Warranty Deeds
What are the 3 ways of assuring title? Describe them.
Title warranty (warranty deed): A warranty deed is a guarantee of title made by Seller. It is just like any other warranty. Typically, it is only worth something if Seller has deep pockets and can be reached. The only remedy for breach is damages (caveat). In some states, it is not customary for sellers to give title warranties
Title search: Buyer searches the grantor/grantee indexes to see if Seller has good title. Using recording acts. Time consuming and often expensive (since Buyer has to hire someone to conduct the search).
Title insurance: Title insurance company promises to pay Buyer X amount of dollars if the title is not good. As a practical matter title insurance is not likely to be much help, because insurance companies are unlikely to issue policies where title is unclear and policies don’t always cover legal risk.
What are the 3 types of general warranty deeds?
General Warranty Deed: seller warrants certain things are true; seller warrants she has good title
Special Warranty Deed: Seller warrants that she has not done anything to impair the title, but does not warrant what past owners may have done (i.e. does not warrant that her seller owned the property).
Quitclaim Deed: the Deed contains no warranty of title. It is not a warranty but the seller says that whatever she has she transfers to the buyer
Describe the race jurisdiction?
Under a race jx, the first party to record the deed wins, even when a subsequent party had notice of a prior conveyance. For example, on Tuesday O--> A, who does not record immediately, then on Monday O--> B, who knows about the prior conveyance, and records immediately. In this case, B would win.
What is the reset rule?
When someone wins under the recoding act we reset everything. That person becomes first in time for all purposes. Once 2nd buyer wins under RA he is treated as owner for all purposes including CL (resets CL).
Define marketable title acts.
Marketable Acts aim to make title good, rather than provide evidence of good title, by defining a “root title” as the most recent conveyance of the property in question older than a specified number of years (mostly 30 yrs) and cutting off any interest pre-existing the root that is not recorded subsequent to the root. Any claim inconsistent with the Root Title is VOID.
What is the rule under common law, and what is the exception to common law?
Under common law rule of first in time, first in right, when 2 owners assert competing claims to legal interest, including servitudes in a deed, the party who acquires a legal interest first has a right over a subsequent purchaser of the same legal interest regardless of whether the deed is by gift or purchase. Similarly, a person who acquires an equitable interest has a greater claim than a subsequent person who acquires a related equitable interest.
EXCEPTION: However, this rule does not apply to a party who obtains an equitable interest, and the subsequent purchaser acquires a legal interest. Thus, the subsequent (Bona Fide purchaser) owner of a legal interest wins, unless he had prior notice of the equitable interest, or the legal interest owner obtained it as a gift. In sum, when there are two competing claims the earlier deal generally wins. This exception not available if the subsequent person had notice of the equitable interest or is not a purchaser (gift).
What are the majority and minority views on obvious encumbrances?
When an encumbrance is not in the deed but is an obvious encumbrance (right of way), the courts split as to whether the grantor is liable. Under the Maj. Rule, the grantor is liable regardless of how obvious the encumbrance is to the grantee. Under the Min. Rule, the grantor is not liable under an exception if the encumbrance is open, visible, and notorious, such as appurtenant large easements for highways, powerlines, railroads, and the like.
Describe the notice jurisdiction?
Under a notice jx, a subsequent purchaser for value wins if (1) the party does not have actual or constructive notice of the previous conveyance and (2) the party is a Bona Fide Purchaser. The subsequent party can win even if he does not record at all.
What is the right of first refusal?
If owner decides to sell the land, the owner must go to the lessee, who has right of first refusal, and offer to sell the land to the lessee on the same terms the original owner proposes to accept from the 3rd party buyer.
Alienable, devisable, descendible and subject to rule against perpetuities
What is the issue with marketable title acts?
An issue arises when a party conveys a forge and fraudulent conveyance. Subsequent grantee’s of the fraudulent deed chain can raise the MKT and make the fraudulent deed the “Root Title.” A Maj. of jx allow wild deeds to be Root Titles while a minority do not approve of fraudulent deeds. A possible solution is to file a notice of intent to enforce every 29 years; however, a person down the line may not do so or a fraudulent deed may hide the notice.
Under title warranty, describe quit claim deed?
