Flashcards in Chapter 9: Title, Deeds, and Ownership Restrictions Deck (110)
Title means ownership. When a party owns property, he or she has legal title to it. Legal title is an ownership interest that’s enforceable by law. Title to real property is the ownership of specified rights in property that forms an estate. The type of estate, as we have seen, is based on all, or specified portions of, the bundle of rights that include possession, disposition, enjoyment, exclusion, and control.
Is the right to gain ownership interest in the future. Equitable title effectively confers a financial or “equitable” interest in a property.
Marketable, merchantable, or clear title to real property is title in fee simple that is free from litigation and defects, which enables an owner to hold it in peace or sell it to a person of reasonable prudence for its fair market value. There is no such thing as proof of good title to property; there is only evidence to support the claim.
Title Defects (Cloud on Title)
Are any claims or other factors that could cause the title to a property to be declared invalid. The title defect can be any issue that causes the current title to be questioned including: failure to comply with local real estate documents laws, or the discovery of other claims or liens on the property that were not acknowledged at the time the deed was issued.
Actual vs. Constructive Notice
A party entitled to the ownership of property must be able to show he or she has acquired such right, or risk losing the property to another claimant. An owner must be able to provide evidence of ownership. Brokers should advise parties they deal with in a transaction to immediately record any documents associated with the transaction that could affect title. The two methods that may be used to provide evidence of ownership are actual notice and constructive notice
actual notice of ownership is provided by physical possession. There is validity in the saying “possession is nine-tenths of the law.” Being in possession of property and claiming ownership is called actual notice. A party who has been shown a deed also has been given actual notice. Actual notice can be either expressed or implied.
Constructive Notice also called legal notice, is achieved by recording documents in the public records. Recording a document has the same legal effect as showing it to the entire world. Documents are recorded in the Office of the Clerk of the circuit court in the county where the property is located.
Although actual and constructive notice have the same legal priority
recording an instrument in the public records may be easier to prove; therefore, constructive notice is the best evidence of ownership.
Root of Title
To ascertain whether or not title is good and merchantable, the record of ownership must be traced back for a period of time necessary to assure that no outstanding or unresolved claims exist against the title. The time period at which this assertion can be made is called the root of title.
In Florida, the root of title extends back 30 years from the recording of the claim, as specified in the Marketable Record Titles to Real Property Act (MARTA). Claims more than 30 years old are extinguished.
Property ownership rights may be traced back to a land grant from the state or federal government, or from a land grant given by the king of Spain.
Chain of Title
Is created by a search of the public records that results in a timeline of recorded documents that links all past owners of a parcel of land from the root of title to the present day. Also contained in the public records are other documents such as mortgages, judgments, divorces, deaths, births, tax liens, and other documents that may have an effect on the title to property.
Abstracting and title insurance companies compile copies of the documents from the public records into a title plant. The title plant contains all documents that pertain to real estate and is arranged according to the date of recording in the public records.
Since many different types of documents may affect the title to property, a search of all such documents must be made. Notations are made regarding any documents that could effect the title.
In some cases, it may be desirable to have copies made of all documents that have an effect on the title to the property that is investigated. These can then be assembled in date order and placed in a binder. A cover page that identifies the property is called the caption, or caption page. When complied in this fashion, it is called an abstract. The chain of the title located in the abstract is a timeline of the recorded documents used to transfer title from one owner to the next.
Since an abstract ends at a certain point in time, it may become necessary in the future to obtain more current information about the property. An update is a newer version of a prior abstract.
Using a prior abstract as a basis, starting from the last date of the last document, an abstractor copies all documents of record since that date to bring the original abstract current.
Attorney's Opinion of Title
The abstract can be considered a history of the title to the property. In and of itself an abstract is useless. Unless an attorney who is experienced in land titles reviews the abstract and forms a legal opinion as to the quality of title, the abstract has little value.
