2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed needs a competent grantor, named grantee, words of conveyance, legal description, consideration, and the grantor's signature - delivery and acceptance complete the transfer.
- Warranty deeds give the most grantee protection; special warranty and quitclaim deeds give progressively less, with quitclaim conveying only whatever interest the grantor has.
- Recording gives constructive notice and establishes priority; in a race-notice or notice state a later bona fide purchaser can defeat an unrecorded prior deed.
- Title insurance covers past defects; an owner's policy protects the buyer and a lender's policy protects the mortgagee.
Essential Elements of a Valid Deed
A deed is the written instrument that transfers title. Title itself is the evidence of ownership; the deed is the vehicle. To be valid, a deed must contain:
- Competent grantor - of legal age and sound mind
- Identifiable grantee - named so the recipient is ascertainable
- Words of conveyance (granting clause) - shows present intent to transfer
- Legal description - metes-and-bounds, lot-and-block, or rectangular survey
- Consideration - something of value, often recited as "$10 and other good and valuable consideration"
- Grantor's signature - the grantor signs, never the grantee
- Delivery and acceptance - the deed must be delivered during the grantor's life and accepted
Trap: recording and notarization (acknowledgment) are not required for validity between the parties - they are required to record.
Types of Deeds and Their Covenants
Deeds differ by how much the grantor promises. From most to least protective:
| Deed type | Protection | Key feature |
|---|---|---|
| General warranty | Highest | Five covenants; warrants title against all defects, even before grantor owned it |
| Special (limited) warranty | Medium | Warrants only against defects arising during the grantor's ownership |
| Bargain and sale | Low | Implies grantor holds title but gives no warranty |
| Quitclaim | Lowest | Conveys only whatever interest grantor has - may be none |
The five covenants of a general warranty deed: seisin, right to convey, against encumbrances, quiet enjoyment, and further assurance (plus warranty forever). A quitclaim is the standard tool to clear a cloud on title because it releases any possible claim without promising one exists.
A buyer wants the broadest protection that the seller will defend title against ALL defects, including those that arose before the seller owned the property. Which deed should the buyer insist on?
Voluntary and Involuntary Alienation
Alienation is the transfer of title. Voluntary alienation occurs by the owner's choice - by deed (sale or gift) or by will. A person who dies with a will is testate; the will directs distribution. A person who dies without one is intestate, and property passes by the state's statute of descent and distribution to heirs.
Involuntary alienation occurs without the owner's consent:
- Escheat - property reverts to the state when an owner dies intestate with no heirs
- Eminent domain - government takes for public use through condemnation, paying just compensation
- Adverse possession - a trespasser gains title by open, notorious, continuous, hostile, and exclusive use for the statutory period
- Foreclosure / tax sale - forced sale to satisfy a lien
- Natural processes - accretion adds land; avulsion or erosion removes it
Recording, Notice, and Priority
Recording a deed in the county land records gives the world constructive notice - everyone is legally presumed to know what is recorded, whether or not they actually looked. Actual notice is what a person truly knows. Visible occupancy gives inquiry notice - a buyer must investigate who is in possession.
Recording does not make a deed valid; it protects priority. Most states follow a race-notice rule: a later bona fide purchaser (one who pays value without notice) who records first defeats an earlier buyer who failed to record.
Worked example: On June 1 Sara buys from Tom but does not record. On June 10 Tom sells the same land to Uma, who has no notice of Sara and records the same day. In a race-notice state, Uma wins - she paid value, lacked notice, and recorded first. Sara's only recourse is to sue Tom.
Title Search, Chain of Title, and Title Insurance
A title search examines the public record to build the chain of title - the unbroken sequence of conveyances from a recognized origin to the present owner. The summary of everything found is the abstract of title; an attorney's opinion of title or certificate of title states whether title is marketable. Marketable title is title a reasonably prudent buyer would accept - free of undisclosed defects and reasonable doubt.
Title insurance indemnifies against losses from past defects (forged deeds, undisclosed heirs, recording errors) - unlike other insurance, it looks backward, not forward.
- Owner's policy - protects the buyer up to the purchase price; premium is a one-time charge at closing.
- Lender's (mortgagee) policy - protects the lender for the loan balance and is usually required to fund the loan.
Exceptions listed in Schedule B (e.g., recorded easements) are not covered.
Two policy forms appear on the exam. A standard policy covers recorded defects, forgery, and incompetent grantors. An extended (ALTA) policy adds protection against off-record risks a physical inspection or survey would reveal - encroachments, unrecorded mechanic's liens, and rights of parties in possession. Lenders typically demand extended coverage. Remember that title insurance is paid once at closing and lasts as long as the insured holds an interest, with no renewal premiums.
Adverse Possession: The Five Elements
Title can pass involuntarily when a trespasser meets every element of adverse possession for the statutory period. The classic memory aid is OCEAN:
- O — Open and notorious: the use is visible, not hidden, putting the true owner on notice.
- C — Continuous: uninterrupted for the full statutory term, with tacking allowing successive possessors to add their periods together.
- E — Exclusive: the possessor does not share possession with the true owner or the public.
- A — Actual: physical occupation or use of the land.
- N — Notorious / hostile (without permission): possession is against the owner's interest. A possessor who has the owner's permission can never adverse-possess, because permission defeats hostility.
The needed period varies by state. Once it runs, the adverse possessor can bring a quiet title action to obtain marketable record title. The same elements (minus exclusivity) underlie an easement by prescription, which conveys a use right rather than ownership.
Conveyance (Transfer) Taxes and the Deed in Practice
Most states impose a one-time transfer (conveyance) tax when a deed is recorded, calculated on the sale price and customarily paid by the seller unless the contract shifts it. The tax is computed in rate increments, so the math is a recurring exam item.
Worked example using a $0.50-per-$500 rate on a $360,000 sale:
- Number of $500 increments = $360,000 ÷ $500 = 720.
- Tax = 720 × $0.50 = $360.
If the rate were instead stated as $1.00 per $1,000, the tax on the same sale would be 360 × $1.00 = $360 as well, identical here, but read the increment carefully because exam distractors change the unit. The deed must be properly executed (signed by a competent grantor, with the grantee named), delivered, and accepted to transfer title; recording is not required for validity between the parties but is essential to give constructive notice and protect priority against later claimants.
A buyer purchases a property and obtains a standard owner's title insurance policy. Two years later, an unknown heir of a prior owner appears, claiming the deed in the chain was forged. What does the title policy do?