2.2 Deeds, Title Transfer, Title Insurance, and Recording

Title is the bundle of ownership rights a person holds in real property; it is the abstract concept of ownership. A deed is the written instrument that actually conveys title from a grantor (seller) to a grantee (buyer). Keep the two ideas distinct: title is what you own, the deed is the document that moves it.

A key exam point: only the grantor signs the deed. The grantee never signs it. A deed is also distinct from the purchase contract; the contract creates the obligation to convey, and the deed performs that obligation at closing.

Essential Elements of a Valid Deed

For a deed to convey title, it generally must contain:

• A competent grantor (of legal age and sound mind).
• An identifiable grantee named with reasonable certainty.
• Granting (conveyance) words showing intent to transfer, often called the granting clause.
• A legal description of the property (a street address alone is not enough).
• Consideration recited (often nominal, e.g., "for ten dollars and other good and valuable consideration").
• The grantor's signature (and, to record, usually acknowledgment before a notary).
• Delivery and acceptance during the grantor's lifetime.

Critical: title passes only upon delivery and acceptance. A signed deed left in a drawer conveys nothing; a deed cannot be delivered by will through this mechanism (a will operates only at death).

Types of Deeds Ranked by Warranty

Deeds differ chiefly in the warranties (promises about title) the grantor makes. More warranty means more protection for the buyer.

The general warranty deed includes covenants such as seisin, quiet enjoyment, warranty forever, and further assurance. A quitclaim is common to fix a title cloud or release a spouse's potential interest.

Involuntary and Other Transfers of Title

Title does not always move by a voluntary deed. It can transfer involuntarily or by operation of law:

• Descent and devise: at death, property passes by will (devise) or, if there is no will, by intestate succession to heirs.
• Escheat: if an owner dies with no heirs and no will, title reverts to the state.
• Foreclosure: a defaulting borrower loses title through the lender's enforcement of a lien.
• Eminent domain: government takes title for public use with just compensation.
• Adverse possession: a trespasser who occupies land openly, notoriously, continuously, exclusively, and hostilely for the statutory period can acquire title.
• Accession / accretion: gradual additions of land by natural deposit.

Recording, Notice, and Priority

Recording a deed in the public land records is not required for the deed to be valid between grantor and grantee, but it serves two vital functions:

• It gives constructive notice to the world that the grantee owns the property.
• It establishes priority among competing claims.

States follow one of three recording acts:

• Race: first to record wins, regardless of notice (rare).
• Notice: a later bona fide purchaser without notice of a prior unrecorded deed wins.
• Race-notice: a later bona fide purchaser wins only if they took without notice and recorded first.

Three forms of notice are tested: actual (real knowledge), constructive (recorded documents charge everyone with notice), and inquiry (facts that would prompt a reasonable person to investigate, such as someone living on the land).

Title Search, Chain of Title, and Marketable Title

Before closing, a title search examines the public record to build the chain of title, the sequence of recorded owners. A break in the chain, an undischarged mortgage, or a lien is a cloud on title that must be cleared. An abstract of title is a condensed history of recorded documents, often reviewed with an attorney's opinion of title (the practice in Maine and other New England states).

The purchase contract typically requires the seller to deliver marketable title, meaning title reasonably free of defects that a court would compel a buyer to accept. A suit to quiet title is the court action used to resolve disputed or clouded ownership.

Title Insurance

Title insurance protects against losses from defects that already exist at the policy date but were undiscovered, such as forged deeds, undisclosed heirs, recording errors, or hidden liens. Unlike other insurance, it is paid with a one-time premium at closing and looks backward in time rather than forward.

• An owner's policy protects the buyer up to the purchase price (and stays in force as long as the owner or heirs hold title).
• A lender's (mortgagee's) policy protects the lender for the loan balance, declining as the loan is paid down. Lenders virtually always require one.
• A standard policy covers record defects; an extended (ALTA) policy adds coverage for matters a survey or inspection would reveal, like encroachments and unrecorded easements.

Exam tip: title insurance covers pre-existing, undiscovered defects, not problems that arise after the policy date.