© 2010 Rockwell Publishing Lesson 3: Transfer of Real Property Principles of California Real Estate

© 2010 Rockwell Publishing Alienation Alienation: Process of transferring ownership of (title to) real property from one party to another. May be voluntary or involuntary.

© 2010 Rockwell Publishing Alienation Voluntary alienation Voluntary alienation: An owner voluntarily transfers interest in her land to someone else. Examples: patents deeds wills

© 2010 Rockwell Publishing Voluntary Alienation Patents Patent: Instrument used to convey government land to private individual.

© 2010 Rockwell Publishing Voluntary Alienation Deeds Deed: Instrument which, when properly executed and delivered, conveys title to real property from grantor to grantee.

© 2010 Rockwell Publishing Deeds Parties to a deed Grantor: Person who grants interest in real property to another. Grantee: Person who receives grant of real property.

© 2010 Rockwell Publishing Deeds Types of Deeds Types of deeds: grant deed quitclaim deed warranty deed

© 2010 Rockwell Publishing 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 deed.

© 2010 Rockwell Publishing Grant Deed After-acquired title Grant deed conveys after-acquired title. After-acquired title: Rights acquired in property by grantor after her conveyance of property.

© 2010 Rockwell Publishing Types of Deeds Quitclaim deed A quitclaim deed: contains no warranties does not convey after-acquired title conveys only interest held by grantor at time given can correct mistakes in earlier deeds (reformation deed)

© 2010 Rockwell Publishing Quitclaim Deed Cloud on title Cloud on title: A claim, encumbrance, or defect that makes title to property unmarketable. Quitclaim deed is often used to “cure” clouds on title.

© 2010 Rockwell Publishing Summary Patents and Deeds Alienation Patents Grant deed Quitclaim deed

© 2010 Rockwell Publishing Requirements for a Valid Deed In writing Grantor(s) and grantee(s) identified Signed by competent grantor Living grantee Words of conveyance (granting clause) Adequate property description

© 2010 Rockwell Publishing Requirements for a Valid Deed In writing Under California’s 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.

© 2010 Rockwell Publishing Requirements for a Valid Deed Identify grantor and grantee Both grantor(s) and grantee(s) must be identified in deed. Grantee can be described rather than referred to by name. Example: Conrad Adams hereby grants title to his only son.

© 2010 Rockwell Publishing Requirements for a Valid Deed Signed by competent grantor Deed must be signed by everyone who will be bound by transfer, and signers must be legally competent. Competent: Of sound mind (for purposes of entering into a contract) and having reached age of majority (18).

© 2010 Rockwell Publishing Requirements for a Valid Deed Signed by competent grantor If grantor can’t sign name (due to disability or illiteracy), she can make her mark instead; mark must include witness signatures. If grantor’s signature is forged, deed is void.

© 2010 Rockwell Publishing Requirements for a Valid Deed Signed by competent grantor Power of attorney: Document authorizing another party (attorney in fact) to act on behalf of grantor. For attorney in fact to sign deed on grantor’s behalf, power of attorney must: give attorney in fact this authority include description of property being conveyed

© 2010 Rockwell Publishing Requirements for a Valid Deed Signed by competent grantor Deeds transferring title to corporate property are usually signed by authorized corporate officer, and signature must be accompanied by corporate seal.

© 2010 Rockwell Publishing Requirements for a Valid Deed Signed by competent grantor All grantors must sign deed. Deed lacking a necessary signature is invalid. Signatures of both husband and wife are required to convey community property.

© 2010 Rockwell Publishing Requirements for a Valid Deed Living grantee Grantee need not be competent for deed to be valid, but must be alive (or legally in existence, if a corporation). Minor child (or mentally incompetent person) can receive title to property but can’t convey title.

© 2010 Rockwell Publishing Requirements for a Valid Deed Words of conveyance Words of conveyance: Words indicating grantor’s intent to transfer interest in property. Single word “grant” is usually sufficient.

© 2010 Rockwell Publishing Requirements for a Valid Deed Adequate property description Legal description of property is not absolute requirement, but using legal description will ensure description is adequate.

© 2010 Rockwell Publishing Property Conveyance Acknowledgment, delivery, acceptance To actually convey property, valid deed should be acknowledged and must be delivered by grantor and then accepted by grantee.

© 2010 Rockwell Publishing Property Conveyance Acknowledgment Acknowledgment: Grantor declares to official witness (usually notary public) that he signed deed voluntarily. Witness cannot have interest in transfer. Deed is valid without acknowledgement but cannot be recorded.

© 2010 Rockwell Publishing Property Conveyance Delivery Delivery: Formal 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.

