2.2 Deeds, Title Transfer, Title Insurance, and Recording

How Title Transfers

Title to real property transfers either voluntarily (by deed during life or by will/descent at death) or involuntarily (by adverse possession, escheat, eminent domain, or foreclosure). The central document for a voluntary lifetime transfer is the deed — the written instrument that conveys title from grantor to grantee.

Do not confuse the deed with title itself. Title is the abstract bundle of ownership rights; the deed is the evidence that conveys them. A buyer receives a deed; the deed gives the buyer title.

Essential Elements of a Valid Deed

To be valid, a deed generally must include:

• Grantor with legal capacity (of age, competent)
• Grantee named with reasonable certainty
• Words of conveyance (granting clause)
• Legal description of the property
• Consideration recited
• Grantor's signature (the grantee need not sign)
• Delivery and acceptance

Trap: A deed is not effective until delivered and accepted during the grantor's lifetime. A deed signed but locked in a drawer and found after death conveys nothing. Conversely, recording is not required for validity between the parties — recording protects against third parties, which is a different issue (covered below).

Types of Deeds and the Covenants They Carry

Deeds differ by the warranties (covenants) the grantor makes. Memorize the protection ladder:

The general warranty deed includes covenants such as seisin (grantor owns it), quiet enjoyment, and warranty forever. A quitclaim deed offers the least protection and is the classic tool to remove a cloud on title.

Involuntary transfer and adverse possession

Title can also pass without the owner's consent, and these methods are heavily tested. Adverse possession lets a trespasser gain title by occupying land that is open and notorious, hostile (without permission), actual, continuous, and exclusive for the statutory period (often 10-20 years, varying by state). Permission defeats the claim — a tenant or invited guest can never adversely possess.

Eminent domain is the government's power to take private property for public use; the legal action that exercises it is condemnation, and the Constitution requires just compensation. Escheat returns property to the state when an owner dies intestate with no locatable heirs.

Trap: Recording a deed protects priority but is not required for the deed to be valid between grantor and grantee — validity turns on delivery and acceptance during the grantor's life, while recording defeats later claimants under the state's recording act.

Title Evidence and Title Insurance

Before closing, the chain of ownership is examined through a title search of the public record, producing an abstract of title (a condensed history) and an attorney's or examiner's opinion of title. Defects found are clouds that must be cleared, sometimes by quitclaim or a suit to quiet title.

Title insurance then protects against losses from defects that the search missed — forgeries, undisclosed heirs, recording errors, fraud. Unlike most insurance, it is a one-time premium paid at closing covering past events, not future ones.

Owner's vs. Lender's Policies (Worked Numeric)

Two policies exist:

• Lender's (mortgagee's) policy — required by the lender, covers the loan balance, and decreases as the loan is paid down.
• Owner's policy — optional but advised, covers the purchase price and stays level for as long as the owner holds title.

Worked example: A buyer purchases a $300,000 home with a $240,000 loan. The lender's policy insures up to $240,000; the owner's policy insures up to $300,000. If a forged deed surfaces five years later when the loan is down to $210,000, the lender's policy now covers only the $210,000 balance, while the owner's policy still protects the full $300,000 equity-and-purchase interest.

Trap: A standard policy excludes things a survey or physical inspection would reveal (encroachments, boundary disputes); an extended (ALTA) policy adds that coverage, usually requiring a survey.

Recording and Priority

Recording is entering the deed (or mortgage, lien, etc.) into the public records of the county where the land sits. Recording gives constructive notice to the world — everyone is legally presumed to know what is recorded, even if they never look. Actual notice is what a person truly knows.

Recording does not make a deed valid; it establishes priority and protects the grantee against later claims. The general rule is "first in time, first in right," but recording acts modify this through notice and race-notice statutes.

Recording Acts and Lien Priority

Most states follow one of these:

• Race-notice (most common) — a later buyer wins only if they took without notice of the prior claim and recorded first.
• Notice — a later good-faith buyer without notice wins even if they record second.
• Pure race — whoever records first wins, notice irrelevant (rare).

Lien priority generally follows recording date, with a major exception: property tax and special assessment liens take priority over all others regardless of when recorded. Worked trap: A mortgage recorded in 2020 outranks a judgment lien recorded in 2023 — but a 2024 property-tax lien jumps ahead of both. This priority controls who gets paid first in a foreclosure sale.