Section 2 Unit 2 Flashcards
1
Q
Legal and equitable title
A
legal title: ownership of the bundle of rights
equitable title: a conditional right to legal title subject to an owner’s agreements with buyers and creditors
For example, a buyer enters into a contract for deed to purchase a house. The seller lends the bulk of the purchase price to the buyer for a term of three years. The buyer takes possession of the property, and makes payments on the loan. During this period, the seller retains legal title, and the buyer owns equitable title. If the buyer fulfills the terms of the agreement over the three year period, the buyer has an enforceable contract to obtain legal title.
Another common example is a mortgage loan transaction that gives the lender the right to execute a strict foreclosure, which transfers legal title to the lender in the event of a default. With this contractual right, the lender has equitable title to the property.
In practice, the terms “title” and “legal title” are often used interchangeably.
2
Q
Notice of title
A
how ownership is evidenced to the public
actual notice: knowledge acquired or imparted directly through demonstrable evidence, e.g., presenting or inspecting a deed, visiting a party in possession
constructive notice: knowledge one could or should have obtained, as presumed by law; imparted by recording in public records “for all to see”
3
Q
Transferring title
A
voluntary by grant, deed, or will
involuntary by descent, escheat, eminent domain, foreclosure, adverse possession, estoppel
4
Q
DEEDS OF CONVEYANCE
A
instruments of voluntary conveyance by grantor to grantee
5
Q
Delivery and acceptance
A
legal title transfers upon competent grantor’s intentional delivery and grantee’s acceptance; in Torrens, title transfers upon registration
6
Q
Validity
A
Validity of the grantee’s acceptance requires only that the grantee have physical possession of the deed or record the deed. Once accepted, title passes to the grantee. The deed has fulfilled its legal purpose and it can not be used again to transfer the property. If the grantee loses the deed, there is no effect on the grantee’s title to the estate.
premises clause: granting habendum clause: type of estate reddendum clause: restrictions tenendum clause: other property included warrants: seizen; quiet enjoyment; further assurance; forever; encumbrances; grantor's acts
7
Q
Statutory deeds
A
bargain and sale: “I own but won’t defend”
general warranty: “I own and will defend”
special warranty: “I own and warrant myself only”
quitclaim: “I may or may not own, and won’t defend”
8
Q
Special purpose deeds
A
used for different purposes, to convey certain interests, or by certain parties
9
Q
Transfer tax
A
state tax on conveyances based on price
10
Q
WILLS
A
last will and testament: voluntary transfer to heirs after death
maker: devisor or testator; heir: devisee; estate: devise
Types of will: witnessed; holographic; approved; nuncupative
11
Q
Validity
A
adult; competent; indicates “last will and testament”; signed; witnessed; voluntary
the testator be of legal age and mentally competent
the testator indicate that the will is the “last will and testament”
the will be signed
the completion of the will be witnessed and signed by the witnesses
the will be completed voluntarily, without duress or coercion
12
Q
Probate
A
if testate, estate passes to heirs; if intestate, to successors by descent; if intestate with no heirs, estate escheats to state or county
process: validate will; validate, settle claims and pay taxes; transfer balance of estate to heirs
If the will does not name an executor, the court will appoint an administrator to fulfill this role.
13
Q
INVOLUNTARY TITLE TRANSFER
A
descent and escheat: no will
foreclosure: lose title by forfeiture
eminent domain: lose title to public for the greater good
adverse possession: by claim of right or color of title; continuous, notorious, hostile possession; may have to pay taxes
estoppel: barred by prior acts or claims
14
Q
TITLE RECORDS
A
all instruments affecting title must be recorded
give public notice; protect owners; protect lienholders’ claims
15
Q
Chain of title
A
successive property owners from original grant to present owner
abstract of title: chronology of recorded owners, transfers, encumbrances
16
Q
Recording system
A
local property recording system governed by state law
Torrens registry: requires court action initially: legal title does not pass until recordation occurs
17
Q
Title evidence
A
needed to prove marketable title as well as who owns
forms of evidence: Torrens; title insurance; attorney’s opinion of abstract; title certificates
18
Q
Alienation
A
Transfer of title to real estate, occurs voluntarily and involuntarily.
19
Q
Conveyance
A
When the transfer uses a written instrument.
20
Q
Transferring Title to Real Estate: Voluntary
A
public grant
deed
will
21
Q
Transferring Title to Real Estate: Involuntary
A
descent
escheat
foreclosure
eminent domain
adverse possession
estoppel
22
Q
Voluntary alienation.
