2.2 Deeds, Title Transfer, Title Insurance, and Recording

Transferring Title

Title to real property transfers by voluntary or involuntary means. Voluntary transfer happens by deed (during life) or by will/devise (at death). Involuntary transfer occurs through descent (dying intestate — without a will), escheat (no heirs, property reverts to the state), eminent domain, adverse possession, foreclosure, or partition.

The instrument that conveys title during life is the deed. The exam repeatedly tests the required elements of a valid deed and what each deed type warrants.

Elements of a Valid Deed

A valid deed must include:

• A grantor with legal capacity (the conveying party).
• A named grantee.
• Words of conveyance (granting clause).
• An adequate legal description of the property.
• Consideration recited.
• The grantor's signature (grantee need not sign).
• Delivery and acceptance during the grantor's lifetime.

Trap: The grantee does not sign the deed, and recording is not required for a deed to be valid between the parties. Title passes on delivery and acceptance, not on recording. Recording only protects against third parties.

Types of Deeds and Warranties

Deed type controls how much the grantor guarantees:

The five covenants of a general warranty deed: seisin, right to convey, against encumbrances, quiet enjoyment, and warranty forever (sometimes plus further assurance).

Worked example: A buyer worried about an old undischarged lien wants maximum protection — a general warranty deed is correct because its covenants reach back through the entire chain of title, not just the current owner's period.

Title Insurance

Title insurance protects against losses from defects in title that existed before the policy date but were unknown — unlike other insurance, it looks backward, not forward. It is a one-time premium paid at closing.

Two policy types:

• Owner's policy — protects the buyer (and often heirs) up to the purchase price; coverage can decline or stay level by policy form.
• Lender's (mortgagee's) policy — protects the lender for the loan balance; coverage decreases as the loan is paid down. Lenders almost always require it.

A standard policy covers record defects (forged deeds, undisclosed heirs, recording errors). An extended (ALTA) policy adds protection for off-record matters a survey or inspection would reveal.

Title Search, Abstract, and Defects

Before issuing a policy, a search of the public record produces a chain of title and an abstract of title (a condensed history of recorded documents). An attorney or title officer issues an opinion of title or commitment.

Common title defects ("clouds"): forged signatures, undisclosed heirs, errors in recording, undischarged liens, and gaps in the chain. A quiet title lawsuit can resolve clouds, and a marketable title is one a reasonable buyer would accept without fear of litigation.

Worked example: A buyer's title search reveals an old mortgage from 1998 with no recorded satisfaction (release). Even if the loan was paid, the open lien is a cloud that makes title unmarketable until a corrective satisfaction or quiet-title action clears the record.

Trap: Title insurance does not cover defects the buyer already knew about, zoning changes, or events arising after the policy date. A standard policy also excludes off-record encroachments — those need an extended policy plus a survey.

Recording and Priority

Recording enters the deed (or mortgage) into the public record at the county recorder's office. It is not required for validity between grantor and grantee, but it gives constructive notice to the world and establishes priority against later claims.

Types of notice:

• Actual notice — the party genuinely knows of a prior interest.
• Constructive (legal) notice — the law presumes everyone knows what is recorded.
• Inquiry notice — visible facts (someone living on the land) that should prompt investigation.

Most states follow a race-notice rule: a later buyer who takes without notice of a prior unrecorded deed and records first wins. Pure notice states protect the later good-faith buyer even if not first to record.

Priority Worked Example

Liens generally rank by recording date — "first in time, first in right" — with one major exception.

Worked example: A property carries a first mortgage recorded 2024 ($300,000), a second mortgage recorded 2025 ($80,000), and a property-tax lien for 2026. On foreclosure the proceeds pay:

1. Property tax / special assessment liens — these are superior and paid first regardless of recording date.
2. First mortgage (2024).
3. Second mortgage (2025).

If the sale nets $350,000 and taxes are $10,000: taxes take $10,000, the first mortgage takes $300,000, leaving $40,000 toward the $80,000 second mortgage — which is only partly satisfied and the rest becomes an unsecured deficiency.

Trap: Real-estate tax and special-assessment liens jump ahead of all private liens, even an earlier-recorded mortgage. Recording date controls only among private liens. Note that a subordination agreement can voluntarily reorder private-lien priority, and mechanic's liens may relate back to the date work began rather than the date filed — two common priority twists.