Principles of California Real Estate Lesson 3: Transfer of Real Property

Alienation Alienation: Process of transferring ownership of real property from one party to another. May be voluntary or involuntary.

Alienation Voluntary alienation Voluntary alienation: owner voluntarily transfers an interest in his or her land to someone else. Examples: Patents Deeds Wills

Voluntary Alienation Patents Patent: Instrument used to convey government land to a private individual.

Voluntary Alienation Deeds Deed: Instrument which, when properly executed and delivered, conveys title to real property from the grantor to the grantee.

Deeds Parties to a deed Grantor: One who grants an interest in real property to another.   Grantee: One who receives a grant of real property.

Deeds Types of Deeds Grant deed Quitclaim deed Trustee’s deed Deeds executed by court order Warranty deed Special warranty deed

Types of Deeds Grant Deed Grant deed warrants that grantor has not: conveyed title to anyone else caused any undisclosed encumbrances to attach to the property Both warranties apply even if not stated in the deed.

Grant Deed After-acquired title Grant deed conveys after-acquired title. After-acquired title: Title acquired by a grantor after she attempted to convey property she didn’t yet own.

Types of Deeds Quitclaim deed A quit-claim deed: contains no warranties does not convey after-acquired title conveys only the interest held by the grantor at the time it is given

Quitclaim Deed Cloud on title Cloud on title: A claim, encumbrance, or apparent defect that makes the title to a property unmarketable. Example: Construction lien filed against the property. A quitclaim deed is often used to “cure” clouds on the title.

Quitclaim Deed Language Should use the words: release remise quitclaim Should NOT use the words: grant convey

Types of Deeds Trustee’s deed Trustee’s deed: The deed given to a successful bidder at a trustee’s sale (deed of trust foreclosure sale).

Types of Deeds Sheriff’s deed Sheriff’s deed: Used to transfer property to the highest bidder at a court-ordered foreclosure sale of property. Example: Mortgage foreclosure sale

Summary Patents and Deeds Grant deed After-acquired title Quitclaim deed

Requirements of a Valid Deed In writing Identify the grantor(s) and grantee(s) Signed by competent grantor Living grantee Contain words of conveyance (granting clause) Contain adequate description of the property

Requirements of a Valid Deed In writing Under statute of frauds, deed to real property must be in writing.

Requirements of a Valid Deed In writing Under statute of frauds, deed to real property must be in writing. Statute of frauds: Law requiring certain contracts and other legal transactions to be in writing and signed in order to be enforceable.

Requirements of a Valid Deed Identify grantor and grantee Both the grantor(s) and the grantee(s) must be identified in the deed. Grantee could be described rather than referred to by name. Example: Conrad Adams hereby grants and conveys title to his only son.

Requirements of a Valid Deed Signed by competent grantor Deed must be signed by the individual(s) who will be bound by the transfer—and he, she, or they must be legally competent.

Requirements of a Valid Deed Signed by competent grantor Deed must be signed by the individual(s) who will be bound by the transfer—and he, she, or they must be legally competent. Competent: Of sound mind, for the purposes of entering into a contract, and having reached the age of majority (18).

Requirements of a Valid Deed Signed by competent grantor Illiterate grantor can sign the deed by making his or her mark, but the mark must be accompanied by the signatures of witnesses.

Requirements of a Valid Deed Power of attorney Power of attorney: document authorizing another party (attorney in fact) to act on behalf of the grantor. For attorney in fact to sign deed on grantor’s behalf, the power of attorney must:  specifically authorize attorney in fact to do so, and be recorded in the county where the property is located.

Requirements of a Valid Deed Transfer by corporation Deed transferring title to property owned by corporation must be signed by an authorized corporate official, with the signature accompanied by the corporate seal.

Requirements of a Valid Deed Transfer by corporation Deed transferring title to property owned by corporation must be signed by an authorized corporate official, with the signature accompanied by the corporate seal. Authorization must come from a resolution of the Board of Directors. Even the President or CEO is not authorized to sign the deed without this resolution.

Requirements of a Valid Deed More than one grantor All grantors must sign deed. A deed lacking a necessary signature is invalid. An unnecessary signature does not invalidate the transfer. Signatures of both husband and wife are required to convey community property.