A
Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party. If the transferor is a government entity and the recipient is a private party, the conveyance is a public grant. If the transferor is a private party, the conveyance is a private grant.
23
Q
deed of conveyance, or deed
A
A living owner makes a private grant
24
Q
transfer by will
A
A private grant that occurs when the owner dies
25
Involuntary alienation.
Involuntary alienation is a transfer of title to real property without the owner's consent. Involuntary alienation occurs primarily by the processes of descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel.
26
Grantor
A deed is a legal instrument used by an owner to transfer title to real estate voluntarily to another party, the grantee.
27
Recording.
Recording is not necessary to make a deed valid. However, it is in the grantee's best interests to do so. Recording the deed gives the public constructive notice of the grantee's ownership.
28
Deed clauses and covenants
Conveyance clauses and covenant, or warrant, clauses set forth all the necessary provisions of the conveyance.
29
Conveyance clauses.
Conveyance clauses describe the details of the transfer.
30
Granting clause, or premises clause
the only required clause; contains the conveyance intentions; names the parties; describes the property; indicates nominal consideration
31
Habendum clause
describes the type of estate being conveyed (fee simple, life, etc.)
32
Reddendum clause, or reserving clause
recites restrictions and limitations to the estate being conveyed, e.g., deed restrictions, liens, easements, encroachments, etc.
33
Tenendum clause
identifies property being conveyed in addition to land
34
Covenant, or warrant, clauses.
Covenant clauses present the grantor's assurances to the grantee. A deed of conveyance usually contains one or more of the following covenants, depending on the type of deed.
35
Warrant of seisin
assures that the grantor owns the estate to be conveyed, and has the right to do so
36
Warrant of quiet enjoyment
assures that the grantee will not be disturbed by third party title disputes
37
Warrant of further assurance
assures that the grantor will assist in clearing any title problems discovered later
38
Warranty forever; warranty of title
assures that the grantee will receive good title, and that grantor will assist in defending any claims to the contrary
39
Warrant of encumbrances
assures that there are no encumbrances on the property except those expressly named
40
Warranty against grantor's acts
states the assurance of a trustee, acting as grantor on behalf of the owner, that nothing has been done to impair title during the fiduciary period
41
Statutory Deeds
A deed of conveyance can make a variety of warranties and convey a range of interests. The most common deeds are statutory deeds, in which the covenants are defined in law and do not need to be fully stated in the deed.
42
Bargain and sale deed.
In a bargain and sale deed, the grantor covenants that the title is valid but may or may not warrant against encumbrances or promise to defend against claims by other parties. If there is a warrant of defense, the deed is a full warranty bargain and sale deed.
The overall bargain and sale covenant is: "I own, but won't defend."
43
General warranty deed.
The general warranty deed, or warranty deed for short, is the most commonly used deed. It contains the fullest possible assurances of good title and protection for the grantee. The deed is technically a bargain and sale deed in which the grantor promises to defend against any and all claims to the title.
The overall general warranty covenant is: "I own and will defend."
44
Special warranty deed.
In a special warranty deed, the grantor warrants only against title defects or encumbrances not noted on the deed that may have occurred during the grantor's period of ownership or trusteeship. The deed does not protect the grantee against claims that predate the owner's period of ownership. Special warranty deeds are often used by trustees and grantors who acquired the property through a tax sale.
The overall special warranty covenant is: "I own and will defend against my acts only."
45
Quitclaim deed.
A quitclaim deed transfers real and potential interests in a property, whether an interest is known to exist or not. The grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee.
The quitclaim is typically used to clear title rather than convey it. Where there is a possibility that prior errors in deeds or other recorded documents might cloud (encumber) the title, the relevant parties execute a quitclaim deed to convey "any and all" interest to the grantee.
If a party responsible for encumbering title refuses to quitclaim the interest, the owner may file a quiet title suit. This requires the lienor to prove the validity of an interest. If the defendant is unable to do so, the court removes the cloud by decree.
The overall quit claim covenant is: "I may or may not own, and I won't defend."
46
Special purpose deeds
A special purpose deed is one tailored to the requirements of specific parties, properties, and purposes.