Quit claim Deed: the Deed contains no warranty of title (“whatever I have and not saying that I have anything I am transferring to you). This quitclaim deed is usually conveyed to clear a title. Moreover, a quitclaim deed only conveys what the transferors had at the moment of the deed. Maj. of jx do not see quitclaims as suspicious when determining if a subsequent party had notice (should have known). Some jx see it as suspicious; thus, find that the subsequent party had notice.
What is the doctrine of after-acquired title?
Under the common law, the Doctrine of After-Acquired Title (Estopped Deed) is when a grantor purports to transfer an interest that he does not own and later acquires title in that interest, then the title passes automatically to his grantee. Some courts follow the modern approach where they look at the quitclaim deed and what the grantor intended to be transferred.
Describe the majority race-notice rule?
Under the Majority race-notice rule, a subsequent purchaser for value wins only if (1) the purchaser records first, (2) the party had no notice, and (3) the party is a Bona Fide Purchaser.
What constitutes a Bona Fide Purchaser?
A Bona Fide Purchaser is one that (1) cannot have any type of notice (inquiry/record); (2) must be a Purchaser for Value (no gift/no inheritance); and (3) must have record notice of transferor’s title. Must be able to show clean record of title from his immediate transferor to the origin/source of title. Your Transferor must have good record title, by which we mean when you go to the recording office you should be able to figure out whether he has good title from the recording office documents.
What is the land registration/Torren system?
A registration certificate is prepared for each piece of land in the system.
Under title warranty, describe the 3 present warranties in the general warranty deed?
Present warranties include (1) seisin, (2) power to convey, and (3) covenant against encumbrances. The present warranties are breached, if at all, at the time of the conveyance of the deed. Benefits of present covenants do not run with the land.
The covenant of Seisin is the grantor’s promise that he is in fact seised of the interest the deed purports to convey. Seller covenants that he is seized of the property that she is trying to convey. Breached if, and only if, at the moment of conveyance, the grantor does not hold the property in the state that he claims.
The covenant of Power to Convey is the grantor’s promise that he has a legal right to convey. Seller covenants that there are no restraints on his ability to convey. Breached if and only if at the moment of conveyance grantor doesn’t have the lawful power to convey the property to the grantee.
The covenant Against Encumbrances is the grantor’s promise that the property is subject to no interests in third parties other than those explicitly disclosed in the deed. Interests in third parties may include easements, profits, real covenants, ES, irrevocable licenses, mortgages, leases, and liens. BREACH COMMON LAW RULE: The covenant is breached if at the moment of the conveyance an interest in a third party exists that is not explicitly excepted in the deed. However, the breach does not occur unless and until there is an actual claimant who wins in court against the grantee. I.e., the grantee has to lose a suit to bring a claim for breach of this Covenant. The SOL on the covenant does not begin to run until the first lawsuit is concluded.
What is the purpose of recording acts, and what are the 3 general appraoches/statues?
States enacted recording acts as a way to avoid abuse under the CL’s “first in time, first in right rule.” The three types of recording statutes include the approaches (1) race, (2) notice, and (3) race-notice. These recording acts can be seen as exceptions to the common law rules. Thus, it supersedes the common law when the RA applies (reset rule). When a subsequent purchaser wins under the Recording Act, we reset and treat him as first in time for all purposes.
Describe the Doctrine of muniments of title?
The Doctrine of Muniments of Title (Maj. Rule) states that if there is a second, recorded document that a subsequent party should have found in the course of their diligent title search which references an original unrecorded transfer of the parcel in question, the subsequent party is considered to have been on notice of the original transfer as if there was the first document (e.g., a deed) that was recorded.
Minority 1: buyer has notice of the 2nd document only if the 2nd document is also recorded and the 1st document tells the reader where
Minority 2: no muniments of title at all, not required to look for docs
What constitutes notice?
Notice is determined at the moment of the deed, not at the moment of recordation. A purchaser who has no notice of the prior purchase is a good faith purchaser.
Actual notice: Actually knew.
Record notice: constructive notice due to recordation within chain of title.
Constructive notice: implied notice (constructed by courts). Court may hold that someone has constructive notice if he went or should have gone on the land
Due Diligence Investigation: Go onto the land, talk to current possessor, ask to see the lease, etc. Failure to conduct may lead to finding of constructive notice.
