WHAT THE LAW PROFESSOR
SAID
ABOUT DEEDS
BY PATRICK J. REVILLE, Esq.
DEDICATION
To My Wife and Partner forever.
All rights reserved under the international and Pan-American
copyright conventions.
First published in the United States of America.
All rights reserves. With the exception of brief
quotations in a review, no part of this book may be reproduced
or transmitted, in any form, or by any means, electronic or
mechanical (including photocopying), nor may it be stored in
any information storage and retrieval system without written
permission from the publisher.
DISCLAIMER
The advice contained in this material might not be suitable for
everyone. The author designed the information to present his
opinion about the subject matter. The reader must carefully
investigate all aspects of any business decision before
committing him or herself.
The author obtained the
information contained herein from his own personal experience
but he neither implies nor intends any guarantee of accuracy.
The author, although in business of giving legal and accounting
advice is not giving such advice through this writing, and
nothing contained herein is intended to create attorney-client
relationship with the reader. Should the reader need such
advice, he or she must seek services from a competent, retained
professional. The author particularly disclaims any liability,
loss or risk taken by individuals who directly or indirectly act
on this information contained herein. The author believes the
advice presented here in sound, but readers cannot hold him
responsible for either the actions they take or the result of those
actions.
Printed in U.S.A.
Copyright © 2009 by Patrick J. Reville
About The Author
Patrick J. Reville graduated from Iona College in New
Rochelle, N. Y., with a B.B.A. degree in Accounting. Three
years later, he was awarded the degree of J.D. from Fordham
University School of Law in N.Y.C. In the spring of 1969,
(Professor to be) Reville was admitted to the N.Y.S. Bar, and
immediately embarked upon the private practice of law and
accounting.
Brief teaching stints in the NYC public school system
and at Mercy College in Dobbs Ferry, N.Y., were followed by
an appointment at Iona College as an Adjunct Professor Of
Business Law in 1975. Since that time, Professor Reville has
risen through the ranks at Iona to become a tenured Associate
Professor Of Business Law, was awarded the Pro Opereis
award for twenty years of full time service, and was most
recently awarded the Bene Merenti award for thirty years of
full time service at that institution.
Professor Reville has practiced what he has taught,
engaging in the General Practice Of Law and Accounting in
New Rochelle, N.Y. for almost forty years.
For many of those years, The Professor has taught the
Real Estate Salesperson’s and Broker’s pre-licensing courses
throughout Westchester County, N. Y., and has been a
practicing licensed Real Estate Broker during the majority of
that time. Professor Reville has been active in Real Estate as
(a) Broker; (b) Landlord; (c) Investor; (d) Accountant; and (e)
Attorney for Landlords, Tenants, Purchasers, Sellers, Lenders
and Title Insurers.
Professor Reville has also represented thousands of
individuals accused of committing criminal acts, and
volunteered his time to represent the indigent in the criminal
justice system. He is a Justice Of The Peace in the Town of
Ridgefield, CT.
Over the years, The Professor has written and spoken
often on numerous legal topics. To illustrate the items and
concepts addressed on a regular basis in front of the college
classroom on a semester to semester basis, Professor Reville
brings his experiences from private practice and the courtroom
to the classroom to enhance his lectures with colorful reality.
PROFESSOR’S POINT
On Deeds:
Get a Lawyer!
INTRODUCTION
This book and the information contained herein
are not to be considered Legal Advice. There are
three (3) rules to remember when tackling a legal
problem:
1. GET A LAWYER; 2. GET A
LAWYER; and, 3. GET A LAWYER. Now, this
may sound a little self-serving, or a promotion for the
hiring of attorneys. NOT TRUE. In fact, it is the only
legal advice contained in this writing, and I cannot
emphasize it enough. Over the past forty (40) years, I
have encountered countless situations where
heartache, frustration and even financial ruin could
have been avoided by just a little bit of good legal
advice.
The old saying, that “An Ounce Of
Prevention…” Well, you know the rest of that axiom.
This writing is about Information, plain and
simple. You have also probably heard the saying, that
“Knowledge is Power.” NOT (Totally) TRUE. It has
been explained to me, and I have learned to accept,
that it is the USE of knowledge that is powerful. It is
my hope, that you, the reader, will use the knowledge
I am attempting to pass on to you to for your
protection and benefit.
