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2. Transfer of Title to Real Property
Chapter 4
Transfer of Title to Real Property
Learning Objectives
List the methods of transferring title:
By descent
Four categories of alienation
Voluntary, involuntary, during life, or at death
List and describe the essential elements of deeds in North Carolina
Describe the three primary types of deeds used in North Carolina
List the types of special purpose deeds used in North Carolina
Describe Excise Tax, defining the rate and calculating the amount of tax
Describe the process of title examination
Describe title insurance and the types of coverage
Describe the importance and process of title recordation
Describe the systems of property description used in North Carolina
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3. Transfer of Title to Real Property
Chapter 4
Transfer of Title to Real Property
Property Description
Adequacy of Description:
Real property must be described in a legally and professionally acceptable manner.
Ambiguity in a real property description will likely result in a cloud on the title to the property.
Agents should not use informal street addresses.
Methods of Describing Real property:
Metes and Bounds –Method most often used in North Carolina
Based on distances and direction
Metes - distance from point to point in the description
Bounds - direction from one point to another in the description
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4. Transfer of Title to Real Property
Chapter 4
Transfer of Title to Real Property
Property Description
Government Rectangular Survey
not used in North Carolina.
based on longitude and latitude
lines
divides ranges into townships
(1 mile square)
divides townships into sections
(640 acres) which may be further
subdivided
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5. Transfer of Title to Real Property
Chapter 4
Transfer of Title to Real Property
Property Description
Description by Reference:
Reference to Recorded Plat:
made to a plat (property map)
includes plat book number and page number
Reference to Recorded Public Documents: (lot and block):
more in depth
often used for real property within subdivisions
Informal Reference:
typically a street address
never to be used in a deed or deed of trust
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6. Transfer of Title to Real Property
Chapter 4
Transfer of Title to Real Property
Property Description
Property Survey:
determination of location and boundaries of a specific tract of land with location of buildings, fences, any other structures, and locations of easements and rights-of-way
should be performed by a licensed surveyor or engineer
will typically disclose existence of any encroachments
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7. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Alienation
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8. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Commonly Misunderstood Terms
Devise- a gift of personal property by will
Bequest/Bequeath- a gift of personal property by will
Remise- to give up, release or quit claim
Demise- to convey an estate by will
to convey an estate for years, to lease or rent
Escheat- involuntary alienation after death to the state if there are neither will or heirs
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9. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Essential Elements of a Valid Deed
Writing
Grantor – Conveys the deed
Grantee – Receives the deed
Property Description:
important that the description distinguishes the subject property from all other properties
Words of Conveyance:
words demonstrating the grantor’s intention to transfer the title to the named grantee
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10. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Essential Elements of a Valid Deed
Execution
Each grantor must sign conveying his/her interest to the grantee.
The grantee is not required to sign but must be identifiable.
Delivery and Acceptance
The valid and executed deed must be delivered by the grantor to the grantee.
Grantee must accept the deed voluntarily.
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11. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Non-Essential Elements of a Deed
Acknowledgment
Deed does not have to be acknowledged (notarized) or recorded to be valid and enforceable.
Acknowledgement is necessary before the deed can be recorded, but not for the validity of the deed.
Consideration
The deed does not need to recite the specific consideration (money) given.
It does need to provide evidence that something of value is present.
Seal
Deeds do not have to be sealed in North Carolina to be valid.
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12. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Non-Essential Elements of a Valid Deed
Recording:
gives constructive notice of grantee’s title to all the world
provides protection to the grantee from everyone, including subsequent purchasers of the same property from the same grantor
Witnessing:
In North Carolina, it is not necessary for the grantor’s signature (execution) to be witnessed.
Date:
Deeds do not have to contain the date to be valid.
A gift deed must be recorded within two years to remain valid
A date is needed to establish the time of the gift in order to avoid confusion about the two year period.
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13. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Types of Deeds
General Warranty Deed:
Most explicit statement of guarantees (promises)
Provides most liability for the Grantor
Least risk for the Grantee
Covers all claims, even though preceding the Grantor’s ownership of property
There are six covenants of a General Warranty Deed:
Seisin (Seizin)
Right to Convey
Against Encumbrances
Quiet Enjoyment
Warranty
Grantees Rights to Recovery
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14. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Types of Deeds
Special Warranty Deed:
warrants against claims arising during the grantor’s period of ownership
Quitclaim Deed (Non-Warranty):
used when no warranty is expected or necessary
often used to clear a cloud on a title
provides least liability for grantor and most risk for grantee
Special Purpose Deed:
Deed of Correction (Confirmation)
Deed of Release
Deed of Surrender
Deed of Gift- need to record within two years
Judicial Deeds
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15. Methods of Transferring Title
Chapter 4
Methods of Transferring Title
Excise Tax
Excise Tax (Revenue or Transfer Stamps):
Amount based on consideration received by the seller in the sale of the real property by deed.
Excise tax is $1 for every $500 (or portion thereof) of the full purchase price.
Typically paid for by the seller at closing.
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16. Transfer of Title to Real Property
Chapter 4
Transfer of Title to Real Property
Title Assurance
Assurance is only as good as the person or entity backing it.
Covenants of Title in Deeds:
General Warranty Deed covenants – most assurance
Special Warranty Deed covenants – less assurance
Quitclaim Deed covenants – no assurance
Title Examination Procedures:
Title Examination – used to determine the owner and quality of title. Limited to recorded documents on public record.
Attorney’s Opinion of Title – opinion of who is the legal owner. Determines
quality of their title.
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17. Chapter 4 Title Assurance Title Insurance
Title Insurance is coverage that protects the purchaser or mortgagee from losses due to title defects.
Types of Policies:
Owner’s Policy:
written for the protection of the owner
coverage in the amount that the owner paid for the property
policy remains in effect for the duration of the insured’s ownership of the property
continues in effect after the owner conveys the property to protect policy holder from claims of subsequent grantee
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18. Chapter 4 Title Assurance Title Insurance Mortgagee’s Policy:
Mortgagee is insured against defects in the title pledged as security in the mortgage
Coverage is limited to the outstanding balance of the mortgage
Leasehold Policy:
Written to protect a lessee (leaseholder) and/or a mortgagee against defects in the lessor’s title
The policy is issued to a mortgagee if the mortgagor has pledged a leasehold interest instead of a fee simple title as security for the mortgage debt.
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19. Chapter 4 Title Assurance Title Recordation:
Title Insurance
Title Recordation:
Recordation is not required in North Carolina
Recordation provides “constructive notice” to third parties
The Conner Act:
Certain real estate documents are not valid against third parties until recorded.
Makes North Carolina a “pure race” state.
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20. Chapter 4 Title Assurance Title Insurance
Documents Required to be Recorded:
Good rule of thumb is if a document has to be in writing according to the Statute of Frauds it has to be recorded under the Conner Act.
Residential contract of sale is short term and does not need to be recorded.
Recordation Procedures:
Document recordation is done at the Register of Deeds office in the county where the property is located.
Copies of each instrument are placed in a book in the chronological order in which they are received.
After recordation, the original document is returned to the owners or the owner’s designee
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21. Chapter 4 Title Assurance Title Insurance Marketable Title Act:
The Statute of Limitations for most title defects is 30 years
The Torrens System:
Titles for real property are registered in a manner similar to motor vehicles.
A change in the status of the property requires that the old registration certificate be destroyed and replaced with a new one.
Advantage – eliminates possibility of someone claiming title by adverse possession
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