© 2010 Rockwell Publishing Property Conveyance Acceptance Conveyance is completed when grantee accepts deed. Deed may be accepted by agent. If deed is recorded, it is legally presumed to have been accepted by grantee.

© 2010 Rockwell Publishing Voluntary Alienation Wills Will: A written instrument disposing of property upon death of maker (testator). Will must be: in writing signed by testator attested to by 2 competent witnesses

© 2010 Rockwell Publishing Wills Terminology A person who receives property under terms of will is beneficiary. Personal property is bequeathed. Real property is devised. A person who carries out will and settles estate is executor or administrator.

© 2010 Rockwell Publishing Wills Probate Probate: Legal process to prove will’s validity. In California, probate is handled at superior court level. If executor sells estate property, both listing and agent’s commission must be approved by court.

© 2010 Rockwell Publishing Wills IAEA If will is administered under Independent Administration of Estates Act, executor or administrator may sell real property without court approval, if beneficiaries do not object.

© 2010 Rockwell Publishing Summary Voluntary Alienation Deed requirements Statute of frauds Words of conveyance Acknowledgement Delivery Acceptance Wills Probate

© 2010 Rockwell Publishing Alienation Involuntary alienation Involuntary alienation: Transfer of property without voluntary action by owner. May occur through: operation of law external causes adverse possession

© 2010 Rockwell Publishing Involuntary Alienation Dedication Dedication: Private party transfers land to public. Sometimes voluntary, but is typically required by public entity.

© 2010 Rockwell Publishing Involuntary Alienation Statutory dedication Statutory dedication: Dedication required by law, for example, dedication of property for sidewalks and streets as condition for subdivision approval.

© 2010 Rockwell Publishing Involuntary Alienation Intestate succession Intestate succession: When someone dies without valid will, decedent’s property passes according to laws of descent. If no will, decedent’s successors are called heirs instead of beneficiaries.

© 2010 Rockwell Publishing Involuntary Alienation Community property In California, intestate succession laws state that surviving spouse receives all community property.

© 2010 Rockwell Publishing Involuntary Alienation Escheat When property owner dies without will or any surviving heirs, property ownership escheats (reverts) to state. The state is ultimate heir when no other rightful heirs to property exist.

© 2010 Rockwell Publishing Involuntary Alienation Condemnation Condemnation: Taking private property for public use through power of eminent domain. Use must be public use. Owner must be compensated. Power of eminent domain may be exercised by government or delegated to quasi-public entities.

© 2010 Rockwell Publishing Involuntary Alienation Inverse condemnation If property owner feels property has been taken or damaged by public entity, owner may file inverse condemnation action to force government to pay market value of property.

© 2010 Rockwell Publishing Involuntary Alienation Court order Involuntary transfers of property interests can also occur under court order. These include: quiet title action suit for partition foreclosure bankruptcy

© 2010 Rockwell Publishing Court Order Quiet title action Quiet title action: Court action intended to settle dispute about title to particular property.

© 2010 Rockwell Publishing Court Order Partition Partition: Lawsuit brought by co-owner to have property divided. Once divided, each co- owner will own his part in severalty. Co-owners may also partition property by agreement.

© 2010 Rockwell Publishing Court Order Foreclosure Foreclosure: Sale of property pursuant to court order, to satisfy lien (any type of lien).

© 2010 Rockwell Publishing Court Order Bankruptcy Bankruptcy: Property conveyed by order of bankruptcy court. Court has authority to distribute or sell debtor’s property to satisfy creditor claims.

© 2010 Rockwell Publishing Involuntary Alienation Adverse possession Adverse possession: Person other than owner of record can acquire title to real property through long period of continuous possession.

© 2010 Rockwell Publishing Five requirements for adverse possession: actual, open, and notorious possession hostile to owner’s interest under claim of right or color of title continuous for five years possessor must pay property taxes during required period of possession Involuntary Alienation Adverse possession

© 2010 Rockwell Publishing Adverse Possession Actual, open, notorious Actual possession: Occupation and use of property in manner appropriate to type of property. Open and notorious possession: Possession of property in way that gives owner of record reasonable notice her property interest is threatened.

© 2010 Rockwell Publishing Adverse Possession Hostile Hostile possession: Possession without owner’s permission. Adverse possessor must intend to claim ownership of property and defend that claim against all parties.

© 2010 Rockwell Publishing Adverse Possession Claim of right/color of title Refers to title that owner believes is good, though in fact it’s not. Example: Deed’s legal description incorrectly indicates boundary extends ten feet further than it really does. Owner believes additional 10-foot strip of land belongs to her, so she fences it in.