This book is not about making lawyers out of
its readers. It is not about enabling its readers to
engage in legal transactions without the need and
costs of sound legal advice. It is not about preparing
its readers to challenge members of the legal
PROFESSOR’S POINT
On Deeds:
An Ounce of Prevention…
profession, or play “gotcha” with those who are
sincere in their efforts to guide you appropriately
through the legal maze of a transaction or problem. It
is certainly not about trying to show you “How To
Make A Million Dollars In Real Estate Or Business In
Thirty Days, With No Money Down, And Without
Ever Paying A Legal Fee.” It is about making you
aware of the terminology, meaning and usage of basic
concepts of the law as they relate to a particular field.
You can use the knowledge and information contained
in the following pages to prepare you to be a better
listener, student and participant in matters that affect
you from a legal standpoint. To paraphrase a
longtime slogan used to promote a New York
business: In The Legal Profession, An Educated
Consumer Is Our Best Client.”
1. A DEED. WHAT IS IT?
A Deed is a Real Estate Instrument. It is a
piece of paper. It is used to convey title, ownership
and rights in real property. There are basically only
two (2) types of property: (1) real property; and, (2)
personal property. These are separate, distinct, and,
for the most part, mutually exclusive concepts.
Accordingly, the laws that govern real property and
PROFESSOR’S POINT
On Deeds:
Awareness is the Key
personal property are also, for the most part, separate,
distinct and mutually exclusive. Here, with deeds, we
are talking about real property and the real property
law governing their use.
By the nature of the beast, there are no oral
deeds. Real Property has been around a long time,
and it is fairly settled in American jurisprudence that
the system does not want the headaches and potential
fraud related to oral conveyances of Real Property.
You can always find some narrow, obscure exception
to any accepted way the law works, but, for the most
part, we are dealing in this book with the deed as an
instrument, and hence, a written document.
It should also be noted that Real Property is
local in nature, and although the law(s) that are
applied to it throughout the United States are similar
in content, there may be local variations. Remember,
they don’t preach “Location, Location and Location”
for no good reason.
2. WHAT ARE THE BASIC REQUIREMENTS?
There are many requirements for a valid
conveyance by deed. But, to keep it simple for
starters, let’s say that there are two (2) basic
requirements: (1) Execution; and, (2) Delivery. A
third requirement would be: Acceptance.
PROFESSOR’S POINT
On Deeds:
Knowledge is NOT Power,
the USE of Knowledge Is
1. Execution. This word, of course, has a
number of meanings, even in the law. If you heard
that a death row inmate was executed last night, you
would presume that he/she was put to death by the
criminal justice system. You might hear someone
ask: “Did he execute the Will while in his right
mind?” you would probably be asking if he signed the
Will being mentally competent. Even in a contract
setting, an executed contract might mean (a) signed;
or, (b) fully performed. Here, with a deed, by
executed, we mean signed.
Q.: Signed by whom? A.: By the grantor, or
the grantor’s agent.
Q.: Who is the grantor? A.: The grantor is the
name/title given to the transferor of an interest in real
property, who signs a deed. The grantor may be a
vendor (a seller) of real property. The grantor may be
a donor (a giver) of real property. The grantor may
be a settlor (a person creating or funding a trust). It
just happens that the generally accepted label for the
person or party that conveys real property by deed is
known as the grantor.
Q.: Who is the grantor’s agent? A.: Most
things in the law that a person can do, can be done
through an agent. If a person is going to have a deed
signed by his or her agent, most states require that the
authority to so sign a deed must be reduced to a
writing, in the form of a Power Of Attorney
(discussed later herein). A Corporation is a person for
PROFESSOR’S POINT
On Deeds:
An Educated Consumer is
the Best Client
most applications of the law, and a Corporation
would sign a deed as grantor by having someone, for
example, its President, sign as agent for the
Corporation. If a corporate officer was signing a deed
for a corporation, a Power Of Attorney is not
generally required, but it would be wise to have some
proof or certification of the authority of the corporate
officer to so sign.
Q.: Can there be multiple grantors? A.: Yes.
