Property - Fundamentals Of Land Title

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PROPERTY - FUNDAMENTALS OF LAND TITLE

The general warranty deed contains six specific covenants of title:

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The covenant of seisin; the covenant of right to convey; and the covenant against encumbrances. These three are called the present covenants.

The covenant of warranty ;the covenant of quiet enjoyment; the covenant of further assurances. These final three are known as the future covenants.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

covenant of seisin warrants that the grantor

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is the owner of the estate described in the deed

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PROPERTY - FUNDAMENTALS OF LAND TITLE

covenant of right to convey warrants that the grantor

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has the legal right to convey title

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PROPERTY - FUNDAMENTALS OF LAND TITLE

and the covenant against encumbrances warrants that

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there are no encumbrances on the land

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PROPERTY - FUNDAMENTALS OF LAND TITLE

The covenant of warranty is the grantor’s promise to

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defend the title against other claimants

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PROPERTY - FUNDAMENTALS OF LAND TITLE

the covenant of quiet enjoyment warrants that the grantee’s possession will

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not be disturbed by anyone with superior title

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PROPERTY - FUNDAMENTALS OF LAND TITLE

the covenant of further assurances is a promise that the grantor will

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take other actions that are reasonably necessary to perfect the grantee’s title

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Remedies for Breach of Covenant

A present covenant is breached—if at all—only when

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escrow closes and, accordingly, the relevant statute of limitations then begins running. Either the original grantee or her successors may sue for breach of a present covenant.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
A future covenant is breached only when the grantee is actually or constructively

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evicted by one holding superior title; in most states, only the grantee has standing to sue. The measure of damages for breach of most covenants is measured by the grantee’s purchase price plus interest.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
Special Warranty Deed

The special warranty deed usually contains the six title covenants found in the general warranty deed, but applies them only to

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defects caused by the acts or omissions of the grantor.

For example, suppose A, having no title whatever to a parcel of land, purports to convey title to B, and B in turn conveys to C using a special warranty deed; because the title defect was caused by A, not B, B is not liable to C.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

The quitclaim deed contains

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no title covenants. By its use, the grantor does not warrant that she owns the property or—if she has any title—that her title is good.

This type of deed merely conveys whatever right, title, or interest the grantor may have in the land.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Essential Deed Components - In general, a deed must

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be in writing, be signed by the grantor, identify the grantor and grantee, contain words of conveyance, and adequately describe the land. In addition, the grantor must deliver the deed to the grantee, and the grantee must accept.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

A deed is not effective until it is

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Delivered. In order to deliver a deed, the grantor must manifest by words or actions an intent that the deed be immediately effective to transfer an interest in land to the grantee.

The typical grantor delivers a deed through the act of physically handing it to the grantee, with words indicating the required intent.

Yet, as an early English judge observed, “As a deed may be delivered to a party without words, so may a deed be delivered by words without any act of delivery.”

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PROPERTY - FUNDAMENTALS OF LAND TITLE

In theory, the grantee must accept the deed in order to for the conveyance to be effective. However, the law

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presumes that a grantee will accept a beneficial conveyance, so the issue rarely arises.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

A forged deed is

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completely void.

It conveys nothing to the grantee or any subsequent grantee in the chain of title, including any bona fide purchaser.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

A deed induced by the grantee’s fraud (fraud in the inducement) is

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voidable in an action brought by the true owner against the grantee, but not against a bona fide purchaser from that grantee.

However, when fraud prevents the grantor from knowing that he is executing a deed at all (fraud in the inception), the deed is void for all purposes, just like a forged deed.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Estoppel by Deed [376]

Under this doctrine, if a grantor uses a warranty deed to convey title to land he does not own, but then later does acquire title to the same land,

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it automatically passes to the innocent grantee.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
The Problem of Conflicting Title Claims

The traditional rule is that the person whose interest is first delivered

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prevails over anyone who acquires an interest later. However, the recording acts adopted in most states carve out two exceptions to this basic first-in-time rule.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
The Problem of Conflicting Title Claims

Almost all states recognize a major exception to the first-in-time rule:

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the bona fide purchaser doctrine. In a title dispute between a first-in-time owner and a later bona fide purchaser, the bona fide purchaser prevails. The recording act in each state defines the precise requirements for bona fide purchaser status. Roughly half of the states are notice jurisdictions, about half are race-notice jurisdictions, and two states do not recognize the exception at all.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
The Problem of Conflicting Title Claims

Who Is a Bona Fide Purchaser?: Notice Jurisdictions

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In a notice jurisdiction, a bona fide purchaser is a subsequent purchaser who pays valuable consideration for an interest in real property, without any notice of an interest that a third party already holds in the land. Suppose O conveys to A, and then O conveys to B, who pays value to O and has no notice of A’s interest. As a bona fide purchaser, B prevails over A.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
The Problem of Conflicting Title Claims

Who Is a Bona Fide Purchaser?: Race-Notice Jurisdictions

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In a race-notice jurisdiction, a bona fide purchaser is a subsequent purchaser for value without notice of any prior interest who also records his deed first. Suppose O conveys to A; then O conveys to B, who pays value to O, has no notice of A’s interest, and who records before A does. B prevails over A.

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PROPERTY - FUNDAMENTALS OF LAND TITLE
The Problem of Conflicting Title Claims

What Constitutes Notice?

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actual notice; record notice; inquiry notice; and imputed notice. Actual notice simply means knowledge of the prior interest. Imputed notice arises from a special relationship between two or more people; if one has knowledge of a fact (e.g., an agent for a principal) the other (e.g., the principal) is also deemed to know the fact.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Record notice (or constructive notice) means notice of any

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prior interest that would be revealed by an appropriate search of the public records affecting land title. A subsequent purchaser is charged with notice of such a prior interest even if he never actually conducts a title search.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Inquiry Notice

If a purchaser of real property has actual notice of facts that would cause a reasonable person

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to investigate further, he is deemed to know the additional facts that inquiry would uncover whether he inquires or not; this is called inquiry notice.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

The “Shelter Rule”

a grantee from a bona fide purchaser is protected as a

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bona fide purchaser, even though the grantee would not otherwise qualify for this status. Suppose O conveys to A, and then to B (a bona fide purchaser). Before B can convey to C, A notifies C about the O-A deed; because C has notice, C cannot be a bona fide purchaser. However, under the shelter rule, C prevails over A.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Special Rule for Race Jurisdictions:

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First Purchaser for Value to Record Prevails

Under a race recording statute, the first purchaser for value to record prevails. If O conveys to A for value, and then O conveys to B for value, B prevails if she records her deed before A does, even if B knows about the O-A deed.

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PROPERTY - FUNDAMENTALS OF LAND TITLE

Why Protect the Bona Fide Purchaser?

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One reason is that the doctrine prevents fraud and quasi-criminal conduct, while a race statute allows the sophisticated to plunder the naive. Another is grounded in comparative fault; as between the prior buyer (who can avoid the conflict by recording promptly) and the later buyer (who cannot), it makes sense to allocate the loss to the person who is best situated to avoid it.