2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed needs a competent grantor, identifiable grantee, granting words, consideration, legal description, signature, and delivery with acceptance during the grantor's life.
- Title passes on delivery and acceptance—not on signing or recording; recording only protects the grantee against third parties.
- General warranty deeds give the most protection; quitclaim deeds carry no covenants and convey only whatever interest the grantor actually holds.
- Title insurance is a one-time premium covering pre-existing defects; owner's policies last while the insured holds title and lender's policies cover the loan balance.
- Recording gives constructive notice; under race-notice rules the good-faith buyer who records first defeats an earlier unrecorded deed.
Voluntary Transfer by Deed
Title to real property transfers voluntarily by deed. The person conveying is the grantor; the person receiving is the grantee. For a deed to be valid it must meet several essentials, and the exam expects you to spot which element is missing in a fact pattern.
Essential Elements of a Valid Deed
- Competent grantor of legal age and sound mind, and an identifiable grantee.
- Words of conveyance (the granting clause).
- Consideration recited (often "$10 and other good and valuable consideration").
- An adequate legal description of the property.
- The grantor's signature (the grantee need not sign).
- Delivery and acceptance during the grantor's lifetime.
Key trap: a deed becomes effective on delivery and acceptance, not on signing and not on recording. Recording protects the grantee against third parties but is not required to pass title between the parties.
Types of Deeds and the Covenants They Carry
| Deed type | Protection to grantee | Typical use |
|---|---|---|
| General warranty | Greatest; covenants cover the entire chain of title | Standard residential sale |
| Special (limited) warranty | Warrants only the grantor's own period of ownership | Banks, corporations, fiduciaries |
| Bargain and sale | Implies grantor holds title; no express warranties | Tax/foreclosure sales |
| Quitclaim | None; conveys only whatever interest grantor has, if any | Clearing clouds, divorce, family transfers |
The general warranty deed offers the strongest protection through five covenants, including the covenant of quiet enjoyment and the covenant of warranty forever. A quitclaim deed makes no promises—if the grantor owns nothing, the grantee receives nothing.
A grantor signs and notarizes a deed but locks it in a desk drawer, intending to hand it over next month. The grantor dies before delivering it. Did title transfer?
Involuntary and Other Transfers
Title can also pass without the owner's consent:
- Descent (intestate succession): Owner dies without a will; title passes to heirs by state statute.
- Devise: Title passes by will to a devisee.
- Escheat: Owner dies with no heirs and no will; property goes to the state.
- Eminent domain: Government takes private property for public use through condemnation, paying just compensation.
- Adverse possession: A trespasser who occupies land openly, notoriously, continuously, hostilely, and exclusively for the statutory period can gain title (mnemonic ON-CHE).
Title Assurance: Insurance and Recording
A title search of public records reveals the chain of title; a gap or defect is a cloud on title. Title insurance indemnifies against losses from title defects, liens, or encumbrances that existed before the policy date—it is not prospective coverage.
Two policy types appear on the exam:
- An owner's policy protects the buyer up to the purchase price and lasts as long as the owner (or heirs) holds an interest.
- A lender's (mortgagee) policy protects the lender for the declining loan balance and is typically required at financing.
Unlike most insurance, a title policy charges a one-time premium at closing—there are no recurring annual premiums.
Recording and Constructive Notice
Recording acts establish priority among competing claims. Recording a deed in the county where the land sits gives the world constructive notice—everyone is legally presumed to know the contents of the public record. Actual notice is what a person genuinely knows or could learn from inspecting the property.
Most states use a race-notice rule: the buyer who takes without notice of a prior claim and records first prevails. A subsequent buyer who knew of an earlier unrecorded deed cannot defeat it merely by recording faster, because they lacked good faith.
Worked Example: Title Insurance Recovery
A buyer purchases a home for $400,000 and obtains an owner's title policy for the full price. Two years later a previously unrecorded $60,000 mechanic's lien from before closing surfaces and must be cleared.
- The pre-existing, undisclosed lien is a covered defect under the owner's policy.
- The insurer pays to clear or satisfy the lien, up to the $400,000 policy limit; the $60,000 loss is well within coverage.
- The buyer recovers the loss; the one-time premium paid at closing already covered this risk—no extra payment is due.
A frequent distractor states the buyer must absorb the lien because the policy expired—owner's coverage does not expire while the insured holds title.
Marketable Title and the Chain of Title
A seller is generally obligated to convey marketable title — title free of undisclosed defects, serious encumbrances, or doubts that would expose the buyer to litigation. It need not be perfect, but it must be reasonably free of risk. The chain of title is the recorded sequence of owners; a gap or break (a "cloud") must be cleared, often by a quiet title lawsuit or a corrective/quitclaim deed. An abstract of title is a condensed history of all recorded documents; an attorney's opinion of title or a title commitment interprets it.
Title Insurance: Owner's vs. Lender's Policy
Title insurance protects against losses from defects that existed before the policy date — it is not forward-looking like hazard insurance.
| Policy | Who is protected | Coverage amount | Term |
|---|---|---|---|
| Owner's policy | The buyer/owner | Purchase price | As long as owner/heirs hold an interest |
| Lender's (mortgagee) policy | The lender | Loan balance (declines) | Until the loan is paid off |
The lender's policy does not protect the buyer's equity, which is why a separate owner's policy is recommended. Standard coverage excludes matters an accurate survey would reveal; an extended (ALTA) policy adds survey-based and other risks for a higher premium.
A buyer obtains only a lender's title policy for the loan amount. Two years later an undisclosed prior easement surfaces and reduces the property's value by $30,000. The buyer's likely recovery from the title policy is:
Buyer A receives a deed but never records it. Months later the same seller deeds the property to Buyer B, who knows nothing of A's purchase and records immediately. Under a race-notice statute, who prevails?