If two or more parties are in title (discussed later
herein)/owners of the property, they each must sign
the deed, either personally or by agent, to make the
conveyance of the full ownership effective. If there
are multiple owners of the property, a signature by
less than all owners only conveys the signing
grantor’s interest in the property.
Q.: Can a spouse sign over his/her spouse’s
interest in the property? A.: NO, not without an
appropriate Power Of Attorney from the “absent”
spouse. A spouse is NOT an automatic agent for a
spouse, particularly in Real Property matters.
Q.: HOW should a grantor sign his or her
name? A.: A wise and common practice would be
for a person to sign his or her name exactly as it
appeared on the deed that he/she received when they
became the owner. This would be ascertained in the
course of a title search (discussed later herein). For
example, if John Paul Smith received a deed
conveying property to him, and the deed cited him as
PROFESSOR’S POINT
On Deeds:
Two Types of Property:
Real Property
And Personal Property
“John Paul Smith” as grantee (discussed later herein),
he would sign a deed as grantor: “John Paul Smith”,
and not as “John Smith”, “John P. Smith”, “J. P.
Smith”, “Johnny Smith”, or “Smitty”, etc. As a very
technical or legal matter, however, if John Paul Smith
did sign his name in any of those other formats, it
would legally convey his interest in the property, but
it likely could become problematic in the future
because the issue might be raised as to whether the
person who signed the later deed was in fact the same
person who was the grantee in the prior deed. This
problem/issue might be resolved by an additional
reference in the later deed (discussed later herein).
Q.: WHERE (on the document) does the
grantor sign? A.: Most documents should be and are
signed at the end of the document. It is no different
with a deed. Traditionally, a deed is signed by the
grantor at the lower right portion of the last page of
the deed, on a line over the printed/typed name of the
grantor.
Q.: MUST the grantor sign on a line? A.: NO.
Q.: MUST the grantor’s name be printed/typed
below the signature? A.: NO.
Q.: What color ink needs to be used for a
grantor’s signature? A.: Most states do not specify a
particular color of ink for a grantor’s signature, and
even allow a signature by pencil (not advised). Some
practitioners prefer blue ink, because it is easier to
determine that a document is an original, since some
PROFESSOR’S POINT
On Deeds:
Basic #1: Execution
copiers copy black ink so well it is difficult to
determine if a document is a copy or an original. Yet
other recording officers (discussed later) try to
impose a “black ink” only rule for a grantor’s
signature. Local custom or rule(s) should be adhered
to. When in doubt, use black ink.
Q.: Must a grantor’s signature be witnessed?
A.: Generally, NO, but it is common to have a
witness sign to the left of a grantor’s signature, just in
case at some later date the authenticity of the grantor’s
signature comes into question.
Q. Must a grantor’s signature be notarized to
make a deed valid? A.: Generally, NO, but, again, it
is common and customary to notarize a deed in the
form of an acknowledgement. A Notary Public,
Commissioner Of Deeds or Justice Of The Peace
usually is the party that performs this act. Also, a
deed will typically not be accepted for recording (see
below) unless duly acknowledged.
Q.: WHAT is Recording? WHO does this,
and WHY?; and is recording a deed necessary to
make a conveyance valid?
A.: Recording is a process whereby a recording
officer (New York—County Clerk where the property
is located, except in NYC, where it is the Office Of
The City Register; Connecticut—Town Clerk where
the property is located, etc.) takes in an original
document (deed, mortgage, etc.), stamps and clocks in
the document with date and time, collects appropriate
PROFESSOR’S POINT
On Deeds:
Signed by the Grantor,
Or the Grantor’s Agent
fees, makes a COPY of the document as so clocked
in, returns the original to the presenting party, and
keeps the copy on record for public examination.
The reason to record any real estate document,
including a deed, is to give NOTICE To The World
that the parties cited in the document have engaged in
a transaction that affects their rights to the property.
This is a form of constructive notice, where the public
is deemed to be aware of what is on the public record,
even though the have not actually seen the recorded
document. A deed does NOT have to be recorded to
make the conveyance valid or legal, but failure to
record a deed can cause ownership and title problems
later. (See discussion of Title Search and Title
Insurance later herein.)
2.
Delivery.
