Chapter 3

Conveying Real Property Interests

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

3-2

Reasons for Complexity in Conveying Real EstateReal property is a complex bundle of

rightsRights to land are enduring: Rights

available today depend on transactions long ago

Land is a continuous surfaceBoundaries not obvious or naturalBoundary errors always hurt someone

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Deeds: The Principal Conveyanceof Real PropertyDeed: A special, written contract for

conveying a permanent interest in real propertyFee simple absoluteLife estateConditional feeEasementOil, mineral, or water rights

Must be in writing to be upheld by a court

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Requirements of a Deed

Grantor (with signature) and granteeRecital of considerationWords of conveyanceCovenantsHabendum clauseExceptions and reservations clauseDescription of landAcknowledgmentDelivery

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Grantor and GranteeGrantor: Person or entity conveying

real propertyMust be of legal ageMust be legally competentMust sign deed

Grantee: Recipient of real propertyNo need to be of legal of ageNo need to be competentOnly needs to be identifiable

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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

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CovenantsCovenants: Legally binding promisesThree 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

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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

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Exceptions and ReservationsClause 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 bounds2. Plat lot and block number3. Government rectangular survey

Unacceptable descriptions include street addressand tax parcel number

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Acknowledgment and DeliveryAcknowledgment: Confirmation that grantor

acted voluntarilyNotarized or equivalent (some states require

witnesses)

Delivery: Observable, verifiable intent that deed is to be given to grantorExamples 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

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How Deeds Differ

Key point: No deed conveys rights that grantor does not have

Deeds differ by number of covenants

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Types of DeedsGeneral 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

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*Highest quality deed =

most covenants!

Review of Deeds

General Warranty*

Special Warranty

Bargain and Sale

Quitclaim

Has validtitle

Will defend grantee against claims of others

No undisclosedrestrictions or

conflicting claims

Yes!

Ltd!

Implied ? ?

No! No! No!

Seizin:Quiet

Enjoyment:No

Encumbrances:

Yes! Yes!

Yes! Yes!

Covenants by Grantor

Type of Deed

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Modes of Conveying Real Property

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Ways Title Can Transfer

Voluntary conveyance by deedOrdinary sale and transfer of title

Involuntary conveyance by deedProbate (distribution of estate)Bankruptcy Divorce settlementCondemnation Foreclosure

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Ways Title Can Transfer (continued)Voluntary conveyances without a deed

(easements only) Implied easementEasement by prior use or necessityEasement by estoppel

Involuntary conveyance without deedEasement by prescriptionTitle by adverse possessionRequirements

Action of water (accretion, reliction)

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Public Records, Notice and RealProperty ConveyanceDoctrine of constructive notice: Cannot be

bound by what you cannot knowStatute of Frauds: Contract must be written to

be enforceableRecording statutes: A contract recorded in

public records is considered knownActual notice: Open, continuous, actual

possession of property

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Creating Evidence of Title

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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”?

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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

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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

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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

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Two “Evidences of Title”Abstract w/Opinion of Title Title Insurance Commitment

Yup

Nope

Marketable?

Details:………

We hereby promise to insure…….…………….

Abstract of title chain

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Marketable Title LawsState 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

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Methods of Land Description:Metes and BoundsA sequence of directed distances:

Compass directed “walk around property”Establishing point of beginning is critical

Oldest form of acceptable land descriptionMost flexible formMost difficult to interpretShould be made or interpreted only by

surveyors

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Metes and Bounds Description: Example

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Methods of Land Description:Subdivision Plat Lot and Block NumberSubdivision 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 descriptionMap shows numerous features

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Subdivision Plat Lot and Block: Example

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Methods of Land Description:Government Rectangular SurveyBasic reference points

BaselinePrincipal meridian

Measures of distanceRange linesTier lines

UnitsTownshipSectionCheck

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Baselines and Principal Meridiansof the United States

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Township Identification

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A Township

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R26E

R27E

R2E

R1W

R1E

NW1/4

SW1/4

SE1/4

NW 1/4of NE 1/4

Tallahassee Principal Meridian

6 12345

7 8 9 1110 12

18 1314151617

19 20 21 22 23 24

252627282930

31 32 33 34 35 36

Township:Range 27 E,Tier 24 S

Jacksonville

Tallahassee

Orlando

Base LineT 2 N

T 1 ST 2 S

R2E

R1W

R2W

T 1 N

T 24 ST 23 S

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Subdividing a Section

End of Chapter 3