2.2 Deeds, Title Transfer, Title Insurance, and Recording

Essential Elements of a Valid Deed

A deed is the written instrument that conveys title from a grantor (seller) to a grantee (buyer). The exam tests the elements required for validity:

• A competent grantor (legal age, sound mind) and an identifiable grantee.
• Words of conveyance (the granting clause) showing intent to transfer.
• A legal description sufficient to identify the property.
• Consideration (recited, even if nominal, e.g., "$10 and other valuable consideration").
• The grantor's signature (the grantee need not sign).
• Delivery and acceptance during the grantor's lifetime.

Trap: Recording and notarization (acknowledgment) are not required for a deed to be valid between the parties — but they are required to record the deed and give public notice.

Types of Deeds and Their Warranties

Key covenants in a general warranty deed include seisin (grantor owns and can convey), quiet enjoyment (no superior claims), and warranty forever (grantor defends title). A quitclaim deed is commonly used to clear clouds on title or transfer between divorcing spouses.

Adverse possession and the statutory elements

A classic involuntary-transfer question is adverse possession: a trespasser can acquire title by satisfying every element for the statutory period. Memorize them as OCEAN:

• Open and notorious — visible, not hidden.
• Continuous — uninterrupted for the full statutory period.
• Exclusive — not shared with the true owner or public.
• Adverse (hostile) — without the owner's permission.
• Notorious/actual possession — genuinely using the land.

Trap: If the owner gave permission, the use is not hostile, so adverse possession fails — that is why owners post and grant revocable licenses. Tacking lets successive adverse possessors combine their time if their possessions are connected.

Reconciling notice systems

Recording acts decide who wins between competing claimants. The three systems:

Most states use notice or race-notice. A bona fide purchaser (BFP) pays value and takes without actual or constructive notice of a prior claim. Possession itself is constructive notice — a buyer who ignores someone visibly living on the land cannot claim BFP status.

Worked title-insurance claim

A buyer closes with an owner's title policy of $300,000. Two years later a previously unknown heir surfaces with a valid recorded claim from before closing, clouding title and costing $40,000 to clear plus legal defense. Because the defect existed at closing and was not an excepted item, the title insurer defends the title and pays the covered loss up to the policy limit. Had the buyer instead relied only on the seller's general warranty deed, recovery would depend on locating and suing a possibly insolvent seller — which is exactly why lenders require a lender's policy and prudent buyers add an owner's policy.

Voluntary and Involuntary Transfer of Title

Title passes in two broad ways:

Voluntary transfer (alienation):

• By deed during life.
• By will at death — the giver is the testator; a gift of real property is a devise to a devisee.
• By dedication of land to public use.

Involuntary transfer:

• Descent — when a person dies intestate (no will), title passes to heirs under state statutes.
• Escheat — property reverts to the state when there is no will and no heirs.
• Eminent domain — government takes private property for public use through condemnation, paying just compensation.
• Adverse possession — a trespasser gains title through open, notorious, continuous, hostile, and exclusive use for the statutory period.
• Foreclosure — title is taken to satisfy an unpaid debt or lien.

Recording, Notice, and Priority

Recording a deed in the public land records gives constructive notice — the law presumes the world knows of the interest, whether or not anyone actually read it. Compare:

• Actual notice: What a person truly knows.
• Constructive notice: Notice imputed by recording (or by visible possession).

Priority: Most states use a race-notice or notice recording act. The practical exam rule: a bona fide purchaser who records first, without notice of a prior unrecorded claim, generally has priority. Property-tax liens are a major exception — they take priority regardless of recording date.

Worked example: On June 1, owner O deeds Lot 9 to buyer A, who does not record. On June 10, O fraudulently deeds the same lot to buyer B, who has no knowledge of A and records the same day. Under a race-notice statute, B — the first to record without notice — generally prevails, and A is left with a claim against O.

Title Insurance

Because a deed's warranties only obligate the grantor (who may be unreachable or insolvent), buyers and lenders rely on title insurance for protection against past, hidden defects discovered after closing — forged deeds, undisclosed heirs, recording errors, or unreleased liens.

Key distinctions:

• Owner's policy: Protects the buyer up to the purchase price; one-time premium paid at closing.
• Lender's (mortgagee's) policy: Protects the lender up to the loan balance and declines as the loan is paid down; usually required to fund the loan.
• Title search and abstract: Examination of the public record and a summary of the chain of title; the basis for the insurer's coverage.

Standard vs. extended coverage: A standard policy covers record defects; an extended (ALTA) policy adds protection against off-record matters such as survey issues, encroachments, and rights of parties in possession.

Trap: Title insurance is backward-looking — it covers defects that already existed at closing, not future events. It does not insure against zoning changes or future liens.