To effect a valid
conveyance, a deed must be delivered to the grantee
or the grantee’s agent. This can be done in person, by
mail (regular or express) or even delivering the deed
to a person of suitable age and discretion acting on
behalf of the grantee. No Power Of Attorney is
required to act on behalf of a grantee in receiving a
deed.
Q.: WHO is the grantee? A.: The grantee is
the transferee, and possibly a vendee (purchaser),
donee (recipient of a gift), or Trustee (party named in
a Trust to receive, hold and manage property).
PROFESSOR’S POINT
On Deeds:
Basic #2: Delivery
3. Acceptance. Acceptance of the deed
by the grantee is required. However, acceptance by
the grantee is typically presumed, that is, if a grantee
bargained for the transfer, and was presented with an
appropriately executed deed, why would not the
grantee accept? Good question. On the other hand,
suppose the transfer was a gift, and the grantee
rejected the gift of real property, for whatever the
reason. Then, the rejection of the tendered delivery of
the deed would cause the transfer to be ineffective.
Even if the transaction was not a gift, and the grantee
had previously bargained for the transfer, it is possible
that the grantee might decide to back out of the
transaction, and face whatever legal consequences
there may be. So, while it is typically presumed that
the grantee accepts a tender of delivery of a deed, it
may not be necessarily so.
3.
WHAT ARE THE OTHER/SPECIFIC
REQUIREMENTS OF A VALID DEED?
To review the various other/specific
requirements of a valid deed, it may serve a person
well to start at the top of a typical deed, and work
down through the layout and content usually
embodied therein.
PROFESSOR’S POINT
On Deeds:
Delivered to the Grantee
Or the Grantee’s Agent
1. The Date. The top of a typical deed
usually has language such as: “THIS INDENTURE,
made the______ day of _______________,
_________...” The date signed or delivered would be
filled in accordingly. If the date is left blank, or
partially blank, this is a mistake, but typically not a
fatal mistake. It may cause problems later proving
just exactly did the conveyance take place.
Remember, even if the deed is dated when signed, it is
not effective to convey the property unless and until
delivered (see above).
2. Description Of The Parties.
The deed will then usually have language as to who
the conveyance is between. Often, the grantor is cited
first, and often referred to as “…party of the first
part…”, and the grantee is then cited, and often
referred to as “…party of the second part…” The
grantor(s) and grantee(s) should be clearly identified
(normally name and address will suffice, but P. O.
Box designations have been known to be rejected by
recording officers. If a party was known in the past
by another name, it is a good idea to cite the party as
the current name, “f/k/a (formerly known
as)______________”; or, if known now by a different
name, cite as the prior name, “n/k/a (now known
as)_____________”. Additional clarification might
be inserted in the body of the deed by language such
as: “Such party of the first part being the same person
PROFESSOR’S POINT
On Deeds:
Basic#3: Acceptance
cited as Grantee in Deed Dated _________and
recorded in the Office Of The County Clerk of The
County Of Erie, Division of Land Records, in
Liber_____
Page________
(or
Control#______________)
on
_____________,
whereby said party of the first part herein became the
owner of the subject property conveyed herein.”
3. A Recital Of Consideration. The
actual price paid for a conveyance typically does NOT
have to be inserted in a deed (although it may be),
except for some specialty deeds (see Types Of Deeds,
discussed later herein). However, there must be some
recital of consideration, for example: “…in
consideration of ten ($10.00) dollars and other
valuable consideration…”, or, “ in consideration of
Four Hundred Forty-One Thousand ($441,000.00)
Dollars…”
4. Words Of Conveyance. There must
be some words of transfer or conveyance, such as:
“…the party of the first part does hereby grant and
release unto the party of the second part, the heirs or
successors and assigns of the party of the second part
forever…”
5. Legal Description Of The Property
Conveyed. There are a number of ways the property
being conveyed can be effectively described. (See:
Legal Descriptions, later herein.) Before the actual
PROFESSOR’S POINT
On Deeds:
You Need to HAVE Title
to PASS Title
Legal Description is inserted in the body of the deed,
there is often language that reads: “ALL that certain
plot, piece or parcel of land, with the buildings and
improvements erected, lying and being in the…”
Recent common practice has been to insert the
following language just after that introductory clause
the following wording:
“SEE SCHEDULE A
ATTACHED HERETO”, and then attach a separate
page, entitled “SCHEDULE A” to the body of the
deed. The Schedule A description can be photocopied
from a prior deed or title report (discussed later
herein) without requiring re-typing or printing the full
legal description in the body of the deed. This device
or practice saves time and greatly reduces the chance
of errors in the legal description.
