8/21/2019 Chapter 5 Transfer of Title to Real Property 1 • Methods of Transferring Title • Essential and Nonessential Elements of a Deed • Types of Deeds • Title Examination & Recordation • Excise Tax 2 2 Functions of a Real Estate Title 1.Represents the Bundle of Rights 2.Enables a person to claim ownership of a parcel 3 1
8/21/2019 • Alienation - the act of transferring property voluntarily as a gift or sale or involuntary as eminent domain or adverse possession. • Deed – written instrument that intentionally conveys right, title or interest to another person Page 86 4 • Grantor – owner • Grantee – the receiving party Only the grantor needs to sign the deed Page 86 5 • “OR” – Giver • “EE” - Receiver Page 86 6 2
8/21/2019 Essential Elements in a Deed 1. Must be in writing 2. A Grantor must have legal capacity to execute deed. Sigmund Freud 7 Essential Elements in a Deed 3. Grantee named with reasonable certainty must be identified 4. There must be adequate words of conveyance - The Granting Clause 8 Essential Elements in a Deed Consideration…Something of Value To be legally binding, there must be adequate consideration. 9 3
8/21/2019 Essential Elements in a Deed 5. Must contain an accurate legal description of the property conveyed Can a surveyor find your land ? 6. Must be signed by ALL grantors In NC both husband and wife must sign even if only one is listed! One to Buy, Two to Sell 10 7. Delivered to and voluntarily and Acceptanced by Grantee (or implied acceptance) In North Carolina, recordation of the deed serves as acceptance. Page 88 11 Elements that are Not Required Witness Consideration Amount Date * 12 4
8/21/2019 Elements that are Not Required Recordation * Notorization If you’re going to record a deed it first has to be notarized 13 Type of Deeds • General Warranty Deed • Special Warranty Deed • Bargain and Sale Deed • Quitclaim Deed North Carolina utilizes some other special purpose deeds Page 89 14 General Warranty Deed aka Full Covenant and Warranty Deed aka Warranty Deed **Best for Grantee but most liability for Grantor** 1. Covenant of Seisin & Right to Convey 2. Covenant against Encumbrances 3. Covenant of Quiet Enjoyment 4. Covenant of Further Assurance 5. Covenant of Warranty Forever 15 5
8/21/2019 Special Warranty Deed aka Limited Warranty Deed Only Guarantees 2 Covenants: 1.Grantor received title 2.Property was unencumbered by grantor Any additional warranties must be specifically stated 16 Bargain & Sale Deed • No expressed warranties against encumbrances • Only implies grantor has the title and possession of the property Little recourse if defects appear later – get title insurance for protection 17 Quitclaim Deed aka non warranty deed ** least protection ** - No covenants or warranties -Cure “cloud on the title” -Only conveys interest, if any, from Grantor Page 90 18 6
8/21/2019 North Carolina Special-Purpose Deeds Correction deed – error in previous deed: Deed of Gift – no or token consideration Deed of Release – when loan is paid in full Page 91 19 North Carolina Special-Purpose Deeds Trustee’s Deed – used when selling land to anyone but Trustor – usually to transfer title after foreclosure auction Timber or Mineral Deed –items severed from the land 20 North Carolina Special-Purpose Deeds Deeds Executed Pursuant to Court Order • sheriff’s deed • tax deed • guardian’s deed… ** full amount of consideration is usually stated** 21 7
8/21/2019 Involuntary Alienation Without owner’s wishes – usually carried out in court of law Action Process Property Taken By Person dies intestate; Escheat State no heirs Eminent Domain Eminent Domain Public or (Land Needed for Public Use) (Condemnation) Governmental Agency Nonpayment of a debt secured Foreclosure Creditor by real property Adverse use of another’s property Adverse Possession through suit to Adverse Possessor for a prescriptive period quiet title Page 92 22 Escheat – no will – no heirs NC State Eminent Domain –- right to take privately owned real estate for public use. Condemnation is the process ie, schools, highways, urban renewal, public housing Page 97 23 Kelo v City of New London 24 8
