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83 Cards in this Set
- Front
- Back
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3 different Deed Types
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General Warranty
Equitable Warranty Quitclaim Deed |
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What is a general warranty deed?
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a. Warrants title against all defects whether they took place before or after the grantor took possession.
b. Basically guarantees good title |
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How can you identify a general warranty deed?
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Can be identified if the deed states that there are no encumbrances on the property
i. Can also identify by finding the general covenants in the deed a) Seisin b) Right to Convey c) Warranty |
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GW deed offers the ____ Protection & contains the ______ specific covenants of title that warrant against any defect in title
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Provides the most title protection. It contains the six specific covenants of title that warrant against any defect in title
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What is a Special Warranty (“Statutory” in Alabama) Deed?
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a. Grantor is saying that the title being granted is still as good as the title received by grantor
b. Grantor is basically saying that they haven’t done anything that would encumber the title while in possession |
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The Special Warranty (“Statutory” in Alabama) Deed Applies the six same covenants, but only as applied to the _______—affords no protection against the __________________
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Applies the six same covenants, but only as applied to the grantor—affords no protection against the acts or omissions of third parties.
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Why would a prudent buyer accept a Special Warranty (“Statutory” in Alabama) Deed?
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Title insurance explains why a prudent buyer would accept this form of title
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Why would you accept a quitclaim deed?
Does a quitclaim alleviate a claim of fraud? |
Settlement, Divorce
NO |
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If the property is NOT homestead and is being conveying by someone who is married, what do you do if the spouse doesn’t join with them?
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i. Put a sentence in the deed that says the subject property is not homestead property
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Formal deed Requirements:
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Writing
Delivery Not Forged/ Fraud |
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The requirements of a deed writing are:
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i. Identify parties
ii. Describe property being conveyed iii. State the grantor’s intent to convey the property interest in question iv. Contain the grantor’s signature |
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How can the grantor describe the property being conveyed?
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a) Description must be sufficient to locate the boundaries of the property
b) Or can be described by plat – produced by private developer c) Or can be described by metes and bounds – system starts at defined point |
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The deed _____ be recorded to transfer title
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The deed need not be recorded to transfer title; delivery of the deed to the grantee is sufficient
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If the deed contains a mistaken description of the property, _____ may sue to reform the deed
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If the deed contains a mistaken description of the property, either party may sue to reform the deed
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What are some specifics of the delivery requirements for a deed?
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Grantor must intend to transfer title and a deed must be delivered to the grantee
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What is the doctrine of merger?
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a. Under the doctrine of merger, after the closing, the title covenants in the deed supersede any promises made in the initial contract of sale.
b. The contract is “merged” into the deed and the sole basis of relief for the buyer is to sue on the title covenants in the deed |
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If seller breaches the duty to convey marketable title, the buyer is entitled to:
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i. Specific performance with abatement of price
ii. Rescission of the Contract iii. Restitution of the deposit iv. Damages |
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Once title passes at closing, the buyer can only sue on the_______________________
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Once title passes at closing, the buyer can only sue on the title covenants in the deed
i. The buyer’s remedies are limited to damages |
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What are the 2 main types of covenants and their subparts?
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Present: Covenant of:
Seisin Right to Convey Against Encumbrances Future: warranted defends right to the title out into the future: Covenant of: General Warranty Quiet Enjoyment Further Assurances |
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What is the Covenant of Seisin?
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a) Promise that the grantor is in possession of the land and/or has the right to possess the land
b) Covers both the type of estate and the quantity of land c) guarantees only at the time of conveyance |
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What is the Covenant of Right to Convey?
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a) Promise that the grantor has the right to convey the property
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What is the Covenant Against Encumbrances?
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a) Promise that there are no encumbrances on the land, such as easements, covenants, mortgages or leases, other than those listed in the deed
b) Breach can only be by a private (not public) encumbrance |
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What is the Covenant of General Warranty?
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a) Promise to warrant and defend the grantee against any attack on the grantee’s title
b) Breach can occur only when one actually or constructively evicts the grantee from the land c) Very much like Covenant of Quiet Enjoyment |
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What is the Covenant of Quiet Enjoyment?
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a) Promise that the grantee’s possession will not be disturbed and that, if it is, the grantor will compensate for the disturbance
b) Breach can occur only when one actually or constructively evicts the grantee from the land |
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What is the Covenant of Further assurances?