47
Personal representative's deed
used by an executor to convey a decedent's estate; also called an executor's deed
48
Guardian's deed
used by a court-appointed guardian to transfer property of minors or mentally incompetent persons
49
Sheriff's deed
used to convey foreclosed property sold at public auction
50
Deed of trust
used to convey property to a third party trustee as collateral for a loan; on satisfaction of the loan terms, the trustee uses a reconveyance deed to convey the property back to the borrower
51
Deed in trust
used to convey property to the trustee of a land trust. not to be confused with deed of trust
52
Master deed
used to convey land to a condominium developer; accompanied by the condominium declaration when recorded
53
Partition deed
used to convey co-owned property in compliance with a court order resulting from a partition suit; a partition suit terminates an estate when one or more co-owners want to dissolve their relationship and are unable to do so without the assistance of a court.
54
Patent deed
used to transfer government property to private parties
55
Tax deed
used to convey property sold at a tax sale
56
Transfer tax
State law usually requires payment of a documentary stamp tax on a conveyance of real property. The tax is based on the actual price of the property conveyed, thus enabling taxing authorities to ascertain current market value for ad valorem tax purposes. Payment of the tax is evidenced on the deed.
57
Exemptions from transfer tax include:
transfer within the immediate family
consideration less than a certain amount
transfer between government entities or non-profit
organizations
trust deed transfer and reconveyance
tax deed
58
A will, or more properly, a last will and testament:
a legal instrument for the voluntary transfer of real and personal property after the owner's death. It describes how the maker of the will, called the testator or devisor, wants the property distributed.. A beneficiary of a will is called an heir or devisee. The property transferred by the will is the devise.
59
Amendatory instrument
A will takes effect only after the testator's death but it can be changed at any time during the maker's lifetime.
60
executor, or personal representative
oversee the settlement of the estate. If a minor is involved, the testator may identify a guardian to handle legal affairs on behalf of the minor.
61
A will generally takes one of the following forms: Witnessed
in writing and witnessed by two people
62
A will generally takes one of the following forms: Holographic
in the testator's handwriting, dated and signed
63
A will generally takes one of the following forms: Approved
on pre-printed forms meeting the requirements of state law
64
A will generally takes one of the following forms: Nuncupative
made orally, and written down by a witness; generally not valid for the transfer of real property
65
Testate proceeding
If the decedent died without a valid will, the estate passes to lawful heirs according to the state's laws of descent and distribution, or succession. Laws of descent stipulate who inherits and what share they receive, without regard to the desires of the heirs or the intentions of the deceased.
66
Intestate proceeding with heirs
If the decedent died without a valid will, the estate passes to lawful heirs according to the state's laws of descent and distribution, or succession. Laws of descent stipulate who inherits and what share they receive, without regard to the desires of the heirs or the intentions of the deceased.
67
Intestate proceeding with no heirs.
If an intestate decedent has no heirs, the estate escheats, or reverts, to the state or county after all claims and debts have been validated and settled.
68
Laws of descent
Involuntary alienation occurs when a title-holder dies without a valid will. The state's statutes of descent and distribution identify heirs and the respective shares of the estate they will receive. In the absence of heirs, title transfers to the state or county by escheat.
69
Abandonment
Property that has been abandoned for a statutory period may also escheat to the state or county.
70
Foreclosure
A property owner who fails to fulfill loan obligations or pay taxes may lose an estate through foreclosure.
71
Eminent domain
Various government and public entities can transfer private property to the public sphere by the power of eminent domain. The transfer is involuntary, even though the owner receives compensation. For example, a city government wants to widen a highway to accommodate growth. The government uses eminent domain to condemn and purchase all properties abutting the thoroughfare in order to complete the construction project.
72
Adverse possession
State laws may allow a real property owner to lose legal title to an adverse possessor. An adverse possessor is someone who enters, occupies, and uses another's property without the knowledge or consent of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time.
73
To claim legal title, the adverse possessor must:
be able to show a claim of right or color of title as reason for the possession
have notorious possession, which is possession without concealment
maintain a consistent claim of hostile possession, which is a claim to ownership and possession
regardless of the owner's claims or consent
occupy the property continuously for a statutory period of time
in some states, pay taxes
74
claim of right
based on the adverse possessor's occupying and maintaining the property as if he or she were the legal owner.
75
Color of title
results when a grantee has obtained defective title, or received title by defective means, but occupies the property as if he or she were the legal owner. A court may hold that a claim of right or a claim of colored title is a valid reason for the possession.