© 2010 Rockwell Publishing Adverse Possession Continuous and uninterrupted Adverse possessor must have continuous and uninterrupted possession for five years. Tacking: Successive adverse possessors can add their periods of possession together to satisfy required time period.

© 2010 Rockwell Publishing Adverse Possession Payment of taxes In addition to continuous and uninterrupted possession of property for five years, California law also requires adverse possessor to pay taxes on property during that period.

© 2010 Rockwell Publishing Adverse Possession Government property Property owned by government entity can never be acquired through adverse possession.

© 2010 Rockwell Publishing Involuntary Alienation External causes Accession: Any addition to real property from natural or artificial causes. It can result in involuntary alienation. Accession includes: accretion reliction avulsion

© 2010 Rockwell Publishing Involuntary Alienation Accession Accretion: When riparian or littoral land is enlarged by waterborne soil such as river deposits, owner acquires title to added soil. Reliction: When body of water gradually retreats, newly exposed soil belongs to landowner.

© 2010 Rockwell Publishing Involuntary Alienation Accession Avulsion: When land is torn away by flowing water and deposited elsewhere, or when land is exposed by sudden change in watercourse. Avulsion does not usually alter ownership of changed piece of land.

© 2010 Rockwell Publishing Summary Involuntary Alienation Dedication Condemnation Quiet title Partition Foreclosure Adverse possession Accession

© 2010 Rockwell Publishing The Recording System Recording: Filing document at recorder’s office in county where property is located, so that information will be part of public record. Documents transferring title, establishing interest, or creating or removing encumbrance should be recorded.

© 2010 Rockwell Publishing The Recording System Procedures Documents are recorded in chronological order, based on order received, and indexed by names and sometimes by property descriptions. Computerization has made indexing less important; in most cases, search functions can locate documents in public record.

© 2010 Rockwell Publishing The Recording System Presumption of validity Recording document creates presumption that it is valid. But remember, deed does not need to be recorded to be valid.

© 2010 Rockwell Publishing The Recording System Legal effects Recording document has two important legal effects: provides notice of interest conveyed establishes priority for that interest

© 2010 Rockwell Publishing The Recording System Notice Actual notice: Person has actual notice of a fact if she is actually aware of it. Constructive notice: Person has constructive notice of fact if he should be aware of it, even if he is not.

© 2010 Rockwell Publishing Notice Constructive notice Recording document provides constructive notice of property interest contained in it. Anyone who later acquires an interest in the property has constructive notice of earlier recorded document (even if he didn't have actual notice of it).

© 2010 Rockwell Publishing Notice Failure to record Grantee who fails to record deed can lose title to subsequent good faith purchaser who did not have notice of earlier conveyance.

© 2010 Rockwell Publishing Notice Possession as notice Possession of land by someone other than seller gives notice to buyer that someone may have interest in the property. Buyer has duty to inquire further.

© 2010 Rockwell Publishing Summary The Recording System Recording procedures Actual notice Constructive notice Failure to record Possession as notice

© 2010 Rockwell Publishing Title Insurance Title insurance: Title insurance company agrees to reimburse policyholder for financial losses resulting from title defects covered by policy. Example: If title company overlooked easement, it will pay owner for diminished value of property.

© 2010 Rockwell Publishing Title Insurance Chain and abstract of title Chain of title: A complete history of recorded interests in property. Abstract of title: A condensed history of recorded interests. These documents do not insure against losses due to title defects. Almost all buyers purchase title insurance.

© 2010 Rockwell Publishing Title Insurance Title search and report 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.

© 2010 Rockwell Publishing Title Insurance Types of policies Title policy issued to buyer is called an owner’s policy. Title policy protecting lender’s security interest is called a mortgagee’s policy.

© 2010 Rockwell Publishing Title Insurance Standard coverage Standard coverage policy: Insures against losses resulting from defects in title, forgery, party’s lack of capacity, improperly delivered deed, etc. Standard coverage does not include problems with adverse possessors, defects known by owners, or problems that could be discovered by inspection, such as encroachments.

© 2010 Rockwell Publishing Title Insurance Extended coverage Extended coverage: Includes same things as standard coverage policy, plus problems that should be discovered through inspection of property. Mortgagee's policy is nearly always extended coverage policy. Extended coverage policy will include survey of property.

© 2010 Rockwell Publishing Title Insurance Homeowner’s coverage Homeowner’s coverage: Usual owner’s policy in residential transactions; it includes same things as extended coverage policy, plus some additional protections.

© 2010 Rockwell Publishing Title Insurance Government action Title insurance policies do not insure against losses due to government action, such as condemnation or zoning changes.

© 2010 Rockwell Publishing Summary Title Insurance Title insurance policy Standard coverage Extended coverage Homeowner’s coverage Government action