1. Chapter 3 Conveying Real Property Interests McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 3-2 Reasons for Complexity 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

3. 3-3 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

4. 3-4 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

5. 3-5 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

6. 3-6 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: 1.Affirms intention to convey real property 2.Determines type of deed

7. 3-7 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

8. 3-8 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

9. 3-9 Exceptions and Reservations Clause and Descriptions Exceptions and reservations clause  Deed restrictions  Clauses withholding mineral or oil rights  Creation of an easement Property descriptions  Must be unambiguous and enduring  Three methods acceptable for public records: 1.Metes and bounds 2.Plat lot and block number 3.Government rectangular survey  Unacceptable descriptions include street address and tax parcel number

10. 3-10 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 grantor  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

11. 3-11 How Deeds Differ Key point: No deed conveys rights that grantor does not have Deeds differ by number of covenants

12. 3-12 Types of Deeds General warranty deed: All three covenants; seizin, 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

13. 3-13 *Highest quality deed = most covenants! Review of Deeds General Warranty* Special Warranty Bargain and Sale Quitclaim Has valid title Will defend grantee against claims of others No undisclosed restrictions or conflicting claims Yes! Ltd! Implied ? ? No! Seizin: Quiet Enjoyment: No Encumbrances: Yes! Covenants by Grantor Type of Deed

14. 3-14 Modes of Conveying Real Property

15. 3-15 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

16. 3-16 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  Requirements Action of water (accretion, reliction)

17. 3-17 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

18. 3-18 Creating Evidence of Title

19. 3-19 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”?

20. 3-20 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

21. 3-21 Possible Breaks in the Chain of Title Inconsistent property descriptions? Fraudulent documents? Missing spousal signature? Conveyance of only a partial interest? Faulty separation of mineral or water rights? Inferior deed? Conveyance by adverse possession? Cloud to Title

22. 3-22 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

23. 3-23 Two “Evidences of Title” Abstract w/Opinion of TitleTitle Insurance Commitment Yup Nope Marketable? Details:……… We hereby promise to insure……. ……………. Abstract of title chain

24. 3-24 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

25. 3-25 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

26. 3-26 Metes and Bounds Description: Example

27. 3-27 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

28. 3-28 Subdivision Plat Lot and Block: Example

29. 3-29 Methods of Land Description: Government Rectangular Survey Basic reference points  Baseline  Principal meridian Measures of distance  Range lines  Tier lines Units  Township  Section  Check

30. 3-30 Baselines and Principal Meridians of the United States

31. 3-31 Township Identification

32. 3-32 A Township

33. 3-33 R26ER26E R27ER27E R2ER2E R1WR1W R1ER1E NW 1/4 SW 1/4 SE 1/4 NW 1/4 of NE 1/4 Tallahassee Principal Meridian 6 12 345 78911 10 12 18 13141516 17 19202122 2324 252627282930 31323334 35 36 Township: Range 27 E, Tier 24 S Jacksonville Tallahassee Orlando Base Line T 2 N T 1 S T 2 S R2ER2E R1WR1W R2WR2W T 1 N T 24 S T 23 S

34. 3-34 Subdividing a Section

35. End of Chapter 3