6. Habendum Clause. This cause
typically reads: “TO HAVE AND TO HOLD the
premises herein granted unto the party of the second
part, the distributees or successors and assigns of the
second part forever.”
By using this standard
language, the type of estate/ownership in real property
being conveyed, cited in the language of the granting
clause above in the deed, is confirmed. The latin
word, habeo, means to have, hold or possess.
PROFESSOR’S POINT
On Deeds:
Don’t Forget the Date
7.
“Together With”, “ Excepting
Therefrom” and/or “Subject Thereto” Clauses.
Here clauses can be and usually are added that will
include rights to streets and roads abutting the
premises, language of appurtenances (discussed later
herein), and any exclusions of or limitations on the
property rights being conveyed. Language of any
easement(s) (discussed later herein) affecting the
property conveyed might be inserted here.
8. Covenants and Restrictions. Any
Covenants and /or Restrictions affecting the subject
property would be inserted. These will be discussed
later herein.
9.
Required Statutory Language.
Some States require some additional language
according to applicable State Law(s).
10. Customary Verbiage Preceding
Signature(s). At the end of the deed, there is often
language that reads: In Witness Whereof, the party of
the first part has duly executed this deed the day and
year first above written.”
11.
Above.
Signature(s) of Grantor(s).
See
PROFESSOR’S POINT
On Deeds:
Identify the Parties
12. Capacity of the Grantor. It is assumed
that the grantor is someone who is legally capable of
conveying real property. By State law, this would
typically mean someone who has reached eighteen
(18) years of age, and who is mentally competent. In
the United States, we operate under a presumption of
sanity, unless proven otherwise. If it turned out by
clear and convincing evidence that the grantor was not
“of his right mind” at the time of the execution of the
deed, the deed, if attacked in Court, would fail to
effectuate a transfer of title. The burden of proof of
the incapacity would be on the party who attacked the
capacity of the grantor. If the grantor had previously
been declared mentally incompetent by a Court of
competent jurisdiction, then any purported
conveyance by that person, who had not been
judicially relieved of that incompetency would be
ruled void. If a party was ruled incompetent, a Court
could appoint a guardian or conservator of the
incompetent party, who then would be the appropriate
person to execute a deed on behalf of the incompetent
party.
4. THE ACKNOWLEDGEMENT
As stated above, it is customary to have certain
important documents, including deeds, notarized.
The notarization of a deed takes the form of an
PROFESSOR’S POINT
On Deeds:
Describe the Property
acknowledgement.
The language of a typical
acknowledgement
has
been
expanded
and
standardized over the years, but it pretty much states
that the person(s) who signed the within instrument
(the grantor(s) in the case of a deed), personally
appeared
before
the
party
taking
the
acknowledgement (a Notary Public, Commissioner Of
Deeds, Justice Of The Peace, etc.) and acknowledged
to the person taking the acknowledgement that
he/she/they executed/signed the within document in
their individual or representative capacity(ies). The
person taking the acknowledgement must be careful to
in fact have the acknowledging person(s) appear
before him, and, because of numerous fraudulent deed
signings, valid photo identification should be viewed
by the acknowledging officer, and, for their protection
and compliance with state and/or federal law, a COPY
of the proofs of identity should be retained by the
acknowledging officer along with a copy of the
document acknowledged.
5. TYPES OF DEEDS
There are a number of different types of deeds, and
they vary a bit from State to State. Local trade or
custom will also usually dictate which form of deed is
used in any given circumstance. Discussion of some
of the most common forms of deeds follows.
PROFESSOR’S POINT
On Deeds:
Recital of Consideration
1. The Full Covenant and Warranty Deed,
sometimes called a Warranty Deed. This deed, like
any other discussed below, must conform to all the
requirements of a valid deed discussed hereinabove,
but, in addition, it typically contains a series of
covenants (promises) made by the grantor(s).
