2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed needs a competent grantor, named grantee, granting clause, legal description, consideration, grantor's signature, and delivery and acceptance.
- A general warranty deed gives the most protection (warrants against all defects ever); a quitclaim deed gives no warranties and conveys only what the grantor has.
- Recording gives constructive notice to the world; actual notice is direct knowledge and inquiry notice arises from visible facts a reasonable person would investigate.
- Recording statutes are race, notice, or race-notice; a bona fide purchaser buys in good faith, for value, and without notice of prior claims.
- An owner's title policy protects the buyer as long as they or their heirs hold an interest; a lender's policy protects only the lender and ends when the loan is paid.
Title Versus Deed
Title is the abstract concept of ownership - the legal right to a property. A deed is the written instrument that actually transfers that title from one party to another. You record a deed, not a title.
Elements of a Valid Deed
For a deed to convey title it must contain all of the following:
- A competent grantor (the conveying owner) and a named grantee (the receiver).
- A granting clause with words of conveyance ("grants and conveys").
- An adequate legal description of the property.
- Consideration - it may be nominal ("$10 and other good and valuable consideration").
- The grantor's signature (the grantee does not sign the deed).
- Delivery and acceptance during the grantor's lifetime.
Title does not pass until the deed is both delivered and accepted. A deed signed and locked in a drawer transfers nothing.
Exam trap: A deed does not need to be recorded to be valid between the parties. Recording protects against third parties; it is not an element of validity.
Deed Types and the Warranty Ladder
The protection a buyer receives depends entirely on the deed type.
| Deed type | Warranty level | Key point |
|---|---|---|
| General warranty deed | Highest | Warrants against all defects, even from before the grantor owned it |
| Special (limited) warranty deed | Medium | Warrants only against defects arising during the grantor's ownership |
| Bargain and sale deed | Low | Implies the grantor holds title, but few or no express warranties |
| Quitclaim deed | None | Conveys only whatever interest the grantor has - possibly nothing |
Covenants of Title
A general warranty deed carries the full set of covenants (promises). Present covenants include the covenant of seisin (grantor owns it), the covenant of right to convey, and the covenant against encumbrances (no undisclosed liens). Future covenants include quiet enjoyment (no superior claim will disturb the grantee), warranty forever (grantor will defend the title), and further assurance (grantor will fix title defects).
Exam tip: A quitclaim deed is the standard tool to clear a cloud on title, release a possible interest, or transfer between divorcing spouses - precisely because it makes no promises.
Voluntary and Involuntary Transfer
- Voluntary alienation - transfer by the owner's choice, by deed during life or by will at death.
- Involuntary alienation - transfer without consent, by foreclosure, tax sale, eminent domain, escheat (to the state when an owner dies with no heirs), or adverse possession (open, notorious, hostile, continuous use for the statutory period).
Recording and the Three Types of Notice
Recording a deed in the county land records protects the buyer by giving public notice of the ownership claim. The exam tests three notice types:
- Constructive notice - notice the law presumes everyone has because a document is recorded, even if no one actually reads it.
- Actual notice - direct, personal knowledge of a fact (the buyer was told, or saw the document).
- Inquiry notice - facts visible enough that a reasonable buyer should investigate, such as a tenant living in a "vacant" house or a worn path crossing the lot.
Recording Statutes
States use one of three statute types to decide who wins between competing claimants:
- Race - the first party to record wins, even with knowledge of an earlier sale.
- Notice - a later bona fide purchaser (BFP) without notice wins, even if they record second.
- Race-notice - a later buyer wins only if they had no notice and recorded first.
A bona fide purchaser buys in good faith, pays value, and takes without actual, constructive, or inquiry notice of a prior claim. Recording statutes exist to protect BFPs and to reward prompt recording.
Mini-Case: The Double Sale
A seller deeds a lot to Buyer A, who fails to record. The seller then deeds the same lot to Buyer B, who pays value, knows nothing of Buyer A, and records immediately. In a notice or race-notice state, Buyer B (a BFP who recorded) generally prevails, and Buyer A is left to sue the seller. The takeaway tested repeatedly: record without delay.
Marketable Title and Title Insurance
Marketable title is title free of serious defects and reasonably safe from litigation - what a buyer is normally entitled to receive. A cloud on title is any claim or encumbrance that calls ownership into question. A quiet title action asks a court to remove a cloud.
Before closing, a title search traces the chain of title and checks for liens, easements, and gaps. Common defects include unreleased mortgages, forged or improperly executed deeds, missing heirs, and boundary encroachments. Defects are either cured (record a release, file a correction deed, obtain an affidavit of heirship) or insured over.
Owner's Versus Lender's Policy
| Policy | Protects | Duration |
|---|---|---|
| Owner's policy | The buyer | As long as the owner or their heirs hold an interest |
| Lender's (mortgagee) policy | The lender only | Until the loan is paid off; coverage declines with the balance |
Title insurance covers defects that existed before the policy date - forged deeds, recording errors, undisclosed liens. It does not cover problems arising after closing. A lender almost always requires a lender's policy; a separately purchased owner's policy is the only thing that protects the buyer's equity.
Exam tip: If a question asks what protects the buyer's ownership after closing, the answer is the owner's title policy - the lender's policy does nothing for the buyer.
A grantor signs a deed conveying a parcel to a buyer but keeps it in a safe deposit box, intending to hand it over later. The grantor dies before delivering it. What is the legal effect?
In a race-notice state, Buyer A receives a deed first but does not record. Buyer B later buys the same property, pays full value, knows nothing of Buyer A, and records immediately. Who has superior title?