2.2 Deeds, Title Transfer, Title Insurance, and Recording

Essentials of a valid deed

A deed is the written instrument that transfers title from a grantor (seller/giver) to a grantee (buyer/receiver). To be valid, a deed must include:

• A competent grantor (of legal age and sound mind)
• A named, identifiable grantee
• Consideration (the deed need only recite consideration, not the true price)
• Words of conveyance — the granting clause ('I hereby grant and convey')
• An adequate legal description of the property
• The grantor's signature (the grantee need not sign)

The deed becomes effective only upon delivery and acceptance during the grantor's lifetime. A signed deed left in a drawer transfers nothing. Acknowledgment (notarization) is not required for validity but is required to record the deed.

The legal description must be precise enough to locate the parcel without guesswork. The three accepted systems are metes and bounds (directions and distances from a point of beginning), lot and block (a recorded subdivision plat), and the rectangular (government) survey of townships, ranges, and sections. A street address alone is not an adequate legal description on a deed.

Types of deeds and their covenants

The general warranty deed includes the major covenants: seisin (grantor owns it), right to convey, against encumbrances, quiet enjoyment, and warranty forever. A quitclaim deed makes no promises — it is the weakest deed and is used to release a possible interest, such as removing a cloud on title.

Voluntary and involuntary transfer of title

Title changes hands in several ways the exam expects you to sort:

• Voluntary: by deed (sale or gift) during life, or by will (devise of real property) at death.
• Involuntary by operation of law: descent (intestate succession when there is no will), escheat (property reverts to the state when an owner dies with no will and no heirs), foreclosure, adverse possession, and eminent domain (government taking for public use with just compensation, exercised through condemnation).

Adverse possession transfers title to a trespasser who possesses land in a way that is, in most states, O-C-E-A-N: Open, Continuous, Exclusive, Adverse (hostile), and Notorious — for the statutory period (commonly 5–20 years, often with tacking of successive possessors).

Trap: escheat (no heirs → state) is distinct from eminent domain (government takes and pays). Both move title to government, but only eminent domain requires compensation.

Recording, notice, and priority

Recording a deed in the county land records gives the world constructive (legal) notice of the ownership claim — everyone is presumed to know what is recorded, whether or not they actually checked. Actual notice is what a person truly knows.

Recording does not make a deed valid; it protects priority. The general rule is 'first in time, first in right' among those who record. A buyer who records promptly defeats a later claimant.

Worked example. On March 1, Owner deeds a lot to Buyer A, who does not record. On April 1, Owner fraudulently deeds the same lot to Buyer B, who has no knowledge of A and records that day. In a notice/race-notice recording state, B — a good-faith purchaser without notice who recorded first — generally prevails, and A is left to sue Owner. This is why recording immediately matters.

Title evidence and title insurance

Buyers and lenders verify ownership before closing using:

• Abstract of title — a summary history of recorded instruments, reviewed for a chain of title; an attorney may issue an opinion of title.
• Title search — examination of the public record to find liens, easements, and gaps (clouds).
• Title insurance — an indemnity policy protecting against past, undiscovered defects (forged deeds, missing heirs, recording errors).

Two policy types: an owner's policy protects the buyer up to the purchase price and lasts as long as the insured or their heirs hold an interest; a lender's (mortgagee's) policy protects the lender for the loan balance and decreases as the loan is paid.

Key traits: title insurance is paid once (a single premium, no monthly cost) and covers past events only — it never insures future defects. Standard policies exclude items a survey or physical inspection would reveal unless extended coverage is purchased.

Worked numeric. A buyer pays $300,000 and the lender funds a $240,000 loan. The owner's policy is written at the $300,000 purchase price; the lender's policy is written at the $240,000 loan amount. After ten years of payments the loan balance is $180,000, so the lender's coverage has dropped to roughly that balance, while the owner's $300,000 coverage stays in force as long as the owner holds title. If a forged deed from before closing surfaces, the owner's policy — not the buyer — bears the defense cost and loss up to the policy limit.