© 2010 Rockwell Publishing Lesson 3: Transfer of Real Property Principles of California Real...

© 2010 Rockwell Publishing

Lesson 3:

Transfer of Real Property

Principles of California Real Estate


Alienation

Alienation: Process of transferring ownership of (title to) real property from one party to another.

May be voluntary or involuntary.


Alienation Voluntary alienation

Voluntary alienation: An owner voluntarily transfers interest in her land to someone else.

Examples: patentsdeedswills


Voluntary Alienation Patents

Patent: Instrument used to convey government land to private individual.


Voluntary Alienation Deeds

Deed: Instrument which, when properly executed and delivered, conveys title to real property from grantor to grantee.


DeedsParties to a deed

Grantor: Person who grants interest in real property to another.

Grantee: Person who receives grant of real property.


Deeds Types of Deeds

Types of deeds: grant deed quitclaim deed warranty deed


Types of DeedsGrant Deed

Grant deed warrants that grantor has not:conveyed title to anyone elsecaused any undisclosed encumbrances

to attach to the property

Both warranties apply even if not stated in deed.


Grant DeedAfter-acquired title

Grant deed conveys after-acquired title.

After-acquired title: Rights acquired in property by grantor after her conveyance of property.


Types of Deeds Quitclaim deed

A quitclaim deed:contains no warrantiesdoes not convey after-acquired titleconveys only interest held by grantor

at time givencan correct mistakes in earlier deeds

(reformation deed)


Quitclaim DeedCloud on title

Cloud on title: A claim, encumbrance, or defect that makes title to property unmarketable.

Quitclaim deed is often used to “cure” clouds on title.


Summary Patents and Deeds

• Alienation• Patents• Grant deed• Quitclaim deed


Requirements for a Valid Deed

In writingGrantor(s) and grantee(s) identifiedSigned by competent grantorLiving granteeWords of conveyance (granting clause)Adequate property description


Requirements for a Valid DeedIn writing

Under California’s statute of frauds, deed to real property must be in writing.

Statute of frauds: Law requiring certain contracts and other legal transactions to be in writing and signed in order to be enforceable.


Requirements for a Valid DeedIdentify grantor and grantee

Both grantor(s) and grantee(s) must be identified in deed.

Grantee can be described rather than referred to by name.

Example: Conrad Adams hereby grants title to his only son.


Requirements for a Valid DeedSigned by competent grantor

Deed must be signed by everyone who will be bound by transfer, and signers must be legally competent.

Competent: Of sound mind (for purposes of entering into a contract) and having reached age of majority (18).



If grantor can’t sign name (due to disability or illiteracy), she can make her mark instead; mark must include witness signatures.

If grantor’s signature is forged, deed is void.


Requirements for a Valid Deed Signed by competent grantor

Power of attorney: Document authorizing another party (attorney in fact) to act on behalf of grantor.

For attorney in fact to sign deed on grantor’s behalf, power of attorney must:

give attorney in fact this authority include description of property being

conveyed



Deeds transferring title to corporate property are usually signed by authorized corporate officer, and signature must be accompanied by corporate seal.



All grantors must sign deed. Deed lacking a necessary signature is

invalid.

Signatures of both husband and wife are required to convey community property.


Requirements for a Valid DeedLiving grantee

Grantee need not be competent for deed to be valid, but must be alive (or legally in existence, if a corporation).

Minor child (or mentally incompetent person) can receive title to property but can’t convey title.


Requirements for a Valid DeedWords of conveyance

Words of conveyance: Words indicating grantor’s intent to transfer interest in property.

Single word “grant” is usually sufficient.


Requirements for a Valid DeedAdequate property description

Legal description of property is not absolute requirement, but using legal description will ensure description is adequate.


Property Conveyance Acknowledgment, delivery, acceptance

To actually convey property, valid deed should be acknowledged and must be delivered by grantor and then accepted by grantee.


Property ConveyanceAcknowledgment

Acknowledgment: Grantor declares to official witness (usually notary public) that he signed deed voluntarily.

Witness cannot have interest in transfer.Deed is valid without acknowledgement

but cannot be recorded.


Property ConveyanceDelivery

Delivery: Formal transfer of deed from grantor to grantee, resulting in transfer of title.