When an attorney conducts such a review and renders a written opinion, it is called an opinion of title. It is not guarantee of good title. The opinion of title is only the attorney’s opinion, and that opinion could prove to be faulty. A lawsuit against the attorney could be necessary if a defect is later discovered.
Purpose of Title Insurance
Title insurance provides financial protection against losses sustained as the result of a defective title. Title insurance does not offer protection from all defects. Real property can be encumbered thereby restricting the use of property for both the current and future owners. These prior encumbrances are listed as exceptions to the title policy and restrict the current owner’s use.
Basic title policy coverage protects owners against issues that may arise with clear title to the property, incorrect signatures on documents, forgery, fraud, restrictive covenants, encumbrances, or judgments.
Lender's Title Insurance Policy
Mortgage lenders will insist that a borrower obtain mortgagee (lender’s) title insurance policy before making a loan. This policy protects the lender by paying the unpaid balance of the loan if the borrower should lost title to the property as the result of a title defect.
If the loan is sold to another lender, the mortgage policy is transferable to the new lender.
Owner's Title Insurance Policy
The property owner may also wish to obtain protection and may do so by purchasing a mortgagor’s (owner’s) title insurance policy. The mortgagor’s title insurance policy is not transferable; each new owner who wishes to be insured must obtain a new policy. The policy is in effect, however, for as long as the original purchaser of the policy owns the property, even if it is for the rest of the policyholder’s life.
It should be noted that the amount of the insurance does not change over time. Therefore, should the value of the property increase, the amount of insurance remains the same. An owner could buy a new, updated policy to increase the amount of the coverage if desired.
Florida law does not require a mortgagor (borrower) to obtain life insurance.
Curing Defects in Title
A property with a defective title is said to have a cloud on title. It could potentially be sold in the market, but any purchaser of such property might be unwilling to pay a fair market price to obtain it. In order to make a property merchantable, title defects must be eliminated. Curing is the elimination or resolution of the problem that caused the defect.
There are essentially three ways in which a defect can be cured:
• Quitclaim deed
• Suit to quiet title
• The marketable record title to real property act (MARTA)
may be used to cure a defect in title by having the party who has a potential claim or interest in the property relinquish the claim by voluntarily executing a quitclaim deed. This is the quickest and least expensive alternative, and is preferred if the party can be located and is willing to release any interest he or she may have.
Suit to Quiet Title
may be filed in court with all potential claimants required to appear in court and assert their claim. The court renders a decision and resolves any dispute, thus curing the defect.
Marketable Record Title to Real Property Act (MARTA)
the purpose is to eliminate claims-in-antiquity, which are old, unresolved claims that are most likely not supported due to the passage of time.
Title searches need to go back only 30 years to establish a root title in Florida. Any claim outstanding that has not been exercised within that time period is eliminated as a matter of law.
Exceptions to MARTA exist if implied interests by occupancy or use are known, or if evidence of an interest in property is recorded in documents at the root of title or later.
Alienation of Title
transferring or conveying ownership from one party to another. Alienation may be voluntary or involuntary.
Transfer by Voluntary Alienation
The willful disposition or gift of real property is called a devise and the recipient of the real property is referred to as the devisee. The disposition or gift of personal property is called a bequest and the recipient of the personal property is referred to as the beneficiary.
is the document that is used to transfer title from one party to another when real property is sold or conveyed by gift. Deeds are the most common document used to transfer title.
is a document that provides for the transfer of title upon the death of an individual (decedent) who died testate (left a will). The decedent is referred to as a testator (if a male) or a testatrix (if female).
Transfer by Involuntary Alienation
1. Descent and Distribution
3. Eminent Domain
4. Adverse Possession
Descent and Distribution
is a statutory system created by law. This system provides for the transfer of title to legal descendants (heirs) upon the death of an individual who died intestate (without a will). Probate law establishes the order in which such assets must be allocated and provides for the distribution of property to those entitled to receive them. This is a form of involuntary alienation because the state, not the decedent, determines the disposition of property.