(a) Covenant of Seisin. By this, the
grantor warrants that he has the rightful ownership
and possession of, and has the right to convey title to,
the property.
(b) Covenant of Quiet Enjoyment. This
does not mean that the grantee will have a quiet,
tranquil enjoyment of the property in a literal sense,
but that the title will withstand attack(s) by third
parties claiming that they have a superior right to the
property.
(c) Covenant Against Encumbrances.
The grantor hereby covenants that the property is free
from liens or other encumbrances (claims, taxes,
charges, rights of others) against the property.
(d) Covenant Of Further Assurances.
The grantor covenants to secure any proofs,
documents, releases that may be necessary to make
the title good/clear.
(e) Covenant Of Warranty Forever. This
means that the grantor promises to stand behind the
validity of the title forever.
PROFESSOR’S POINT
On Deeds:
Words of Conveyance
On its face, the Full Covenant and Warranty
Deed seems like the preferred deed of choice for the
grantee. Yet, common practice has it that this type of
deed is often not used. Why not? For a few reasons.
First, when a grantor/seller transfers property, they
usually want to be finished with it, without lingering
potential problems. Hence, the grantor does no want
to make promises that could come back to haunt (and
cost) him. Secondly, once a grantor conveys, it
becomes difficult for a grantee to later seek out, find,
and practically enforce promises against a former
owner. Thirdly, it is very common for a potential
grantee (and for that matter, a potential lender) to
obtain Title Insurance (discussed below) issued by an
insurance company regulated by State law. If a
problem of title does crop up, the Title Insurance
Company, with required reserves, can be required to
step up and provide a fountain of remedy for the
insured grantee to drink from.
2. The Bargain and Sale Deed(s). This deed,
as stated above, would contain all the legal
requirements, but it might contain a Covenant
Against Grantor’s Acts. There would not be the five
(5) promises contained in a Warranty Deed, but there
would be a single covenant that “…the party of the
first part covenants that the party of the first part has
not done or suffered anything whereby the said
premises have been encumbered in any way
PROFESSOR’S POINT
On Deeds:
To Have and To Hold…
whatsoever, except as aforesaid.” This, in effect is a
limited covenant by the grantor. Yet, again as a
practical matter, the use of Title Insurance (discussed
below) will minimize any real difference between this
type of deed and the Full Covenant and Warranty
Deed.
There may be a Bargain and Sale Deed Without
The Covenant Against Grantor’s Acts. It is generally
concluded that a grantor, while not expressly making
the abovementioned covenant, would by implication
make same.
3. The Quitclaim Deed. This deed uses
conveyance language such as: “…does hereby remise,
release and quitclaim unto the party of the second
part…” No promises or covenants regarding title are
made with this deed. Yet, if the grantor has title, the
grantee gets title. Again, the use of Title Insurance
will minimize the risks in taking a deed with or
without promises.
This type of deed is often used for conveyances
by gift, between spouses and other family members,
and where there is some issue of title that needs to be
clarified. If there is some claim of title made to real
property, and the parties wish to “clear the cloud on
title”, a quitclaim deed can be employed without the
granting party making any representations or promises
as to the right(s) he or she is relinquishing. It should
be noted, however, that even though a quitclaim deed
PROFESSOR’S POINT
On Deeds:
Covenants and Restrictions
is commonly used between family members, if the
transaction is in fact a purchase, care should be given
to observe the advice below regarding Title Insurance.
In fact, even if the intra-family transfer is in the nature
of a gift, it would be wise for the grantee to consider
the protections of the title search/title insurance path,
for there may be some defect in title that the family
member grantor is unaware of. It would be much
easier to correct/alleviate any such problem(s) sooner
than later.
(4) The Executor’s or Administrator’s Deed.
