2.2 Deeds, Title Transfer, Title Insurance, and Recording

Deeds and Their Essential Elements

A deed is the written instrument that transfers title from a grantor (owner) to a grantee (recipient). A deed is not the same as title — title is the abstract right of ownership; the deed is the evidence that conveys it. To be valid, a deed must contain certain essentials, and the exam loves asking which element is missing.

• Grantor with legal capacity (competent, of age)
• Named grantee identifiable with reasonable certainty
• Consideration stated (often nominal, e.g., "$10 and other good and valuable consideration")
• Granting clause (words of conveyance, the "habendum" describes the estate granted)
• Legal description of the property
• Grantor's signature (grantee need not sign)
• Delivery and acceptance while the grantor is alive

Trap: a deed is effective on delivery and acceptance, not on recording. Recording is for protection against third parties, not for validity between the parties.

Types of Deeds and Their Warranties

Deeds differ by how much the grantor promises about the title. From strongest to weakest protection:

A general warranty deed carries the five covenants: seisin, right to convey, against encumbrances, quiet enjoyment, and warranty forever. A quitclaim deed is the workhorse for clearing clouds on title, but a buyer should never accept one in an arm's-length purchase without title insurance, because it warrants nothing.

Methods of Title Transfer

Title can pass voluntarily or involuntarily.

• Voluntary alienation — by deed (sale or gift) or by will. A transfer by will is a devise of real property; the person who dies with a will dies testate, and the executor handles the estate.
• Involuntary alienation — title passes without the owner's consent.

The common involuntary methods tested on the exam are:

• Descent (intestate succession) — owner dies without a will; state statutes determine heirs.
• Escheat — no heirs and no will; title passes to the state.
• Eminent domain — government takes private property for public use, paying just compensation through condemnation.
• Foreclosure and tax sales — for unpaid debts or property taxes.
• Adverse possession — a trespasser gains title by OCEAN possession: Open, Continuous, Exclusive, Adverse (hostile), and Notorious for the statutory period.

Trap: a transfer by will is voluntary, while a transfer by intestate descent is involuntary because the owner never chose the recipients. Likewise, natural forces can transfer land involuntarily — accretion slowly adds soil along a waterway (the owner gains it), while avulsion is a sudden loss; erosion gradually wears land away. Examiners pair these with the alienation list to test whether candidates separate voluntary acts from events imposed by law or nature.

Recording, Constructive Notice, and Priority

Recording a deed in the county land records gives constructive notice to the world that the grantee owns the property. Actual physical possession also gives notice. Recording establishes priority — generally "first in time, first in right," but recording statutes refine this:

• Race statute — whoever records first wins, regardless of notice.
• Notice statute — a later buyer who takes without notice of an earlier unrecorded deed wins.
• Race-notice statute — a later buyer wins only if they take without notice and record first.

Worked Example: Competing Buyers

Owner sells to Buyer 1 on March 1 (Buyer 1 does not record). Owner fraudulently sells the same parcel to Buyer 2 on March 10. Buyer 2 has no knowledge of Buyer 1 and records on March 11. In a race-notice state, Buyer 2 wins: no notice plus first to record. In a pure notice state, Buyer 2 also wins for lack of notice. The lesson: record promptly — Buyer 1's failure to record cost the title.

Evidence of Title and Title Insurance

Because a deed alone does not prove clean title, buyers rely on a chain of title (the recorded ownership history) and an abstract of title summarizing recorded documents. Modern practice replaces the lawyer's opinion of title with title insurance.

• Owner's policy — protects the buyer up to the purchase price; one-time premium at closing; coverage lasts as long as the owner or heirs hold an interest.
• Lender's (mortgagee's) policy — protects the lender for the loan balance; required by most lenders; declines as the loan is paid down.

Title insurance covers defects of record plus, in extended coverage, certain unrecorded risks (forgery, undisclosed heirs, fraud). It is the only major insurance that protects against past events rather than future losses. Trap: a standard policy excludes survey problems, zoning, and matters a physical inspection would reveal — those need extended coverage or a survey.

Worked Example: Two Policies, One Closing

A buyer purchases a home for $300,000 with a $240,000 mortgage. At closing the buyer pays a one-time premium for an owner's policy insuring up to $300,000, and the lender requires a lender's policy for the $240,000 loan. Five years later a long-lost heir of a prior owner surfaces claiming a recorded interest the examiner missed.

The owner's policy defends the title and pays the loss up to the policy amount, so the buyer is protected even though the defect predates the purchase. Had the buyer skipped the owner's policy and relied only on the lender's policy, the lender — not the buyer — would be protected, and the buyer would bear the loss personally.