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a) Promise to execute any additional documents needed to clear the grantee’s title.
b) This covenant, unlike the others, may be enforced by specific performance as well as damages |
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The distinction between present and future covenants:
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a. Present covenants are breached, if at all, at the time of the conveyance
b. Future covenants are a continuing obligation that extend out into the future |
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The distinction between present and future covenants:, when the covenants are breached
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Present – at the very instant the deed is delivered to the grantee, the SOL runs
Future – A future covenant is breached, if at all, only when the grantee is actually or constructively evicted by someone holding superior title or suffers other damages (SOL runs at breach) a) When there is substantial interference due to a title problem or lack of payments b) “Ouster” is the catchall word to cover that |
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i. If a present covenant is breached or fulfilled at the time of the conveyance, what do you have if you are the grantee?
If a Future Covenant is breached, you have a______ |
Nothing but the property – don’t have a cause of action in the future
Cause of Action |
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Chose in action :
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basically a cause of action associated with a deed covenant issue
iv. Majority rule is that choses in actions are assignable |
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Present Covenant Damages: (Doesn't run with the land)
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ii. Covenant of Seisin - % of purchase price plus interest
iii. Covenant of Encumbrance – cost of removal or diminution in value (Max = purchase price + interest) iv. Covenant of the right to convey - % of purchase price + interest |
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Future Covenant Damages: Covenant will either attach to the title or to possession for a covenant that runs with the land
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ii. Warranty – Damages sustained as a result of eviction with the Max being the purchase price
iii. Quiet Enjoyment - Damages sustained as a result of eviction with the Max being the purchase price iv. Further Assurances - Damages sustained as a result of eviction with the Max being the purchase price OR Specific performance |
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An unrecorded deed is only good against the ______
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grantor
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Under the common law rule, the ________ grantee wins against all others
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First
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The recording system:
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changes the common law rule in te case of the BFP
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Under the recording system, c) In a title dispute between a first-in-time claimant and a later BFP, the _____________ prevails
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In a title dispute between a first-in-time claimant and a later BFP, the BFP prevails
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What is the shelter rule?
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—a grantee from a bona fide purchaser is protected as a bona fide purchaser, even though the grantee would not otherwise qualify for this status
1) May be protected against previously granted equitable interests but NOT legal interests |
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ii. Two mechanisms to protect from deed issues
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a) Search title before buying
b) Record title after buying 1) If the deed is not recorded, then someone coming along later has no way to know about a prior transaction 2) SIP will have rights under the law |
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2 Types of Title Search
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Grantor & Grantee Index
Tract Index |
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Define Grantee Index
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a) Start with this index
b) All instruments are listed both alphabetically and chronologically by the grantee’s last name c) Search backward in the grantee index to find “root of title” |
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Define Grantor Index
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a)Go forwards through index
b) Want to make sure there are not multiple conveyances of the same property c) Start with each grantor upon the date of execution of the deed to him, not the date of recordation d) object: establish chain of title of previous owners e) Lawyer/abstractor performing title search owes duty to client to make careful examination of the records and may be liable for negligence |
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Explain the tract index
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Most Efficient
a) Indexes documents by a particular identification number assigned to the particular tract. b) Does not exist in most states |
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Address Improper Indexing w/ regards to Tract Index:
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a) Majority Rule: Recording but not indexing a deed does not prevent constructive notice
b) Minority Rule: Mis-indexing does not give constructive notice |
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vii. Recorded Documents that Do Not Provide Constructive Notice
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a) Defective Document
1) Invalid acknowledgement 2) Incorrect Name 3) Incorrect Property Description b) Document Outside the Chain of Title 1) If can’t be located using the standard title search |
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Name the 3 types of recording acts:
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Race Statute
Notice Statute Race Notice Statute |
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What is a notice statute?
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ii. A Subsequent Innocent Purchaser for Value is protected if the SIP had no notice of the earlier conveyance at the time of purchase
a) “Innocent” means the person doesn’t have prior notice of the other conveyance. A SIP is a donee b) Still protected even if fails to record |
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What types of notice suffice under a notice statute?
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a) Actual Notice – buyer is aware at the time of sale of the earlier conveyance
b) Constructive Notice – buyer would have found out about earlier conveyance if performed a title search c) Inquiry Notice - Under certain circumstances, purchaser is req'd by law to make reasonable inquiries& is charged w/ notice of whatever the inquiry would reveal |
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What is a race-notice statute?
