2.2 Deeds, Title Transfer, Title Insurance, and Recording

A deed is the written instrument that transfers title from a grantor (seller/giver) to a grantee (buyer/receiver). Title itself is the abstract concept of legal ownership; the deed is the evidence and vehicle that moves it. For a deed to be valid it must meet several requirements. Only the grantor must sign - the grantee never signs the deed. The grantee must be named with reasonable certainty, and the property must be identified by an adequate legal description, not just a street address.

Essential Elements of a Valid Deed

Trap: a deed is valid between the parties even if it is never recorded. Recording is for protection against third parties, not for validity. Also, an undelivered deed sitting in a drawer transfers nothing - delivery and acceptance during the grantor's lifetime is essential.

Types of Deeds and the Covenants They Carry

Deeds differ by how much the grantor promises about the title.

• General warranty deed - the strongest. The grantor warrants the title against all defects, even those arising before the grantor owned the property. Contains the full covenants (seisin, against encumbrances, quiet enjoyment, further assurance, warranty forever).

• Special (limited) warranty deed - the grantor warrants only against defects arising during the grantor's own period of ownership.

• Bargain and sale deed - implies the grantor holds title but gives no warranties (common in foreclosures/estates).

• Quitclaim deed - conveys whatever interest the grantor has, if any, with no warranties. Best tool to clear a cloud on title or release an interest.

Voluntary vs. Involuntary Transfer

Title can move with or without the owner's consent.

• Voluntary - sale (deed), gift, dedication (to government), or by will. A person who dies with a valid will dies testate; gifts of real property by will are devises to devisees.
• Involuntary - the owner's consent is not needed. Key examples: descent (dying intestate - no will - so the state's statute of descent and distribution controls), escheat (property reverts to the state when there are no heirs), eminent domain/condemnation, foreclosure, tax sale, adverse possession, and partition.

Memory aid: if the question lacks a willing owner signing a deed, it is an involuntary transfer.

Adverse Possession

Adverse possession lets a trespasser gain title by long-term occupation. The use must be open, notorious, hostile, actual, exclusive, and continuous for the statutory period (often 5 to 20 years, set by state law). Memory acronym: OCEAN plus hostile. Some states also require paying property taxes or holding color of title. Land owned by the government is generally immune - you cannot adversely possess public land.

Recording, Notice, and Lien Priority

Recording places a deed in the public record at the county recorder's office. Its purpose is to give constructive notice (legal notice to the world) of the ownership interest. The two notice concepts:

• Actual notice - what a person genuinely knows.
• Constructive notice - what a person is presumed to know because it is recorded or visible by inspection.

For liens, the general rule is "first in time, first in right" - priority follows the recording date. The big exceptions: property tax and special-assessment liens take priority over everything, regardless of when recorded, and mechanic's liens may relate back to the date work or materials began. A subordination agreement lets a senior lienholder voluntarily step behind a junior lien (common in refinancing).

Evidence of Title and Title Insurance

Before closing, the buyer wants assurance the title is marketable (free of undisclosed defects). Tools:

• Abstract of title - a condensed history of all recorded documents affecting the parcel; an attorney issues an opinion of title based on it.

• Chain of title - the unbroken record of successive owners. A break creates a cloud that may need a quitclaim or suit to quiet title to fix.

• Title insurance - indemnifies against losses from covered title defects. An owner's policy protects the buyer for as long as they (or heirs) hold title; a lender's (mortgagee's) policy protects the lender up to the loan balance. Title insurance is a one-time premium paid at closing - it does not renew like other insurance.

Worked Example: Standard vs. Extended Coverage

A standard owner's policy covers recorded defects, forgery, and capacity problems found in the public record. An extended policy (often after a survey) also covers off-record risks such as encroachments, boundary disputes, and rights of parties in possession.

Numeric trap: if a home sells for $300,000 with a $240,000 loan, the lender's policy covers up to the $240,000 loan amount (declining as the loan is paid down), while the owner's policy is written for the full $300,000 value and stays level. Candidates often wrongly assume the lender's policy equals the sale price.