Highlights • Chapter 12 ½ 9
Chapter 12: deeds
Chapter Highlights
1. What is a consensual transfer and how is it accomplished?
A consensual transfer is referred to as a voluntary transfer. Voluntary transfers of title are accomplished with a deed executed either by the grantor or, if the property owner is no longer living, by the executor of the owner’s estate as prescribed in the owner’s will. Both types of documents must be drafted carefully to ensure that they, in fact, transfer the desired ownership interest and amount of real estate.
2. Explain a deed.
A deed is a written instrument, or document, that serves two purposes: evidence of real property ownership, and as a vehicle to transfer title, a conveyance. The deed is simply a tangible piece of paper that reflects the intangible rights of real property ownership.
3. What must happen before a deed conveys title?
When properly executed, delivered, and accepted a deed conveys title.
4. What is the main difference between a will and a deed?
Deeds are normally used during the property owner’s lifetime, whereas wills are used to specify the transfer of ownership after the owner’s death.
5. Who are the grantor and grantee?
The party transferring title is called the grantor, and the party receiving title is referred to as the grantee. The grantee and buyer are usually, but not always, the same individual or entity. It is possible, for example, that one party may purchase real estate and put it in another individual’s name, as a gift.
6. What is a reservation?
A reservation, therefore, creates an independent right that did not exist before the conveyance. A reservation can also be used to limit the manner in which a property is used.
7. What is essential for a deed to be valid?
According to the Statute of Frauds, a deed must be in writing to be enforceable. Additionally, the following six items are essential for a deed to be valid.
1. Both the grantor and grantee must be named.
2. There must be a legal description of the subject property.
3. In most states, there must be some mention of consideration.
4. Words that make clear the grantor’s intention to transfer an interest in the property must be included.
5. The grantor’s, and possibly the grantee’s, signature must be on the document.
6. The grantor must deliver the deed to the grantee, and the grantee must accept it.
8. What does the competency requirement do?
The named grantor(s) must be competent (of legal age and of sound mind). This requirement is to ensure that those who do not have the mental capacity or maturity to understand the consequences of executing a deed will not be deprived of their property. If a deed is executed without this requirement, the grantor can take legal action to have the transfer set aside and title restored. In cases with more than one grantor, it is customary to have each named in a single deed, although each grantor may convey his or her interest with a separate deed.
9. What is a recital clause?
Sometimes, following the legal description, there is a recital clause that states all, or part, of the title chain to indicate how the grantor acquired title.
10. Explain actual and nominal consideration.
State laws vary regarding the recital of the consideration the grantee offers in exchange for the property. Some statutes require that the actual amount paid for the property, actual consideration, be included in the deed (deeds granted by corporations and fiduciaries must state the actual consideration). Most states only require the citation of nominal consideration, which need not be related to the actual amount paid.
11. Why might grantees prefer a recitation of nominal consideration?
First, to keep the actual consideration confidential. Second, to make clear that the grantee is a purchaser and not a recipient of a gift.
12. Describe valuable and good consideration.
A monetary value is stated for both actual and nominal consideration, both of which are types of valuable consideration. The recital of good consideration in a deed may also be acceptable. An example of good consideration is “for love and affection.” This, or a similar phrase, is sometimes used in a gift deed where, for example, one party wishes to hold title jointly with a spouse property that was previously owned in severalty.
13. Explain operative words of conveyance and cite examples.
To make clear the grantor’s intent to convey title to the grantee, each deed must contain operative words of conveyance. These words are commonly called the granting clause, and they must be carefully chosen because, as shown in the following table, they reflect the type of deed being used.
General warranty: “grant and convey,” “convey and warrant” and “warrant generally.”
Special warranty: “warrant specially.”
Bargain and sale: “grant bargain and sell,” “conveys” and “grant and release.”
Quitclaim: “remise, release, and quitclaim” and “release and quitclaim.”
14. When is a deed executed?
A deed is executed when it is signed by the grantor, sealed (a more formal method of acknowledgement required in some states), and delivered to the grantee. Most states require a corporate seal if the grantor is a corporation. The corporate seal serves as evidence that the proper corporate officer, with control of the corporate seal and the power to convey property, has executed the deed. For a deed to be properly executed, each grantor must sign it, or make a mark if he or she cannot write. In most states, a signature by grantor’s mark must be witnessed. With a power of attorney, deeds are sometimes legally executed by someone other than the grantor. Some states require that the marital status of the grantor(s) be stated and, if married, require the spouse to sign the deed to release any community property, dower, curtesy, or homestead rights.
15. What is an acknowledgement?
An acknowledgement is a formal declaration, before a notary public or another duly authorized official, by the person who has executed an instrument that such execution was one’s own free and voluntary act. An unacknowledged deed is valid for the purpose of transferring title, but an unacknowledged deed cannot be recorded in many states.
16. When is a grantee’s signature required?
The grantee’s signature on the deed is usually not required. However, the grantee’s signature is required if the grantee assumes an existing mortgage or agrees to comply with a restrictive covenant in the deed.
