2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed needs a competent grantor, identifiable grantee, granting clause, legal description, consideration, grantor's signature, and delivery plus acceptance.
- Warranty levels run highest to lowest: general warranty, special warranty, bargain and sale, then quitclaim, which carries no warranties at all.
- Recording gives constructive (legal) notice to the world; actual notice is direct knowledge and inquiry notice arises from visible facts a buyer should investigate.
- Recording acts come in three flavors — race, notice, and race-notice — all designed to protect a bona fide purchaser.
- An owner's title policy protects the buyer for as long as they or their heirs hold an interest; a lender's policy protects only the lender until the loan is repaid.
Title Versus Deed
Title is the abstract concept of ownership and the bundle of rights. A deed is the written instrument that actually transfers that title from a grantor (seller) to a grantee (buyer). Title is held; a deed is delivered.
Elements of a Valid Deed
A deed must contain each of the following or it is void or voidable:
- A competent grantor (of legal age and sound mind) and an identifiable grantee
- A granting clause with words of conveyance (e.g., 'grant and convey')
- An adequate legal description of the property
- Consideration (may be nominal, such as 'ten dollars and other good and valuable consideration')
- The grantor's signature (the grantee does not sign)
- Delivery and acceptance during the grantor's lifetime
Exam trap: A deed transfers title at the moment of delivery with intent, not at recording. A signed deed left in a drawer transfers nothing because it was never delivered.
Deed Types and Warranty Levels
The deed type determines how much the grantor promises about the title.
| Deed type | Warranty level | Key point |
|---|---|---|
| General warranty | Highest | Warrants title back through every prior owner |
| Special (limited) warranty | Moderate | Warrants only against defects arising during the grantor's ownership |
| Bargain and sale | Low | Implies the grantor holds title but warrants nothing |
| Quitclaim | None | Conveys only whatever interest the grantor has, if any |
The Covenants of a General Warranty Deed
A general warranty deed carries six promises. Present covenants are tested at delivery: seisin (grantor owns it), right to convey (grantor may sell), and against encumbrances (no undisclosed liens). Future covenants continue afterward: quiet enjoyment (no superior claim will disturb the grantee), warranty forever (grantor will defend the title), and further assurance (grantor will fix defects).
Exam trap: A quitclaim deed is often used to clear a 'cloud,' release a spouse's interest in a divorce, or correct a name. It can convey full ownership — but it promises nothing, so the grantee gets no recourse if the grantor owned nothing.
A grantor wants to transfer whatever interest she may hold without making any promises about the quality of the title. Which deed fits?
Transfer of Title
Title changes hands in two broad ways.
- Voluntary alienation — the owner chooses to transfer, by deed (during life) or by will (a testate transfer at death). Dying without a will is intestate, and property passes by descent under state law.
- Involuntary alienation — transfer without the owner's consent: foreclosure, tax sale, eminent domain (government taking for public use with just compensation), escheat (to the state when an owner dies with no heirs), and adverse possession.
Adverse Possession Essentials
A trespasser may gain title by adverse possession if use is Open, Notorious, Continuous, Exclusive, Hostile, and Adverse (mnemonic ONCHA, sometimes with 'actual') for the statutory period. The classic exam memory aid is 'HELUVA'-style continuous, hostile, open use without the owner's permission. Permissive use can never ripen into adverse possession.
Recording and Types of Notice
Recording a deed in the county land records does not create ownership — delivery did that — but it protects the grantee by establishing priority and giving notice.
- Constructive notice — the legal notice the recording system gives to everyone; you are charged with knowing what the records contain whether or not you read them.
- Actual notice — direct, personal knowledge of a fact.
- Inquiry notice — facts visible enough that a reasonable buyer should investigate, such as a tenant living in a 'vacant' house.
Recording Acts
States use one of three statutes, all aimed at protecting a bona fide purchaser (BFP) — one who buys in good faith, for value, and without notice of a prior claim.
- Race — first to record wins, even with notice (rare).
- Notice — a later BFP without notice wins, even without recording first.
- Race-notice — a later buyer wins only if they had no notice and recorded first.
Recording Race Worked Example
A seller deeds a lot to Buyer A, who does not record. The seller then deeds the same lot to Buyer B, who pays value, has no knowledge of Buyer A, and records immediately.
- In a notice state, Buyer B wins because B was a BFP when she purchased.
- In a race-notice state, Buyer B still wins because she lacked notice and recorded first.
- In a pure race state, the first to record wins regardless of knowledge.
The practical lesson for every system is the same: record immediately.
Marketable Title and Curing Defects
Marketable title is free of reasonable doubt and defensible in court. A cloud on title is any claim or defect that calls ownership into question. Common cures include recording a release of a paid-off lien, filing a correction deed for a description error, using an affidavit of heirship, or bringing a quiet title lawsuit to extinguish stale claims.
Title Insurance
Title insurance is a one-time-premium policy that indemnifies against defects existing on or before the policy date — forged deeds, undisclosed heirs, recording errors, and similar hidden problems. It does not cover problems that arise after closing.
| Policy | Who is protected | How long it lasts |
|---|---|---|
| Owner's policy | The buyer | As long as the owner or heirs hold an interest |
| Lender's (mortgagee's) policy | The lender only | Until the loan is paid off; decreases with the balance |
Exam trap: The lender's policy protects the lender, not the buyer, even though the buyer often pays for it. A buyer who skips the optional owner's policy has no coverage of their own equity.
Application Check
If a question asks who is protected after the mortgage is satisfied, the answer is the owner (only the owner's policy survives). If it asks what protects the bank against a forged deed in the chain, the answer is the lender's policy.
In a race-notice state, a second buyer will prevail over an earlier unrecorded buyer only if the second buyer:
A buyer inspects a home and sees a tenant living there, though no lease appears in the public records. What kind of notice does the tenant's presence create?