If a property owner dies with a valid will that is
probated, the Surrogate’s/Probate Court will likely
confirm an Executor named in the will to carry out the
disposition of the deceased’s property. If someone
other than a named Executor is appointed by the
Court, or if a property owner dies without a valid will,
the Court will appoint an Administrator to carry out
the estate’s distribution. When either an Executor
(male), Executrix (female), Administrator (male) or
Administratrix (female) conveys real property of the
estate, the deed used is either an Executor’s Deed or
an Administrator’s Deed. Again, all the technical
requirements of a deed must be met, but, in addition,
the deed typically recites who the deceased person
was, when he/she died, who the Executor or
Administrator confirmed was, the Court that issued
either Letters Testamentary (if a will) or Letters Of
PROFESSOR’S POINT
On Deeds:
Acknowledgement
Administration (no valid will), and when issued, and
the file number/docket number of the estate
proceeding. Another usual requirement for a deed
conveyed by an estate is that the full purchase
price/consideration, if any, is spelled out.
5. A Referees Deed. This deed is used when a
Court directs a conveyance of the property, as in the
end game of a mortgage foreclosure proceeding. Like
the deed from an estate, the designation of the Court,
the proceeding, etc., and the full conveyance price are
included in the body of the deed.
6. TITLE SEARCH/TITLE INSURANCE
Any time you acquire property, either real or
personal, there is some risk involved. People deal
with risk in different ways. Some people take extra
precautions. Some people investigate an opportunity
to death. Some people just flat out ignore risks. This
can be very dangerous. Think about it. What is the
major risk you might face in the acquisition of real
property? The answer may be that there is a risk that
you don’t actually get what you bargained for, What
is it that you seek in the acquisition of real property?
The basic answer is: title to the property.
Q.: What is title? A.: Basically it is equated to
ownership (of the property). It is an abstract concept.
PROFESSOR’S POINT
On Deeds:
Recording
It does not mean a piece of paper (like the title
certificate for a car). Title does not mean the deed
you receive. You receive title when a properly
executed deed is delivered to you, IF the grantor
executing/signing the deed has title. If the grantor
does not have title, all the grantee receives is a very
fancy piece of paper.
Q.: How do you know if the grantor has title?
A.: Ask!
Q.: Should you take the grantor’s word for it?
A.: Absolutely NOT.
Q.: But the grantor is my father, my brother,
my minister, my friend; should I question their
integrity? A.: NO. But to borrow a line from former
President Ronald Reagan: “Trust, but Verify.”
Q.: How would I verify whether or not the grantor
has title? A.: By having a title search performed. A
title search
basically is a search of the land records in the
jurisdiction where the property is located, to
determine if the person who claims to be the current
owner in fact received a valid deed as grantee in the
past, and then search the same records to see if that
person conveyed the property by deed since its
acquisition. But that is just the beginning. After that
search, you then have to go back to search the records
to see when and by what deed the stated grantor in the
deed wherein your proposed grantor was a grantee got
his or her title. Sound confusing? It is, and can be.
PROFESSOR’S POINT
On Deeds:
Title Search
Title Insurance
Q.: How far should a search be made to verify
the chain of ownership of the property? A.: As far
back as the records go, probably to Colonial days!
Q.: What is the chance that you could make a
mistake in verifying the chain of ownership? A.:
Quite likely.
Q.: Isn’t this risky? A.: Absolutely.
Q.: How could or should a person handle this
risk? A.: The answer may be in the method or device
that many people use to deal with risk, in many areas
of their lives. The answer may be: with insurance.
Property acquisition poses some unique risks,
including the risk that you may receive a deed that
does not effectively convey you ownership. The
specialty insurance that deals with this risk is known
as title insurance.
Q.: Where can one obtain this title insurance?
A.: From a title insurance company.
Q.: Is it expensive? A.: It is not cheap. But
consider the alternative. If you acquire a piece of
property without obtaining title insurance, you may
stand to lose your current investment, and any future
appreciation, due to a title defect. There is just no
margin in neglecting to purchase title insurance. In
fact, the issue may be moot, in that if you finance the
acquisition and/or the improvement of the property,
the lender will undoubtedly require you to obtain title
insurance, at a minimum, to protect their interest as
mortgage holder.
PROFESSOR’S POINT
On Deeds:
Power of Attorney
A title insurance company is going to assume
the risk of you encountering a title problem after your
acquisition, and issue you a title insurance policy.
This is obtained for a one shot cost, up front, at the
time of the acquisition of the property. It will cover
you for as long as you own the property, and you can
elect a market value rider covering you not only for
your acquisition cost, but for whatever value the
property may increase to in the future.