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i. In order to be protected, must record first
ii. A subsequent purchaser prevails if: a) Had no notice of the prior conveyance at the time acquired interest b) Records before the prior instrument is recorded |
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ii. Advantage of notice statute over race statute
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a) Notice statutes correct inequity in allowing later buyers to prevail over earlier buyers when they know about the earlier conveyance
b) Prevent later buyers from snatching property away from earlier buyers just because they record first |
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iii. Disadvantage of notice statute
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a) They protect innocent buyers at the cost of reducing clarity of land titles
b) Reduce predictability because they depend on factual determinations about a party’s subjective knowledge |
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iv. Shelter rule
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a) A person who takes from a BFP will prevail over any interest over which the BFP would have prevailed.
b) This is true even where such person had actual knowledge of the prior unrecorded interest |
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a. Two questions that should be asked when there is a chain of title problem
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i. What can a reasonable searcher find in this position?
ii. What effect would adopting rule have on future searchers? |
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With chain of title problems, Courts think about two things:
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i. Fairness
a) The purpose of the recording act is to protect the innocent subsequent purchasers of the world b) Did the SIP have any way to determine whether there was a title anomaly? ii. Efficiency |
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What are wild Deeds?
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i. Recorded deeds that a subsequent purchaser could not be expected to find through a normal searching procedure
ii. Recorded deed to the property which is not recorded within the chain of title |
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Hints Involving Title Search Problems (questions to ask) (5)
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i. In a normal title search, what would a typical searcher find?
ii. Would the particular document give or not give constructive notice? iii. What effect would the rule have on future searchers and recorders? iv. What type of index is in effect – grantor/grantee and/or tract? v. What type of recording statute exists? |
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Title Registration
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a. System in which individual owners voluntarily “register” their land and a certificate of title is issued by an official of state or local government that represents the final word on the ownership of interests in a particular parcel of land
i. Also called the Torrens system |
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Because the certificate is regarded as conclusive as to almost all property rights in a parcel, a ________ is required
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Judicial Proceeding.
i. Notice given to all parties w/ possible interests in the land & to the public ii. hearing: determine what the ownership interest & encumbrances are w/respect to the parcel iii. Hearing results in a certificate of title binding on all the world |
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Title Insurance
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a. Protects purchasers who want protection against the risks posed by undiscovered claims
b. Promises to indemnify the beneficiary for any losses arising out of title problems |
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A title insurance c. Contract lists known encumbrances and excepts those from scope of coverage
d. Contract also promises to: |
i. Cure title defects if possible
ii. Defend the beneficiary of the contract in the event of litigation |
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Define: Title Insurance Commitment
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i. This is not the policy – this is just a commitment that they will issue title insurance when the time comes
ii. They can’t issue the title insurance until the house has actually been purchased |
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iii. A number of conditions are laid out that the title policy will be subject to
a) Schedule B Section 1 lays out what will be needed in order to issue policy: (7 things) |
Warranty deed from present owner; 2) Mortgage from the purchaser; 3) Payment to the sellers; 4) Payment of all taxes; 5) Mechanics lien clause – all work has been paid for. Affidavit will cover this; 6) Unrecorded easements, if any – prescription, implication, etc.; a. Title company can’t cover that because there’s no way for them to find out if they exist since they are unrecorded; b. Requires a survey – may be some question about whether an older survey will suffice; c.Have to determine if there is any boundary line conflict; and 7. Mortgage of seller must be settled
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iii. A number of conditions are laid out that the title policy will be subject to b) Schedule B, Section 2
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1) Exceptions that will not be covered in the insurance policy
2) Defects, liens, encumbrances, etc that may be placed on the property by the owner AFTER the standard checks have already taken place (4/06) 3) Number 4 – “less and except an easement for sanitary sewers . . .” |
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A number of conditions are laid out that the title policy will be subject to:
Schedule C |
1) Describes land that is being insured. This language should match that on the deed and the survey to ensure the proper piece of property is being insured and conveyed
H. Mortgage |
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1. Note and Mortgage
a. The note is the _____. The mortgage is the ______ Person who grants the mortgage is the _______ Person who mortgages property is the ________ |
The note is the promise to pay. The mortgage is the secured interest
Person who grants the mortgage is the mortgagee Person who mortgages property is the mortgagor |
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Equity of Redemption
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a. Anytime a mortgagor gives title in exchange for a loan (early version of the mortgage), the mortgagor has the ability to come back at a later time to pay his loan back to secure his property again
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The mortgagor's interest is referred to as the _______
c. The mortgagees became dissatisfied with that and wanted to know how long was a reasonable time So a time frame was determined at which point the equity of redemption would be foreclosed __ sales emerged @ that point |
mortgagor’s interest is referred to as the Equity of Redemption
Foreclosuree |
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Judicial proceeding forcing the public sale of the property Terminates the equity of redemption period
b. The bank traditionally has a ______ which means that if the property sells, the bank gets paid |
Foreclosure Sale.