Delivery must take place while grantor is alive.

Grantor must intend to immediately transfer title to grantee.


Property Conveyance Acceptance

Conveyance is completed when grantee accepts deed.

Deed may be accepted by agent. If deed is recorded, it is legally

presumed to have been accepted by grantee.


Voluntary Alienation Wills

Will: A written instrument disposing of property upon death of maker (testator).

Will must be:in writingsigned by testatorattested to by 2 competent witnesses


WillsTerminology

A person who receives property under terms of will is beneficiary.

Personal property is bequeathed.Real property is devised.

A person who carries out will and settles estate is executor or administrator.


WillsProbate

Probate: Legal process to prove will’s validity. In California, probate is handled at superior court level.

If executor sells estate property, both listing and agent’s commission must be approved by court.


WillsIAEA

If will is administered under Independent Administration of Estates Act, executor or administrator may sell real property without court approval, if beneficiaries do not object.


SummaryVoluntary Alienation

• Deed requirements

• Statute of frauds

• Words of conveyance

• Acknowledgement

• Delivery

• Acceptance

• Wills

• Probate


Alienation Involuntary alienation

Involuntary alienation: Transfer of property without voluntary action by owner.

May occur through:operation of lawexternal causesadverse possession


Involuntary AlienationDedication

Dedication: Private party transfers land to public.

Sometimes voluntary, but is typically required by public entity.


Involuntary AlienationStatutory dedication

Statutory dedication: Dedication required by law, for example, dedication of property for sidewalks and streets as condition for subdivision approval.


Involuntary AlienationIntestate succession

Intestate succession: When someone dies without valid will, decedent’s property passes according to laws of descent.

If no will, decedent’s successors are called heirs instead of beneficiaries.


Involuntary AlienationCommunity property

In California, intestate succession laws state that surviving spouse receives all community property.


Involuntary AlienationEscheat

When property owner dies without will or any surviving heirs, property ownership escheats (reverts) to state.

The state is ultimate heir when no other rightful heirs to property exist.


Involuntary AlienationCondemnation

Condemnation: Taking private property for public use through power of eminent domain.

Use must be public use.Owner must be compensated.

Power of eminent domain may be exercised by government or delegated to quasi-public entities.


Involuntary AlienationInverse condemnation

If property owner feels property has been taken or damaged by public entity, owner may file inverse condemnation action to force government to pay market value of property.


Involuntary Alienation Court order

Involuntary transfers of property interests can also occur under court order. These include:

quiet title action suit for partition foreclosure bankruptcy


Court Order Quiet title action

Quiet title action: Court action intended to settle dispute about title to particular property.


Court Order Partition

Partition: Lawsuit brought by co-owner to have property divided. Once divided, each co-owner will own his part in severalty.

Co-owners may also partition property by agreement.


Court OrderForeclosure

Foreclosure: Sale of property pursuant to court order, to satisfy lien (any type of lien).


Court OrderBankruptcy

Bankruptcy: Property conveyed by order of bankruptcy court. Court has authority to distribute or sell debtor’s property to satisfy creditor claims.


Involuntary AlienationAdverse possession

Adverse possession: Person other than owner of record can acquire title to real property through long period of continuous possession.


Five requirements for adverse possession:actual, open, and notorious possessionhostile to owner’s interestunder claim of right or color of titlecontinuous for five yearspossessor must pay property taxes

during required period of possession

Involuntary AlienationAdverse possession


Adverse PossessionActual, open, notorious

Actual possession: Occupation and use of property in manner appropriate to type of property.

Open and notorious possession: Possession of property in way that gives owner of record reasonable notice her property interest is threatened.


Adverse PossessionHostile

Hostile possession: Possession without owner’s permission. Adverse possessor must intend to claim ownership of property and defend that claim against all parties.


Adverse PossessionClaim of right/color of title

Refers to title that owner believes is good, though in fact it’s not.

Example: Deed’s legal description incorrectly indicates boundary extends ten feet further than it really does. Owner believes additional 10-foot strip of land belongs to her, so she fences it in.


Adverse PossessionContinuous and uninterrupted

Adverse possessor must have continuous and uninterrupted possession for five years.

Tacking: Successive adverse possessors can add their periods of possession together to satisfy required time period.