Requirements of a Valid Deed Grantee must be alive Deed recipient must be alive, but need not be competent. Child (or mentally incompetent person) can receive title to property but can’t convey title. A corporation can receive title to property because it exists legally.

Requirements of a Valid Deed Contain words of conveyance Words of conveyance in a deed are often referred to as a granting clause: the words indicating the grantor’s intent to transfer an interest in property.

Requirements of a Valid Deed Adequate property description Legal description of the property is not an absolute requirement, but including a legal description will ensure the description is adequate.

Requirements of a Valid Deed Acknowledgment, delivery, acceptance For a conveyance to occur, the deed must be acknowledged and delivered by the grantor, and then accepted by the grantee.

Requirements of a Valid Deed Acknowledgment Acknowledgment: Grantor declares to authorized official (i.e., notary public) that he signed deed voluntarily. Official then attests that signature is voluntary and genuine. Official cannot have an interest in transfer. Without acknowledgment, deed may be valid—but cannot be recorded.

Requirements of a Valid Deed Delivery Delivery: Legal transfer of deed from grantor to grantee—resulting in transfer of title. Delivery must take place while grantor is alive. Grantor must intend to immediately transfer title to grantee.

Requirements of a Valid Deed Acceptance Conveyance is completed when grantee accepts deed.

Requirements of a Valid Deed Acceptance Conveyance is completed when grantee accepts deed. Deed may be accepted by an agent.

Voluntary Alienation Wills Will: A written instrument disposing of property upon the death of the maker (the testator). Will must be: in writing signed by the testator attested to by at least two competent witnesses

Wills Holographic will Holographic will: A will written, dated, and signed entirely in the testator’s handwriting, and which was not witnessed. California recognizes holographic wills. Any typewritten or pre-printed provisions in a holographic will be disregarded.

Wills Will terminology Person who receives property under terms of a will is called a beneficiary. Personal property is bequeathed to a legatee. Real property is devised to a devisee. Person who carries out will and settles estate is an executor or administrator.

Summary Voluntary Alienation Statute of frauds Grantor Grantee Competent Words of conveyance Acknowledgement Delivery

Alienation Involuntary alienation Involuntary alienation: transfer of property interest against the will of the owner, or without action by the owner. May occur through: operation of law natural processes adverse possession

Involuntary Alienation Dedication Dedication: Private party transfers land to the public. Sometimes voluntary, but is typically required by a public entity.

Involuntary Alienation Statutory dedication Statutory dedication: Involves recording a subdivision map identifying areas dedicated to the public (such as parks and streets). Example: Land developer is required to indicate on her subdivision map where dedicated parks and streets will be located before subdivision is approved.

Involuntary Alienation Intestate succession Intestate succession: When someone dies without a valid will, the decedent’s property passes according to the laws of descent. When there is no will, the decedent’s lawful successors are called heirs instead of beneficiaries.

Involuntary Alienation Escheat When property owner dies without will or any surviving heirs, property ownership escheats (reverts) to the state. State is ultimate heir when no other rightful heirs to the property exist.

Involuntary Alienation Condemnation Condemnation: Taking private property for public use through power of eminent domain. Use must be a public use. Owner must be compensated. Power of eminent domain may be exercised by government, or it can be delegated to quasi-public entities.

Involuntary Alienation Court order Transfer of interest in property against the owner’s will can also occur under court order. Most common examples:  Quiet title action suits for partition foreclosures

Court Order Quiet title actions Quiet title action: Court action intended to settle dispute about title to a particular property.

Court Order Suits for partition Partition action: Lawsuit brought by a co-owner to have property divided. Once divided, each co-owner will own his or her part in severalty. Co-owners may also partition property by agreement.

Involuntary Alienation Foreclosure Judicial foreclosure: Sale of property pursuant to court order to satisfy a lien (may be any type of lien). Deed of trust foreclosure: sale of property at a trustee’s sale under a power of sale (only available for deed of trust liens).

Involuntary Alienation Adverse possession Adverse possession: Person other than owner of record can acquire title to real property through a long period of continuous possession.

Involuntary Alienation Adverse possession Adverse possession must be: actual, open, and notorious hostile to the owner’s interest under claim of right or color of title continuous for five years

Adverse Possession Actual, open, and notorious Actual possession: Occupation and use of the property in a manner appropriate to the type of property. Open and notorious possession: Conspicuous possession of the property in a way that would constitute reasonable notice to the owner of record.