76
Notorious possession and hostile possession
give constructive notice to the public, including the legal owner, that a party other than the legal owner is occupying and claiming to own the property. It is possible for such notice to prevail over notice by recordation as the dominant evidence of legal ownership, provided the possessor has occupied the property continuously for the statutory period of time.
In some states, the possessor must have paid taxes over a prescribed period to obtain title. However, if the possessor has paid rent of any kind, the claim of ownership might be refuted.
77
Avoiding adverse possession.
An owner can avert the danger of involuntary alienation by adverse possession by periodically inspecting the property within statutory deadlines and evicting any trespassers found. The owner may also sue to quiet title, which would eliminate the threat of the adverse possessor's claim to legal title.
A property registered in the Torrens system cannot be lost to adverse possession.
78
Estoppel
Estoppel prevents a person from claiming a right or interest that is inconsistent with the person's previous statements or acts. As a basis for involuntary alienation, the doctrine of estoppel can prevent an owner from re-claiming a property that was transferred under false pretenses. For example, an owner conveys a property with a defective title. The grantor is fully aware of the defect but makes no disclosure to the grantee. The grantor later cures the defect and then claims to be the rightful owner of the property on the basis of the effort and expense of clearing the title. Estoppel disallows the grantor's claim because of the prior conveyance action. The grantee remains legal owner and benefits from the cleared title as well.
79
State laws require the recording of all documents that affect:
rights and interests in real estate in the public real estate records of the county where the property is located. These public records, or title records, contain a history of every parcel of real estate in the county, including names of previous owners, liens, easements, and other encumbrances that have been recorded.
Deeds, mortgages, liens, easements, and sale contracts are among the documents that must be recorded . Other public records that affect real estate title are marriage, probate, and tax records.
Generally, a County Recorder's Office or other similarly named office maintains the title records.
80
Public notice
Title records protect the public by giving all concerned parties constructive notice of the condition of a property's legal title: who owns the property, who maintains claims and encumbrances against the property.
81
Buyer protection
Title records protect the buyer by revealing whether a property has marketable title, one free of undesirable encumbrances. The buyer is legally responsible for knowing the condition of title, since it is a matter of public record. Recording a transaction also protects a buyer by replacing the deed as evidence of ownership.
82
Lienholder protection
Title records protect the lienholder by putting the public on notice that the lien exists, and that it may be the basis for a foreclosure action. Recording also establishes the lien's priority.
83
Chain of title
Chain of title refers to the succession of property owners of record dating back to the original grant of title from the state to a private party. If there is a missing link in the chronology of owners, or if there was a defective conveyance, the chain is said to be broken, resulting in a clouded title to the property. To remove the cloud, an owner may need to initiate a suit to quiet title, which clears the title record of any unrecorded claims.
84
Abstract of Title.
An abstract of title is a written, chronological summary of the property's title records and other public records affecting rights and interests in the property. It includes the property's chain of title and all current recorded liens and encumbrances, by date of filing. A title abstractor or title company analyst conducts the search of public records, called a title search, needed to produce an abstract. Insurers and lenders generally require the search to identify title defects and ascertain the current status of encumbrances.
85
Title plant
duplicate set of records of a property copied from public records and maintained by a private company, such as a title company.
86
Recording system
There are no federal recording standards. Each state prescribes procedures and requirements for recording in public title records: forms, proper execution, acknowledgment, and witnessing.
87
The Torrens system.
Certain states and counties use the Torrens System of recording. The Torrens system differs from other title recording systems in that title passes only when the conveyance has been duly registered on the title certificate itself. Encumbrances likewise have no legal effect until they are recorded. In effect, the Torrens title record is the title itself. It is not necessary to search public records to ascertain the status of title; it is all reflected on the title certificate.
To enter a property in the Torrens system, a court action must first clear title by giving notice to all potential interest holders that they must express their claims. At the end of the proceeding, the court decrees that the title is accepted into Torrens registration. The Torrens registry retains the original registration documents and provides copies to the recorder or other appropriate office. All subsequent transactions affecting title must follow the proper Torrens recording procedures and requirements.
88
Title evidence
Since the value of a property is only as good as the marketability of its title, the evidence supporting the status of title is a significant issue. To demonstrate marketable title to a buyer, a seller must show that the title is free of:
doubts about the identity of the current owner
defects, such as an erroneous legal description
claims that could affect value
undisclosed or unacceptable encumbrances
89
The four principal forms of evidence the owner can use to support these assurances are:
a Torrens certificate
a title insurance policy
an attorney's opinion of the title abstract
a title certificate
90
Torrens certificate.