Adverse PossessionPayment of taxes

In addition to continuous and uninterrupted possession of property for five years, California law also requires adverse possessor to pay taxes on property during that period.


Adverse PossessionGovernment property

Property owned by government entity can never be acquired through adverse possession.


Involuntary AlienationExternal causes

Accession: Any addition to real property from natural or artificial causes. It can result in involuntary alienation.

Accession includes:accretionrelictionavulsion


Involuntary AlienationAccession

Accretion: When riparian or littoral land is enlarged by waterborne soil such as river deposits, owner acquires title to added soil.

Reliction: When body of water gradually retreats, newly exposed soil belongs to landowner.


Involuntary AlienationAccession

Avulsion: When land is torn away by flowing water and deposited elsewhere, or when land is exposed by sudden change in watercourse.

Avulsion does not usually alter ownership of changed piece of land.


SummaryInvoluntary Alienation

• Dedication

• Condemnation

• Quiet title

• Partition

• Foreclosure

• Adverse possession

• Accession


The Recording System

Recording: Filing document at recorder’s office in county where property is located, so that information will be part of public record.

Documents transferring title, establishing interest, or creating or removing encumbrance should be recorded.


The Recording SystemProcedures

Documents are recorded in chronological order, based on order received, and indexed by names and sometimes by property descriptions.

Computerization has made indexing less important; in most cases, search functions can locate documents in public record.


The Recording SystemPresumption of validity

Recording document creates presumption that it is valid.

But remember, deed does not need to be recorded to be valid.


The Recording SystemLegal effects

Recording document has two important legal effects:

provides notice of interest conveyedestablishes priority for that interest


The Recording SystemNotice

Actual notice: Person has actual notice of a fact if she is actually aware of it.

Constructive notice: Person has constructive notice of fact if he should be aware of it, even if he is not.


NoticeConstructive notice

Recording document provides constructive notice of property interest contained in it.

Anyone who later acquires an interest in the property has constructive notice of earlier recorded document (even if he didn't have actual notice of it).


NoticeFailure to record

Grantee who fails to record deed can lose title to subsequent good faith purchaser who did not have notice of earlier conveyance.


NoticePossession as notice

Possession of land by someone other than seller gives notice to buyer that someone may have interest in the property.

Buyer has duty to inquire further.


SummaryThe Recording System

• Recording procedures

• Actual notice

• Constructive notice

• Failure to record

• Possession as notice


Title Insurance

Title insurance: Title insurance company agrees to reimburse policyholder for financial losses resulting from title defects covered by policy.

Example: If title company overlooked easement, it will pay owner for diminished value of property.


Title InsuranceChain and abstract of title

Chain of title: A complete history of recorded interests in property.

Abstract of title: A condensed history of recorded interests.

These documents do not insure against losses due to title defects. Almost all buyers purchase title insurance.


Title InsuranceTitle search and report

Title company first performs title search.Based on title search, company issues

title report.All defects and encumbrances found in

public record are listed in report and excluded from coverage when policy is issued.


Title InsuranceTypes of policies

Title policy issued to buyer is called an owner’s policy.

Title policy protecting lender’s security interest is called a mortgagee’s policy.


Title InsuranceStandard coverage

Standard coverage policy: Insures against losses resulting from defects in title, forgery, party’s lack of capacity, improperly delivered deed, etc.

Standard coverage does not include problems with adverse possessors, defects known by owners, or problems that could be discovered by inspection, such as encroachments.


Title InsuranceExtended coverage

Extended coverage: Includes same things as standard coverage policy, plus problems that should be discovered through inspection of property.

Mortgagee's policy is nearly always extended coverage policy.

Extended coverage policy will include survey of property.


Title InsuranceHomeowner’s coverage

Homeowner’s coverage: Usual owner’s policy in residential transactions; it includes same things as extended coverage policy, plus some additional protections.


Title InsuranceGovernment action

Title insurance policies do not insure against losses due to government action, such as condemnation or zoning changes.


SummaryTitle Insurance

• Title insurance policy

• Standard coverage

• Extended coverage

• Homeowner’s coverage

• Government action

© 2010 Rockwell Publishing Lesson 3: Transfer of Real Property Principles of California Real...

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