8/21/2019 Lien Foreclosure • Property is sold to pay off debts: Mortgage Loans • • Real Estate Taxes • Mechanics’ Lien and • General Judgements against property owner. Page 93 25 Adverse Possession aka Involuntary Transfer O Open – well known to others C Continuous – uninterrupted for 7-20 years E Exclusive – not shared with another A Adverse – possessor intends to claim as own N Notorious – without permission of the owner Action to Quiet Title 26 Transfer by Descent aka Intestate Succession Act Statute of Descent and Distribution = + No = Will Administrator or Administratrix 27 9
8/21/2019 Statute of Decent and Distribution cont 28 Transfer of Title by Will Will = mentally competent owner conveys real and personal property; takes effect only after death. Real Property Device Devisee Personal Property Legacy/Bequest Beneficiary * Survivorship rights cannot be affected by a will Page 94 29 Title and Public Records • Public records open to anyone • Establish ownership, find notices of encumbrances, and lien priority, judgments, marriage status …. • Find in recorders of deeds, county clerks, county treasurers, city of clerks, collectors and clerks of court 30 10
8/21/2019 Recording: act of placing documents in public record to serve as public notice. First in time, first in right Or first served principal Page 95 31 Constructive Notice: 1. Properly Recording so anyone has access to find out 2. Physical possession Readily Available to the World Page 96 32 Actual Notice: aka direct knowledge Someone as been given the information and actually knows it Page 96 33 11
8/21/2019 Priority The order of when documents or liens are recorded . First in time, first in right, first served principal. Unrecorded Documents Some liens are not recorded until past due (ie real estate taxes and special assessments, inheritance taxes) 34 Chain of Title – a record of properties ownership from beginning of time Gap or cloud on the title…might need a “suit to quiet title” 35 5 Criteria of a Marketable Title 1.Free from any significant liens and encumbrances 2.Disclose no serious defects 3.Be free of doubtful questions of law 4.Protect a purchaser from the hazard of litigation or any threat to quiet enjoyment 5.Convince a reasonably well-informed person it could be resold Page 97 36 12
8/21/2019 Title Search Examination of all public records that might affect title Lawyers, paralegals or title companies can perform a search, but only a lawyer can “give an opinion of title.” 37 Real estate agents are prohibited from saying anything about the condition of a title. 38 Abstract of Title • Condensed history of owners • Usually only go back 30-60 years • Found in Register of Deeds by names of grantors and grantees, not by parcel • Breaks solved by suit to quiet title 39 13
8/21/2019 Marketable Title Act • If a chain can be traced back 30 years with no other claims recorded, the title becomes marketable. Conflicting claims before 30 years are extinguished. • Eliminates obsolete defects in the chain of title 40 Title Insurance • Insures the owner and/or mortgagee against loss by reason of defects in the title • Owner’s title = purchase price; permanent protection • Lender’s title = loan amount and ends with payoff 41 ALTA – AMERICAN LAND TITLE ASSOC. • No protection against things found in title search • See page 99 for other protections • One-time premium, paid at closing • Pay out is value of property up to mortgaged amount • See 5.3 42 14
8/21/2019 Process of Getting Title Insurance 43 Title Insurance – insures against financial loss from defects in title Grantee should get title insurance because if a claim arises later, the grantor may be dead or not have any money 44 Title Recordation Title insurance and title examinations must be recorded to be enforceable. • Serves as constructive notice • Physically possession is actual notice. Potential buyer can verify if the seller can convey good title 45 15
8/21/2019 Any instrument affecting any estate or interest in land must be recorded in county where property is located – in NC = Register of Deeds 46 North Carolina Connor Act pure race statute Some documents are not valid unless recorded. Whoever files first wins! Gives protection against claims from third parties. Deeds Mortgages Purchase Contracts Assignments Options Leases of 3+ years CC&Rs Installment Land Contracts Page 101 47 Torrens System of Land Registration Similar to registration of titles; rarely used in NC Eliminates searching public records – all proof in one spot Does NOT reveal federal or state taxes. Relies on physical title document Page 101 48 16
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