2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- Title is ownership; a deed is the document that conveys it. Title passes on delivery and acceptance, not on recording.
- A valid deed needs a competent grantor, granting clause, legal description, consideration, grantor's signature, and delivery/acceptance.
- Deed warranty ranges from general warranty (highest, covers defects even before the grantor owned) down to quitclaim (no warranties).
- Recording gives constructive notice and protects a bona fide purchaser who buys for value, in good faith, without notice of prior claims.
- Title insurance looks backward at pre-policy defects; an owner's policy protects the buyer and a lender's policy protects only the lender.
Title vs. Deed
These two terms are constantly confused on the exam.
- Title is the abstract concept of ownership and the right to it. You cannot physically hold title.
- A deed is the physical legal document that transfers (conveys) title from one party to another.
The person conveying is the grantor; the person receiving is the grantee. A handy memory aid: the granTOR gives title away, the granTEE receives it. Title can transfer voluntarily (sale, gift) or involuntarily (foreclosure, eminent domain, escheat, adverse possession).
Elements of a Valid Deed
A deed must contain these essentials to be valid:
- A competent grantor (of legal age and sound mind) and an identifiable grantee
- Granting clause (words of conveyance, e.g., "I hereby grant and convey")
- Adequate legal description of the property
- Consideration (something of value; it may be nominal, such as "$10 and other good consideration")
- The grantor's signature (the grantee does not sign the deed)
- Delivery and acceptance during the grantor's lifetime
Exam Tip: Title passes only when the deed is delivered and accepted. A signed deed locked in a drawer transfers nothing. If a deed is delivered but the grantee refuses it, no conveyance occurs. Recording is NOT required for a valid transfer between the parties.
A grantor signs a properly drafted deed but keeps it in a safe and never hands it over. Has title transferred to the named grantee?
Types of Deeds and Warranty Levels
| Deed Type | Warranty Level | Key Point |
|---|---|---|
| General warranty deed | Highest | Warrants against all defects, even before grantor owned it |
| Special warranty deed | Limited | Warrants only against defects arising during grantor's ownership |
| Bargain and sale deed | Implied only | Implies grantor holds title; few or no express warranties |
| Quitclaim deed | None | Conveys only whatever interest grantor has, if any |
Buyers want a general warranty deed because it offers the most protection. A quitclaim deed offers no protection and is used to clear clouds on title, correct errors, or transfer between family members. If a quitclaim grantor owns nothing, the grantee receives nothing.
The Six Covenants of Title
A general warranty deed contains six promises, split into present and future covenants.
Present covenants (breached, if at all, at the moment of conveyance):
- Seisin - grantor owns the estate being conveyed
- Right to convey - grantor has authority to transfer
- Against encumbrances - no undisclosed liens or easements
Future covenants (breached later, when someone asserts a claim):
- Quiet enjoyment - grantee will not be disturbed by a superior claim
- Warranty forever - grantor will defend the title
- Further assurance - grantor will execute documents needed to perfect title
Exam Tip: The covenant of quiet enjoyment is about freedom from a superior title claim, not about noisy neighbors.
A buyer wants maximum protection, including against title defects that arose before the seller ever owned the property. Which deed should the buyer insist on?
Recording, Notice, and the Bona Fide Purchaser
Recording a deed in the county land records is not required to make the transfer valid, but it gives the world constructive notice and protects the buyer's priority. Three types of notice:
- Actual notice - the party genuinely knows of a prior claim
- Constructive notice - recorded documents put the world on notice as a matter of law ("you should have looked")
- Inquiry notice - visible facts (a tenant in possession) require a reasonable person to investigate
A bona fide purchaser (BFP) buys in good faith, for value, and without notice of prior claims. Recording statutes exist to protect BFPs and reward prompt recording. If a later buyer has actual, constructive, or inquiry notice of a prior unrecorded claim, that buyer cannot qualify as a BFP and may lose priority.
Title Search, Chain of Title, and Curing Defects
A title search traces the chain of title - the sequence of recorded owners - and looks for liens, easements, and errors. An abstract of title is a condensed history of all recorded documents; an attorney or examiner then renders an opinion of title. Common defects:
- Unreleased (paid-but-not-cleared) mortgages
- Missing heirs or unresolved probate
- Forged or improperly executed/acknowledged deeds
- Gaps in the chain, boundary disputes, and encroachments
A cloud on title is any defect that impairs marketability. Defects must be cured before closing (often via a quitclaim from the adverse party or a quiet title lawsuit) or insured over by the title company.
Title Insurance: Owner's vs. Lender's Policy
Title insurance protects against losses from defects that existed before the policy date - it looks backward, unlike hazard insurance which looks forward.
| Feature | Owner's Policy | Lender's (Mortgagee) Policy |
|---|---|---|
| Who is protected | The buyer/owner | The lender only |
| Coverage amount | Purchase price | Loan balance (declines as paid) |
| Premium | One-time, at closing | One-time, at closing |
| Duration | As long as owner/heirs hold title | Until the loan is paid off |
Worked example. A buyer pays $400,000 with a $320,000 loan. The lender requires a lender's policy of $320,000; a smart buyer also buys an owner's policy of $400,000. A standard policy covers recorded defects; an extended policy adds survey, encroachment, and unrecorded-lien risks. A pre-existing forged deed in the chain is exactly what title insurance is designed to cover.
Escrow and the Closing Flow
A neutral escrow holder coordinates the transfer so neither side performs until both are ready. A typical sequence:
- Contract is executed and earnest money is deposited into escrow.
- Title search and survey are ordered.
- Lender underwrites the loan and reviews the title commitment.
- Closing documents (deed, note, mortgage/deed of trust) are signed and acknowledged before a notary.
- Funds are disbursed, the deed is recorded, and the buyer takes title.
Recording the deed immediately at closing establishes constructive notice and locks in the new owner's priority against later claimants.
Six months after closing, a title examiner discovers that a deed forged 12 years earlier sits in the property's chain of title. Which protection addresses this loss for the current owner?