2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed needs a competent grantor, named grantee, consideration, words of conveyance, legal description, and the grantor's signature; the grantee never signs.
- Delivery and acceptance during the grantor's lifetime are required to pass title - an undelivered deed conveys nothing.
- A general warranty deed gives the most grantee protection; a quitclaim deed conveys only whatever interest the grantor has, with no warranties.
- Recording gives constructive notice and establishes priority; under most recording acts, the first to record generally prevails.
- Title insurance protects against past defects and is paid once at closing; an owner's policy and a lender's policy cover different parties.
Methods of Transferring Title
Title to real property can change hands voluntarily or involuntarily.
- Voluntary: by deed during life, or by will (devise) at death.
- Involuntary:
- Descent (intestate succession) - owner dies with no valid will; state intestacy law distributes title to heirs.
- Escheat - owner dies with no will and no heirs; title passes to the state.
- Eminent domain - government takes private property for public use, paying just compensation.
- Adverse possession - a trespasser who possesses land openly, notoriously, continuously, hostilely, and actually for the statutory period may acquire title.
- Foreclosure - involuntary sale to satisfy a lien.
The process by which government exercises eminent domain is called condemnation; the owner is entitled to fair market value as compensation.
The Deed and Its Requirements
A deed is the written instrument that conveys title. The grantor conveys; the grantee receives. Essential elements:
- Grantor of legal age and competent
- Grantee named with reasonable certainty
- Consideration recited (even 'ten dollars and other good and valuable consideration')
- Granting clause (words of conveyance)
- Adequate legal description of the property
- Grantor's signature (the grantee does not sign)
- Delivery and acceptance during the grantor's lifetime
Trap: title passes on delivery and acceptance, not on signing or recording. A deed found in a drawer after the grantor's death, never delivered, conveys nothing.
Types of Deeds and Their Warranties
The deed type controls how much the grantor promises about title. From most to least grantee protection:
| Deed type | Warranties given | Typical use |
|---|---|---|
| General warranty | Full covenants covering the entire chain of title, back to the property's origin | Standard residential resale |
| Special (limited) warranty | Grantor warrants only against defects arising during the grantor's own ownership | REO/bank sales, fiduciaries |
| Bargain and sale | Implies grantor holds title but adds no express warranties | Tax/foreclosure sales |
| Quitclaim | None - conveys only whatever interest, if any, the grantor has | Clearing clouds, divorce, gifts |
The covenant of seisin (grantor owns and can convey), covenant against encumbrances, and covenant of quiet enjoyment appear in a general warranty deed. A quitclaim deed is the weakest: it makes no promise that the grantor even owns anything, so it is used to release a possible claim - for example, removing a divorced spouse's name from title.
Worked example: A buyer takes a quitclaim deed from a seller who, unknown to both, does not actually own the parcel. The buyer receives nothing and cannot sue the grantor for breach of warranty, because a quitclaim makes no warranties. The same loss under a general warranty deed would give the buyer a claim against the grantor.
Which element is NOT required for a deed to be valid and effective in transferring title?
Recording and Notice
Recording is the act of entering documents in the public land records of the county where the property sits. Recording does not make a deed valid, but it provides constructive notice - the law presumes the entire world is on notice of what is recorded, whether or not anyone actually reads it. Actual notice is what a person genuinely knows.
Recording establishes priority. Under the common 'race-notice' and 'notice' recording acts, a later buyer who pays value without notice of a prior unrecorded claim, and who records first, can defeat the earlier unrecorded interest. Practical rule for the exam: record promptly, because the first to record generally prevails.
A chain of title is the recorded sequence of owners. A gap or defect is a cloud on title. A title search examines the public records to confirm the chain and reveal recorded liens and easements. A suit to quiet title is a court action used to remove a cloud.
Title Insurance
Title insurance indemnifies the insured against financial loss from defects that already existed when the policy was issued - forged deeds, undisclosed heirs, recording errors, or missed liens. Unlike hazard insurance, it looks backward in time and is paid with a single premium at closing, not monthly.
Two policy types are tested:
- Owner's policy - protects the buyer (and often heirs) up to the purchase price.
- Lender's (mortgagee's) policy - protects the lender up to the loan balance and is usually required to fund the loan.
Key distinctions:
- Standard coverage covers recorded defects and matters found in the public records.
- Extended coverage adds risks a survey or physical inspection would reveal, such as encroachments and rights of parties in possession.
- Exceptions are items the policy will not cover; exclusions are entire categories (e.g., zoning) the policy never insures.
Worked example: Six months after closing, a previously unknown heir of a prior owner claims an interest because an old deed was forged. The buyer's owner's title policy defends the claim and pays covered losses up to the policy limit. A general warranty deed alone would force the buyer to chase a possibly insolvent grantor; title insurance shifts that risk to the insurer.
Worked Example: Why Recording Order Decides the Winner
Recording statutes resolve who wins when the same parcel is conveyed or encumbered twice. The dominant U.S. rule is the notice / race-notice system: a later purchaser who pays value without notice of a prior unrecorded deed, and who records first, takes priority.
Suppose a seller deeds Blackacre to Buyer A on March 1 but A does not record. On April 1 the same seller deeds Blackacre to Buyer B, who has no knowledge of A and records that day. In a race-notice state, B wins — B was a bona fide purchaser for value who recorded first. A is left to sue the seller for fraud. The exam lesson: recording gives constructive notice to the world, and the prudent licensee always confirms the deed is promptly recorded after closing.
Involuntary Transfer and Marketable Title
Title also passes without a willing owner: descent (dying intestate, by state law), escheat (no heirs, property goes to the state), eminent domain, foreclosure, adverse possession, and partition. Each is a frequent single-answer item.
A seller's contract obligation is to deliver marketable title — title a reasonable buyer would accept, free of undisclosed liens, encroachments, or doubtful claims. A chain of title is the recorded history of ownership; a gap in that chain is a cloud that must be cleared, often by a quiet-title action or a quitclaim deed from the party with the potential interest. Marketable does not mean perfect — minor, well-documented easements (a standard utility easement) do not make title unmarketable.
A title defect from a forged deed signed by a prior owner surfaces after closing. The current buyer purchased an owner's title insurance policy. What is the buyer's best protection?