Adverse Possession Hostile Hostile possession: Possession without the owner’s permission. The adverse possessor must intend to claim ownership of the property and defend that claim against all parties.

Adverse Possession Claim of right/color of title Refers to title that appears to be good, but which in fact is not. Example: Deed’s legal description incorrectly indicates the boundary extends ten feet further than it really does. The owner believes the additional 10-foot strip of land belongs to her, so she fences it in.

Adverse Possession Continuous and uninterrupted The adverse possessor must: have continuous and uninterrupted possession for five years pay the property taxes during this time Tacking: Successive adverse possessors can add together their periods of possession to satisfy the time period.

Summary Involuntary Alienation Dedication Condemnation Quiet title Partition Foreclosure Adverse possession

The Recording System Recording: Placing document in public record so its information is available to the general public. Whenever interest in real property is transferred, new owner should record deed or other transfer document.

The Recording System Procedures Document is recorded by filing it at county clerk’s office in county where property is located. Establishes document priority Recorder's office maintains grantor and grantee indexes in which all recorded documents are indexed according to grantor or grantee’s last name.

The Recording System Title searching Grantor and grantee indexes are used for title searches. Title search: used to determine who holds what interest in a particular piece of property. Tracing the chain of title back through several owners establishes the validity of the seller's title.

The Recording System Notice Legal rights often depend on whether a party had notice of a particular fact at a given time. Actual notice: Person has actual notice of a fact if she is actually aware of it. Constructive notice: A person has constructive notice of a fact if she should be aware of it, even if she is not.

Notice Constructive notice Recording a document provides constructive notice of the property interest contained in it. Anyone who later acquires an interest in property is considered to have constructive notice of the earlier recorded document (even if he didn't have actual notice of it).

Documents transferring title, establishing an interest in property, or creating or removing encumbrances should be recorded. Including lis pendens: document stating that a pending lawsuit may affect title to a piece of property.

Summary The Recording System Recording procedures Title search Actual notice Constructive notice Recorded documents Lis pendens

Title Insurance Title insurance policy: Title insurance company agrees to reimburse policyholder for financial losses resulting from title defects covered by policy.

Title Insurance Title insurance policy: Title insurance company agrees to reimburse policyholder for financial losses resulting from title defects covered by policy. If someone makes adverse claim against title, title company will defend against claim.

Title Insurance A title policy issued to a buyer is called an owner’s policy.

Title Insurance A title policy issued to a buyer is called an owner’s policy. A title policy protecting a lender’s security interest is called a mortgagee’s policy.

Title Insurance Obtaining a policy Title company first performs title search. Based on title search, company issues title report.

Title Insurance Obtaining a policy Title company first performs title search. Based on title search, company issues title report. All defects and encumbrances found in public record are listed in report and excluded from coverage when policy is issued.

If the title report reveals unexpected problems, buyer or lender may require seller to clear them up before transaction proceeds.

If the title report reveals unexpected problems, buyer or lender may require seller to clear them up before transaction proceeds. Title insurance policy lasts as long as the policyholder has legal interest in property.

If the title report reveals unexpected problems, buyer or lender may require seller to clear them up before transaction proceeds. Title insurance policy lasts as long as the policyholder has legal interest in property. Subsequent defects or encumbrances will not be covered.

Title Insurance Standard coverage Standard coverage title insurance policy (CLTA policy) insures against losses resulting from any encumbrances not included in the title report.

Title Insurance Standard coverage Standard coverage title insurance policy (CLTA policy) insures against losses resulting from any encumbrances not included in the title report. It also insures against hidden problems not discoverable by searching public record.

Title Insurance Extended coverage Extended coverage policy (ALTA policy) covers the same things as a standard coverage policy, plus problems that should be discovered through inspection of the property.

Title Insurance Extended coverage Extended coverage policy (ALTA policy) covers the same things as a standard coverage policy, plus problems that should be discovered through inspection of the property. A mortgagee's policy is nearly always an extended coverage policy.

Title Insurance Government action Neither type of title insurance policy insures against losses due to government action, such as condemnation or zoning changes.

Summary Title Insurance Title insurance policy Owner's policy Mortgagee's policy Title report Standard coverage Extended coverage Government action