b. The bank traditionally has a due on sale clause which means that if the property sells, the bank gets paid |
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Proceeds 1st used to repay debt & excess goes to mortgagor
i. If proceeds do not cover debt, mortgagee can obtain a ________ against Owner on the basis of the promissory note. ii. Owner can defend by questioning sufficiency of ___ |
i. If proceeds do not cover debt, mortgagee can obtain a deficiency judgment against Owner on the basis of the promissory note
ii. Owner can defend by questioning sufficiency of foreclosure sale amount and process |
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Foreclosure purchaser takes the property free and clear of second mortgage
i. A condition of the 1st mortgage is that the Bank must be able to recover fully before ______ ii. 2nd mortgagee may want to ___ at the foreclosure and sell the property himself. second mortgage can be satisfied out of the future sale |
i. A condition of the first mortgage is that the Bank must be able to recover fully before subordinate obligations
ii. Second mortgagee may want to bid at the foreclosure sale and sell the property himself second mortgage can be satisfied out of the future sale |
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4. Mortgagee duties in foreclosure
a. Mechanisms to ensure the price bid at the foreclosure sale is near Fair Market Value |
*Right to Redeem
*Public Notice and mortgagor right to bid *Unjust Enrichment *Prohibition of Deficiency judgments. * Statutory Right of Redemption |
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How does unjust enrichment work with foreclosure sales?
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a) If the price paid at the foreclosure sale is well below market value, the mortgagor may be able to sue the mortgagee for unjust enrichment if the mortgagee purchases the property at a low price and resells it within a short period of time for a much higher price
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Mortgagee's Duties in Foreclosure: Commercial reasonableness standard.
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Duty of good faith and due diligence (like a fiduciary) to exert every reasonable effort to obtain a fair and reasonable price under the circumstances
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Bad Faith concerns in foreclosure:
i. Intentional disregard of duty or purpose to injure --> may lead to _______ ii. Inadequacy of price alone is ______ to demonstrate bad faith unless ______ |
i. Intentional disregard of duty or purpose to injure--> may lead to punitive damages
ii. Inadequacy of price alone is not sufficient to demonstrate bad faith unless the price shocks the judicial conscience or other factors e.g. fraud, unfairness, or other circs (chilled bidding or unusual hour of sale) |
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d. Due diligence
i. Whether a ____ would have adjourned the sale ii. Key factor is a finding that the mortgagee knew or should have known __ iii. Damages = ___ |
Whether a reasonable man would have adjourned the sale
ii. that he could have obtained a higher price iii. difference between fair price and foreclosure purchase price |
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Title Loan v. Lein Theory
a. Title theory treats legal title as _____ b. Lien theory states consider legal title as _____ and that the mortgagee has a lien on the property |
being in the mortgagee
remaining in the mortgagor |
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Does an execution of a mortgage terminate a joint tenancy?
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depends on whether a mortgage is legal title (yes) or merely a lien (no)
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Alabama is a ___ Theory State
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Title
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a. If mortgagor has already given title to a mortgagee a first mortgage, what can he offer to a subsequent mortgagee in a title theory state?
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his equity of redemption
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Installment Sales Contract/ Bond for Title in Alabama:
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3. Purchaser agrees to pay agreed upon amount for a specified time and once the payments are completed, the property becomes that of the purchaser
a. This is very disadvantageous for the buyer because they don’t build up any equity in the property |
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Define Imminent Domain and give 2 Restrictions on Imminent Domain power:
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1. The power to take title to property against the owner’s will
i. May take private property only for public use ii. Must pay just compensation to the owner |
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b. Public Use
i. The _____ must benefit the public ii. Public purpose is very broad: 3 Examples a) iii. Where the exercise of the eminent domain power is _____ to a _____ public purpose, the legislature may take the property |
Condemnation
Transferring ownership from one person to another b) Urban renewal c) Establish free market (Hawaii case) Rationally Related, Conceivable |
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iv. Public Purpose Test
a) Public use is defined by the ____ underlying the government’s action. b) As long as property is taken for a legitimate public purpose that is within the _______, the public use requirement is satisfied |
purpose
government’s scope of police power c) This is the modern test |
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c. Just Compensation
i. Supreme Court has defined just compensation as the Fair Market Value of the ________ ii. FMV is the amount a willing buyer would pay in ___ a) Goal is to put the owner in as good a monetary position as if the property had not been taken, but rather _______ |
i. Supreme Court has defined i. property when the taking occurs
ii. cash to a willing seller a) sold voluntarily on open market |
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1. Taking Title
a. The government formally exercises the power of eminent domain, bringing a ____ & ___. b. Taking possession i. If the government takes permanent possession of the property, without taking title, this is a ____ ii. Any permanent ____ by the government is a taking – this is a categorical rule |
condemnation proceeding
taking title to the land i. The government must pay for the land bi. constitutional taking which must be paid for ii. physical invasion or occupation |
