FSU Chap 03 PowerPoint PDF

Chapter 3: Conveying Real Property Interests Florida State University – Real Estate Principles Complications in Conveying Real Estate  Real property is a complex bundle of rights  Rights to land endure: The bundle of rights today depends on what was conveyed in the past...

Chapter 3: Conveying Real Property Interests Florida State University – Real Estate Principles Complications in Conveying Real Estate  Real property is a complex bundle of rights  Rights to land endure: The bundle of rights today depends on what was conveyed in the past  Land is a continuous surface  Boundaries not obvious or natural  Boundary errors always hurt someone Florida State University – Real Estate Principles 2 How is it Possible to Convey Real Property Successfully?  No title certificates, but there are  Deeds  Recorded documents  Doctrine of constructive notice  Title search  Chain of title  Evidence of title  May still not work, thus,  Title insurance  Need for adequate property descriptions Florida State University – Real Estate Principles 3 Deeds: The Principal Conveyance of Real Property  Deed: A special, written contract to convey a permanent interest in real property  Fee simple absolute  Life estate  Conditional fee  Easement  Oil, mineral, or water rights  Must be in writing to be upheld by a court Florida State University – Real Estate Principles 4 Requirements of a Deed  Grantor (with signature) and grantee  Recital of consideration  Words of conveyance  Covenants  Habendum clause  Exceptions and reservations clause  Description of land  Acknowledgment  Delivery Florida State University – Real Estate Principles 5 Grantor and Grantee  Grantor: Person or entity conveying real property  Must be of legal age  Must be legally competent  Must sign deed  Grantee: Recipient of real property  No need to be of legal of age  No need to be competent  Only needs to be identifiable Florida State University – Real Estate Principles 6 Recital of Consideration and Words of Conveyance  Recital of consideration: (can be minimal) “For 10 dollars and other good and valuable consideration…”  Words of conveyance: “Does hereby grant, bargain, sell and convey…” 1. Affirms intention to convey real property 2. Determines type of deed Florida State University – Real Estate Principles 7 Covenants  Covenants: Legally binding promises  Three main covenants:  Covenant of seizen: Grantor has good title and right to convey it  Covenant against encumbrances: No encumbrances except as noted in the deed (liens, easements)  Covenant of quiet enjoyment: No one with a better claim to title Florida State University – Real Estate Principles 8 Habendum Clause  Defines interest being conveyed  “for use as” implies easement  “so long as” implies conditional fee /reverter  “and his/her heirs and assigns forever” implies fee simple absolute Florida State University – Real Estate Principles 9 Exceptions and Reservations Clause  Exceptions and reservations clause  Deed restrictions  Clauses withholding mineral or oil rights  Creation of an easement Florida State University – Real Estate Principles 10 Describing Real Property  Acceptable Property descriptions:  Must be unambiguous and enduring  Three methods acceptable for public records: 1. Metes and bounds 2. Plat lot and block number 3. Government rectangular survey Florida State University – Real Estate Principles 11 Describing Real Property  Unacceptable property descriptions  Street address  Tax parcel number  Why?  Frequent errors  More importantly, point description, no defined boundaries Florida State University – Real Estate Principles 12 Acknowledgment and Delivery  Acknowledgment: Confirmation that grantor acted voluntarily  Notarized or equivalent (some states require witnesses)  Delivery: Observable, verifiable intent that deed is to be given to grantee  Example failures of delivery:  Deed found in a desk/safety deposit box and handed to named grantee  Grantor’s attorney hands deed to named grantee without explicit instructions to do so Florida State University – Real Estate Principles 13 Key Conclusion about Deeds  Deed requires drafting by a knowledgeable legal professional  “Don’t try this at home!” Florida State University – Real Estate Principles 14 How Deeds Differ  Key point: No deed conveys rights that grantor does not have  So, what makes one deed better than another?  Answer: The number of covenants Florida State University – Real Estate Principles 15 Three Covenants of a Deed  Seizen: the grantor truly has good title and the right to convey it  No encumbrances: the property has no encumbrances that are not revealed  Encumbrance: any interest carved out of the fee simple- leasehold, easement, lien, etc.  Quiet enjoyment: the property will not be taken by someone with a better claim to title Florida State University – Real Estate Principles 16 Types of Deeds  The three covenants:  Seizin  No encumbrances  Quiet enjoyment  General warranty deed: All three  Special warranty deed: All three but “no encumbrances” limited to grantor’s tenure  Deed of bargain and sale: No covenants, but still seems to imply ownership (implicit covenant of seizin?)  Quitclaim deed: No covenants and makes no assertions Florida about State University grantor’s – Real interest Estate Principles 17  Review of Deeds Covenants by Grantor Quiet No Seizen: Enjoyment: Encumbrances: Has valid Will defend No undisclosed title grantee against restrictions or claims of others conflicting claims Type of Deed General Warranty* Yes! Yes! Yes! Special Warranty Yes! Yes! Ltd! Bargain and Sale l ie d ? ? Imp Quitclaim No! No! No! 18 Florida State University – Real Estate Principles The Significance of Covenants  Do not assure that a grantor can deliver property as described.  Enable the grantee to sue if grantor fails to deliver. Florida State University – Real Estate Principles 19 It’s Hard to Know What You Are Getting!  