2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed requires a competent grantor, named grantee, words of conveyance (granting clause), legal description, consideration, and the grantor's signature plus delivery and acceptance.
- A general warranty deed gives the broadest protection; a quitclaim deed conveys only whatever interest the grantor has, with no warranties.
- Title transfers voluntarily (deed, will) or involuntarily (descent, escheat, eminent domain, adverse possession, foreclosure).
- Recording gives constructive notice and establishes priority; an unrecorded deed is valid between the parties but can be defeated by a later good-faith recorded buyer.
- Title insurance protects against past defects; an owner's policy protects the buyer and a lender's (mortgagee) policy protects the lender.
Deeds and Their Essential Elements
A deed is the written instrument that conveys title to real property from the grantor (seller/giver) to the grantee (buyer/receiver). Title itself is the legal evidence of ownership; the deed is the document that transfers it.
For a deed to be valid, it generally must include:
- Competent grantor of legal age and sound mind.
- Identifiable grantee named with reasonable certainty.
- Words of conveyance (granting clause) showing intent to transfer.
- Adequate legal description of the property.
- Consideration (even nominal, e.g., "$10 and other valuable consideration").
- Grantor's signature (the grantee need not sign).
- Delivery and acceptance during the grantor's lifetime.
Note that recording is NOT required for a deed to be valid between grantor and grantee. Acknowledgment (notarization) is generally required to record the deed but not to make it valid between the parties. Exam trap: a deed can be valid even if never recorded or notarized delivery and acceptance complete the transfer.
Types of Deeds by Warranty
Deeds differ by the covenants (promises) the grantor makes about title. From strongest to weakest protection:
| Deed type | Protection | Key feature |
|---|---|---|
| General warranty | Highest | Warrants against ALL defects, even before grantor owned it |
| Special (limited) warranty | Moderate | Warrants only against defects during grantor's ownership |
| Bargain and sale | Limited | Implies grantor holds title; few or no express warranties |
| Quitclaim | Lowest | Conveys only whatever interest grantor has; no warranties |
The general warranty deed includes covenants such as seisin (grantor owns and can convey), quiet enjoyment (no superior claims), and warranty forever (grantor will defend title). A quitclaim deed is used to clear clouds on title (e.g., a release of a possible interest) it transfers whatever the grantor has, which may be nothing.
Worked example: A neighbor signs a quitclaim deed releasing any claim to a disputed 2-foot strip. If the neighbor had no real interest, the buyer received nothing of value but the recorded quitclaim still clears the cloud on title for future buyers.
A buyer wants the broadest possible protection covering title defects that may have arisen even before the current seller owned the property. Which deed should the buyer insist on?
How Title Transfers
Title passes either voluntarily or involuntarily.
Voluntary transfer (alienation):
- Deed during life (a sale or gift).
- Will (devise) at death; the recipient is a devisee of real property.
- Dedication an owner gives land to government (e.g., streets in a subdivision).
Involuntary transfer:
- Descent when an owner dies intestate (no will), property passes to heirs per state law.
- Escheat if there are no heirs, property goes to the state.
- Eminent domain government takes private property for public use, paying just compensation (the process is condemnation).
- Foreclosure lender forces a sale to satisfy a defaulted debt.
- Adverse possession a trespasser can gain title by open, notorious, continuous, hostile, and exclusive possession for the statutory period.
Adverse possession test (ACHE / OCEAN mnemonics): possession must be Open, Continuous, Exclusive, Adverse (hostile), and Notorious for the statutory term, sometimes requiring color of title or payment of taxes.
Recording, Notice, and Priority
Recording a deed in the county public records does not make it valid it provides constructive notice (legal notice to the world) and establishes priority among competing claims.
Three forms of notice:
- Actual notice what a person actually knows.
- Constructive notice what the public records or inspection would reveal; everyone is presumed to know recorded facts.
- Inquiry notice facts that should prompt a reasonable person to investigate (e.g., someone living on the land).
Worked example: Seller deeds a lot to Buyer A on March 1 (unrecorded). Seller fraudulently deeds the same lot to Buyer B on March 10. Buyer B, with no knowledge of A and acting in good faith, records on March 11. Under a typical notice/race-notice statute, Buyer B prevails A's deed was valid between A and Seller but lost priority to a later good-faith purchaser who recorded first. Lesson: record promptly.
A chain of title is the recorded sequence of conveyances; a gap or defect is a cloud on title, often cured by a suit to quiet title or a corrective/quitclaim deed.
Title Evidence and Title Insurance
Before closing, a title search examines the public records to build the chain of title and uncover liens, easements, or defects. The summary of that search is an abstract of title; an attorney may issue an opinion of title on its marketability. A marketable title is one reasonably free of defects that a prudent buyer would accept.
Title insurance indemnifies against losses from past (pre-policy) defects such as forged deeds, undisclosed heirs, or recording errors. It is a one-time premium paid at closing. Two policy types:
- Owner's policy protects the buyer up to the purchase price (and may rise with appreciation in an extended policy).
- Lender's (mortgagee's) policy protects the lender for the loan balance; usually required by the lender and declines as the loan is paid.
Standard exceptions (not covered) typically include matters a survey would reveal, rights of parties in possession, and unrecorded easements unless an extended-coverage policy and survey are obtained. Exam trap: title insurance covers past defects discovered later it does not insure against future events like a new lien filed after closing.
Worked numeric example: A buyer pays $300,000 with a $240,000 loan. The lender requires a mortgagee's policy of $240,000 (declining as principal is paid). The buyer separately buys an owner's policy of $300,000 to protect equity. If an undisclosed heir later proves a valid claim, the owner's policy indemnifies the buyer up to the policy limit and pays defense costs without an owner's policy, the buyer bears that loss alone even though the lender was protected.
Finally, distinguish title (ownership) from possession and from the deed (the conveyance document). A buyer can hold title without recording, possess without owning (a tenant), or hold a deed that conveys nothing (a quitclaim from a stranger).
Buyer A receives and accepts a valid deed but never records it. Two weeks later the seller deeds the same property to Buyer B, who has no knowledge of A and immediately records. Under a typical race-notice statute, who most likely holds superior title?