Issues with the Torren system?
First problem: legal action is expensive, requires an attorney, notice publications, etc.
Second problem: there are exceptions to the system, which means have to do title search anyhow. Torren system doesn’t protect against Adverse claims, if one of these many kinds of exceptions.
Under title warranty, describe the 3 future warranties in the general warranty deed?
Future warranties include (1) quiet enjoyment, (2) warranty (same as quiet enjoyment), and (3) further assurances. These covenants run with the land provided that there is privity of estate (conveyance of one to another). Seller at much greater risk and on the hook for covenant that runs with the land.
The covenant of Quiet Enjoyment (and covenant of warranty) is the grantor’s promise that grantee will not be ousted by someone with a superior title. A breach may occur sometime in the future if a third party has a legal interest in the grantee’s title (violated at the time of ouster). However, the breach does not occur unless and until there is an actual claimant who wins in court against the grantee. The SOL on the covenant does not begin to run until the first lawsuit is concluded. This covenant runs with the land, provided that there exists privity of estate “… her heirs and assigns” which shows intent.
The covenant of Future Assurances is the grantor’s promise that he will execute any documents necessary to protect the grantee’s title. I.e. if a document is not properly notarized, then the grantor is responsible for having the documents properly notarized. The grantee’s remedy under this covenant is injunctive relief (specific performance). It is breach when the grantor refuses to execute the document.
How does someone Index Documents in a Recording Office?
1) By metes and bounds: describes where the property is and how much deed covers (like a treasure map)
2) By grantor/grantee
What occurs to mis-indexed deeds?
If a deed is mis-indexed by a clerk and it is impossible to find it, a majority of jx. State that the mis-indexed deed is nevertheless valid for Recording Act purposes. A minority of jx state that the deed is not valid.
On an essay, what is the analysis for assuring title?
Analysis: Common Law --> Recording Acts (+reset rule) --> Marketable Title Acts --> Torrens Registration
In 1960, A, who owned Blackacre in fee simple absolute, conveyed it to B, who recorded immediately. In 1985, X, who had no ownership interest whatever in Blackacre, conveyed Blackacre to Y, who recorded immediately. In 1992, B conveyed Blackacre to C, who recorded immediately. In 2020, Y conveyed Blackacre to Z, who recorded immediately. At no time did any of the foregoing parties actually occupy Blackacre. X and Y knew that X had no legal right to Blackacre, but none of the other parties had any knowledge that there might be competing claims to title. Blackacre is located in a jurisdiction that has a notice recording act and a marketable title act that treats the first deed more than 30 years old as the root of title and permits wild deeds to serve as roots of title. In a lawsuit in 2023 between C and Z to establish title, who will prevail and why?
(A) Z, because in 2023 the first deed more than 30 years old is the 1985 deed from X to Y, which is treated as the root of title
(B) Z, because Z was a bona fide purchaser without notice
(C) C, because the 1960 deed from A to B, the root of title of C's line, is older than the 1985 deed from X to Y, the root of title of Z's line
(D) C, because in 2023 the first deed more than 30 years old is the 1992 deed from B to C, which is treated as the root of title
(D) C, because in 2023 the first deed more than 30 years old is the 1992 deed from B to C, which is treated as the root of title
Under the marketable title act, from 1990 to 2015 the 1960 deed from A to B is the first deed more than 30 years old and is therefore declared to be the root of title. The 1985 deed from X to Y is a wild deed, because it cannot be found by a buyer searching the true chain of title. Nevertheless, under the marketable title act, from 2015 to 2022, it is the first deed more than 30 years old and is therefore declared to be the root of title. Therefore, in a suit before 2022, Z should win. By this logic, however, from and after some time in 2022 the 1992 deed from B to C will be the first deed more than 30 years old and should therefore become the root of title. If the lawsuit is delayed until after that date in 2022, therefore, C should win. If we were to apply the principle that recording acts should be construed so as to protect diligent buyers, the priority of one over the other cannot be established, because a diligent buyer in neither line would be able to find any deeds in the other. But Marketable Title Acts trump recording acts.