Complex bundle of rights  Long history of ownership  Problem of accurate boundary description  PLUS! Multiple ways that title may have transferred, some with no record Florida State University – Real Estate Principles 20 Modes of Conveying Real Property Florida State University – Real Estate Principles 21 Ways Title Can Transfer  Voluntary conveyance by deed  Ordinary sale and transfer of title  Involuntary conveyance by deed  Probate (distribution of estate)  Bankruptcy  Divorce settlement  Condemnation  Foreclosure Florida State University – Real Estate Principles 22 Ways Title Can Transfer (continued)  Voluntary conveyances without a deed (easements only)  Implied easement  Easement by prior use or necessity  Easement by estoppel  Involuntary conveyance without deed  Easement by prescription  Title by adverse possession  Action of water (accretion, reliction) Florida State University – Real Estate Principles 23 Questions  Why can a single document – a “title” – never serve as proof of real property ownership?  If no single document can confirm title, what do we mean by “title”? Florida State University – Real Estate Principles 24 Evidence of Title: The Building Blocks  Doctrine of constructive notice: Documents that are “knowable” are binding  Statute of Frauds: Contract must be written to be enforceable  Recording statutes: A contract recorded in public records is considered known  Actual notice: Open, continuous, actual possession of property Florida State University – Real Estate Principles 25 Creating Evidence of Title Florida State University – Real Estate Principles 26 Doctrine of Constructive Notice  If you can know of a deed (or other property conveyance) it is binding for all concerned.  Any document placed in open public records is “knowable.”  Being unaware of it is no defense. Florida State University – Real Estate Principles 27 The Meaning of “Title”  Title: Collection of evidence indicating a specific person(s) as holder of the “fee”  Title search: Examining public records to construct “chain of title”  Chain of title: the sequence of conveyances passing ownership down through time Florida State University – Real Estate Principles 28  Possible Breaks in the Chain of Title Conveyance of only a partial interest? Conveyance by adverse possession? Inconsistent property descriptions? Fraudulent documents? Inferior deed? Faulty separation of mineral or water rights? Missing spousal signature? Cloud to Title Florida State University – Real Estate Principles 29 Evidence of Title  Evidence of title: Assurance of a good or marketable title  Marketable title: Claim to title is regarded as free from reasonable doubt  Two main forms of evidence of title  Title abstract with attorney’s opinion: Summary of all records in chain of title reviewed by an attorney for completeness  Title insurance commitment: Indemnifies grantee if challenge to title arises Florida State University – Real Estate Principles 30 Title Insurance  Protects against title flaw, or title loss  Covers litigation cost and loss of value  Covers no other hazards  Cannot restore rights that do not exist  Unusual form of insurance: Single up-front premium for “lifetime”  Controversy about cost and coverage Florida State University – Real Estate Principles 31 But how far back do title risks really go?  The earlier the event the more likely it has been settled.  More recent transactions are greater risk. Florida State University – Real Estate Principles 32 Marketable Title Laws  State laws to shorten title search  Root of title: Most recent title conveyance that is a minimum of years old (Ex.: 30)  To survive, some interests may need restatement in post-root records  Restrictive covenants  Some easements  Title unbroken since its root is marketable Florida State University – Real Estate Principles 33 “Legal” Land Descriptions  Metes and Bounds  Oldest form  Directed distances (a trip along property boundaries)  Government Rectangular survey  Covers “newer” parts of the US (post Revolution)  Mostly for rural and undeveloped land  Plat lot and block number  Most urban property (any property in a subdivision)  Preferred choice. Florida State University – Real Estate Principles 34 Methods of Land Description: Metes and Bounds  A sequence of directed distances:  Compass directed “walk around property”  Establishing point of beginning is critical  Oldest form of acceptable land description  Most flexible form  Most difficult to interpret  Must be made or interpreted by surveyors Florida State University – Real Estate Principles 35 Metes and Bounds Description: Example Florida State University – Real Estate Principles 36 Methods of Land Description: Subdivision Plat Lot and Block Number  Dominant description for urban land  Metes & bounds survey defines map of lots  Map identifies lots by block & lot number  Map is placed in public records  Block and lot number identifies each parcel  Map shows easements and other features Florida State University – Real Estate Principles 37 Subdivision Plat Lot and Block: Example Florida State University – Real Estate Principles 38 Methods of Land Description: Government Rectangular Survey  Basic reference points  Baseline  Principal meridian  Measures of distance  Range lines  Tier lines  Units  Section  Township  Check Florida State University – Real Estate Principles 39 Baselines and Principal Meridians of the United States Florida State University – Real Estate Principles 40 Township Identification Florida State University – Real Estate Principles 41 A Township Florida State University – Real Estate Principles 42 Florida State University – Real Estate Principles 43 Benchmark Numbers for Real Estate  Section:  Described square mile within government rectangular survey  640 acres  Acre  43,560 square feet  Area of a football field from one goal line to the opposite 10-yard line  Size of the public area of large supermarkets. Florida State University – Real Estate Principles 44 Summing up  Three challenges to overcome in describing real property:  Complexity of the “bundle” of rights  History of ownership  Boundaries  Deeds as central  Role of covenants – general warranty, special warranty, bargain and sale, quitclaim  Cannot prove ownership  Doctrine of constructive notice and recording statutes Florida State University – Real Estate Principles 45 Summing up still more  Title search and chain of title  “Clouds to title”  Marketable title  Evidence of title  Interests can convey without a deed  Title insurance  Property descriptions  Metes and bounds  Subdivision plat lot and block  Government rectangular survey Florida State University – Real Estate Principles 46