17. Explain restrictive covenants.
When title to real estate is conveyed it is assumed to be made free of any restrictions and encumbrances except those expressly stated. Restrictive covenants that are binding on future owners are sometimes referred to as covenants running with the land. Examples include limitations on the height of improvements, and whether livestock may be kept on the property. To be enforceable, such a covenant must: “touch and concern” the land, be included in the deed, have been the intention of the original parties that it would run with the land, and subsequent grantees must have notice of its existence.
18. Explain the delivery process.
The final act of the grantor, which signifies that the deed shall take effect, is the delivery of the deed to the grantee. Usually, title to real property transfers when the deed is delivered to, and accepted by, the grantee. Delivery can be actual, as during closings attended by both the grantor and grantee, or in escrow by agents of the parties.
19. Why is recording a deed important?
In most states, deeds do not have to be recorded to be valid between the grantor and grantee, but they usually are recorded to protect the grantee from claims made by third parties. In addition, if a deed is lost or destroyed, a property owner may have difficulty proving title if the deed was not recorded.
20. What does recording do?
Recording a deed at the County Recorder’s Office in which the property is located gives constructive notice that the grantee has acquired an interest in the property. Unless third parties have either constructive or actual notice of the ownership of the property, the grantee is not protected against their claims.
21. Under what circumstances would a court declare a deed void?
A court would declare a deed void if undue influence was exerted on the grantor to induce the transfer of title. A court is also likely to declare a deed void in any case in which the conveyance constitutes a fraud on the grantor’s creditors. For creditors to be defrauded, a deed must be executed in exchange for less than the fair market value of the property, and the remaining assets of the grantor must be insufficient to satisfy all outstanding debts owed at the time of the transfer. If both of these conditions do not exist, then the real estate transfer did not harm the creditors. Frequently, deeds that defraud creditors involve transfer of title to a relative or close friend of the grantor.
22. Explain premises.
Premises contains the terms upon which the transfer of title is to be made. The elements usually contained in the premises include: names of the grantor and grantee, recital of consideration, legal description of the property, operative words of conveyance, any exceptions and restrictions, and the date. The last two items are not essential elements for a valid deed. A date is, however, recommended to help prevent future questions concerning the time of the transfer.
23. What is habendum?
Part of the deed in which the extent of the interest (quantum of estate) being conveyed by the grantor is defined (e.g., fee simple, easement, life estate). The habendum follows the granting clause, and usually begins with the words “to have and to hold” and then describes the estate being conveyed. The habendum may include an appurtenance clause. The inclusion of such a clause, which describes any improvements on the land and all the additional rights that are necessary to the proper use and enjoyment of the property, is optional. If an appurtenance clause is included in the habendum, it must be consistent with the granting clause in the premises. Inconsistency between the two may result in unwanted legal costs to resolve the problem.
24. Explain testimonium.
Testimonium contains any covenants of warranty, the signatures, and the acknowledgement.
25. What are the most common deeds used in a voluntary transfer?
In voluntary transfers, parties may employ any one of several types of deeds. The two most commonly used deeds are the general warranty and the quitclaim. Other types are sometimes employed, including bargain and sale, and special warranty. The primary difference between deed types is the number of promises, or warranties, made by the grantor.
26. What deed is most commonly used to satisfy purchase agreements?
The deed most commonly used to satisfy purchase agreements is the general warranty deed, also referred to as a warranty deed, or full warranty deed. From the purchaser’s perspective, this is the most desirable type of deed because the grantor fully warrants the title to the property.
27. Explain estoppel by deed.
There is a legal doctrine known as estoppel by deed, also called title by estoppel, which applies to general warranty deeds, and not others, such as a quitclaim. Under this doctrine, should the grantor subsequently obtain the interest claimed, but not possessed at the time of the deed delivery, the interest is automatically vested in the grantee.
28. Describe a grant deed.
In these deeds, the grantor normally warrants only three things: that the grantor has not encumbered the title except as noted in the deed, that the interest currently being conveyed has not previously been conveyed by the grantor, and that any title to the property later acquired by the grantor will be conveyed to the grantee.
29. What are the five standard covenants in a general warranty deed?
The covenant of seisen, the covenant against encumbrances, the covenant of quiet enjoyment, the covenant of further assurance, and the covenant of warranty forever. The first two concern the present character of the title while the others make guarantees about the future goodness of the title.
30. Explain the covenant of seisen.
With this covenant, the grantor warrants possession of good title to the real property at the time of the transfer. The term “seisen” derives from the ancient custom whereby a landowner signified the intention to transfer ownership by grabbing a handful of the land and handing it to the new owner. If, at the time of delivery, the grantor does not hold the interest claimed in the deed, this clause entitles the grantee to recover the price paid for the property.
31. What is the covenant against encumbrances?
With this covenant, the grantor warrants that there are no encumbrances, such as liens or easements, against the title other than those disclosed in the deed. From the perspective of the grantor, it is important to have all existing encumbrances listed in the deed, because the grantee can usually recover from the grantor any expenses incurred in extinguishing unlisted encumbrances. Even if the encumbrance was unknown by the grantor at the time of the conveyance, the grantee can recover such expenses. An exception to recovering expenses would be where there was an open and visible physical encumbrance such as an easement for a power line.