If available, the Torrens certificate is the best evidence, for the reasons given earlier—it is not merely a record, but is the title itself.
91
Title insurance.
In the absence of Torrens registration, a title insurance policy is commonly accepted as the best evidence of marketable title. A title insurance policy indemnifies the policy holder against losses arising from defects in the insured title.
92
common policy types
the lender's policy and the owner's policy, which protect the respective policy holders' interests in the property. Thus, a lender who holds an $80,000 mortgage on a property will obtain protection worth $80,000 against the possibility that the lender's lien cannot be enforced. The owner's policy will insure against defective title to the extent of the property's initial or appreciated value.
93
An owner's policy:
may have standard coverage or extended coverage. Standard coverage protects against title defects such as incompetent grantors, invalid deeds, fraudulent transaction documents, and defects in the chain of title. Extended coverage protects against liabilities that may not be of public record, including fraud, unrecorded ownership claims, unintentional recording errors, and unrecorded liens. Extended coverage may also protect against adverse possessors, boundary disputes, and prescriptive easements. Neither standard nor extended coverage insures against defects expressly excluded by the policy or defects that the owner might have been aware of but did not disclose.
94
Before issuing a title insurance policy:
a title company conducts a title search to uncover defects in title or unrecorded breaks in the chain of title. If the search fails to discover any uninsurable defects, the company issues a binder, or commitment to insure. The binder recapitulates the property description, interest to be insured, names of insured parties, and exceptions to coverage.
95
Attorney's opinion of abstract.
An attorney's opinion of abstract states that the attorney has examined a title abstract, and gives the attorney's opinion of the condition and marketability of the title. Generally, an opinion is not a proof or guarantee of clear title. Further, it offers no protection in the event title turns out to be defective.
96
Title certificate.
A title certificate is a summary of the condition of title as of the date of the certificate, based on a search of public records by an abstractor or title analyst. The certificate does not guarantee clear title against defects, unrecorded encumbrances or encroachments.
97
A person wishes to convey any and all interests in a property to another without making any assurances as to encumbrances, liens, or any other title defects on the property. This party would most likely use which of the following types of deed?
A quitclaim deed
98
A property owner can avert the danger of losing title by adverse possession by
inspecting the property and evicting any trespassers found.
99
If a person having several heirs dies intestate, the property will
pass to heirs by the laws of descent and distribution.
100
Just prior to passing away, a person tells two witnesses that she would like her estate to pass to her husband. One witness records the statement and signs his name. This is an example of
an unenforceable nuncupative will.
101
Constructive notice of ownership of a parcel of real estate is primarily demonstrated through
title records
102
With the exception of a Torrens certificate, the best evidence of marketable title is
title insurance
103
The only required clause in a deed of conveyance is one that
states the grantor's intention, names the parties, describes the property, and indicates a consideration.
104
The fundamental purpose of recording instruments that affect real property is to
give constructive notice of one's rights and interests in the property
105
A hermit secretly lives in a cave on a 200-acre property. After twenty years, the person makes a claim of ownership to the property. This claim will likely be
declined because possession was secretive.
106
If a person dies with no legal heirs or relations and has left no valid will, what happens to real property owned by that person?
It is taken by the state according to the process called escheat
107
A person claims ownership of a parcel of real estate to a prospective buyer, stating that she has lived on the property for five years and nobody has ever bothered her. The claimant also shows the buyer a copy of the deed. The legal basis of this claim is referred to as
actual notice
108
To be marketable, title must be
free of undisclosed defects and encumbrances
109
For a deed to convey title, it is necessary for the deed to be
accepted by the grantee
110
Which of the following best describes the concept of "legal title" to real estate?"
Ownership of the bundle of rights to real estate
111
The Torrens System differs from other title recording systems in that
title is conveyed only when conveyance is registered on the title certificate
112
What is "chain of title?"
A chronology of successive owners of record of a parcel of real estate
113
An owner transfers title to a property to a buyer in exchange for a consideration. This is an example of
voluntary alienation
114
A one-time tax levied on a property for purposes of recording a transaction is called
a documentary stamp tax
115
The purpose of a covenant clause in a deed of conveyance is to
state the grantor's assurance or warrant to the grantee that a certain condition or fact concerning the property is true
116
The type of statutory deed that contains the most complete protection for the grantee is a
general warranty deed.
