 2015 OnCourse Learning

Lender’s Policy Lender’s title policy gives title protection to a lender who has taken real estate as collateral for a loan. The lender’s policy only protects the amount owed on the mortgage. The coverage on the policy declines and terminates when the loan is fully repaid. © 2015 OnCourse Learning

Lender’s Policy The lender’s policy is assignable to subsequent holders of that same loan. The owner’s policy is not. When a owner’s and lender’s policy are purchased at the same time, the combined cost is only slightly more than a single policy. © 2015 OnCourse Learning

Claims for Losses When an insured defect arises, the title insurance company reserves the right to either pay the loss or fight the claim in court. © 2015 OnCourse Learning

Claims for Losses Title insurance protects against something that has already happened but has not been discovered. © 2015 OnCourse Learning

The Growth of Title Insurance A warranty deed places a great obligation on the grantor. By purchasing title insurance, the grantor can transfer that obligation to an insurance company. © 2015 OnCourse Learning

The Growth of Title Insurance The use of title insurance has made mortgage lending more attractive and lending a little easier. Lenders can charge a lower rate of interest. © 2015 OnCourse Learning

The Growth of Title Insurance In nearly all real estate transactions, the seller agrees to deliver marketable title to the buyer. Marketable title is title that is reasonably free of litigation. If a discovered defect is not serious, the insurance company will accept the risk. © 2015 OnCourse Learning

Quiet Title Suit When a title defect, also called a cloud on the title, must be removed, it is logical to remove it by using the path of least resistance. © 2015 OnCourse Learning

Quiet Title Suit A quiet title suit permits a property owner to ask the courts to hold hearings on the ownership of land. © 2015 OnCourse Learning

Quiet Title Suit Anyone claiming to have an interest or right to the land in question may present verbal or written evidence of that claim. © 2015 OnCourse Learning

Quiet Title Suit A judge rules on the validity of each claim. The result is to recognize those with a genuine right and to “quiet” those without a genuine interest. © 2015 OnCourse Learning

Marketable Title Acts A marketable title act is legislation aimed at making abstracts easier to prepare and less prone to error. This is done by cutting off claims to rights or interests in land that have been inactive for longer than the act’s statutory period. © 2015 OnCourse Learning

Marketable Title Acts A full title search in Georgia is considered to be 50 years. People have 50 years to come forward and make their claim known. © 2015 OnCourse Learning

Marketable Title Acts Marketable title acts do not eliminate the need for legal notice, nor do they eliminate the role of adverse possession. © 2015 OnCourse Learning