Before a title insurance company will issue a
policy, it will do a title search to satisfy itself that you
are getting good title. Since they are taking the risk
off of your shoulders onto theirs, it is incumbent on
them to be careful and efficient in their search. The
title insurance companies are regulated by state and
federal law, and required, like any other insurance
companies, to reserve sufficient amounts against
future claims or losses.
Now, I am not an advocate for lining the
pockets of insurance companies with premium dollars,
but, on the other hand, I am not comfortable with the
practice of ignoring risks that may come home to
roost. In fact, virtually no attorney (in his/her right
mind) in the New York metropolitan area will do the
legal work representing a party acquiring real property
if the acquiring party does not purchase title
insurance.
I know that there are other, alternative methods
used to attempt to minimize the risks of title
PROFESSOR’S POINT
On Deeds:
Transfer Forms and Taxes
problems, and that, across the country, practices will
vary. I don’t subscribe to any of them. So, if you
want to acquire real property without title insurance,
get someone other than me to assist you. What’s that?
Your Uncle Charlie buys and sells real estate all the
time, and he never wastes his money either on title
insurance or on attorneys? Good luck to Uncle
Charlie! And to you, too, if you follow his lead! (For
Charlie has broken the first piece of advice written in
the Introduction to this book, and you and he are
about to ignore the risks, and break the title insurance
caveat.) See you in Bankruptcy Court, or at the soup
kitchen. We serve chicken noodle on Thursdays, with
a side dish of crow. These two (not so) little side
steps from sanity (using Title Insurance and an
attorney) will eventually bring about your financial
demise. It’s only a matter if time.
7. OTHER DOCUMENTS, FORMS AND COSTS
RELATED TO DEEDS
There are a number of other documents and forms
that typically go hand in hand with transfer of title by
deed. Most of them carry at least some nominal filing
or recording fee/cost; some of them require substantial
payment of taxes and/or fees.
1. Power Of Attorney. As mentioned above in
PROFESSOR’S POINT
On Deeds:
Easements
Run With the Land
Section 2, paragraph 1. on execution of deeds, the
situation may present itself that the grantor elects to
have an agent execute (sign) the deed for him or her.
This may come to pass because the grantor knows in
advance that he/she is not going to be present at the
closing/settlement date, and does not want to execute
the deed prior. Sometimes, one member of a
husband/wife team holding property in both names is
not going to be present at closing. In any event, a
grantor can elect to have an agent sign his/her name to
a deed in their stead, either prior to or at a closing.
The obvious problem that arises, is that how does
anyone know if the person signing actually has the
authority to do so? The issue is resolved by the agent
producing an appropriately executed written power of
attorney document, which will be simultaneously
recorded with the deed. The power of attorney is
typically produced with the deed, or, it is possible that
the power of attorney was executed and recorded on
prior occasion. The title search (discussed earlier)
should show a prior recorded power. Whether the
power of attorney was executed and recorded prior, or
produced at closing with the deed, an additional
affidavit by the agent (sometimes called an “attorneyin fact”) that the principal is alive and of full mental
capacity, and that said power is still in full force and
effect at the time of its use, is normally required by
the title company or a cautious grantee.
PROFESSOR’S POINT
On Deeds:
Licenses are Personal
A power of attorney typically must be in writing,
signed by the principal (the one granting the power).
Many (but not all) states require that it be witnessed
by one or more parties and acknowledged (discussed
earlier) in front of a Notary Public/Justice Of The
Peace/Commissioner of Deeds, etc.
Most states have standard statutory forms for
powers of attorney, and the powers may be “general”
in nature, granting wide powers, or “special” in
nature, specifically narrowing the scope of the power.
In addition, a power of attorney may be “durable” in
nature (that is, it may specifically survive the
intervening mental incapacity of the principal.) Most
states’ laws dictate that if a power of attorney is not
“durable” by its terms, it typically will not survive the
intervening incapacity of the principal. In addition, a
power of attorney does not survive the death of the
principal.
2. Transfer Forms and Taxes. In addition to
the deed itself, along with the possible power of
attorney, most states/counties/cities have forms that
must be presented with a deed for recording.
(a) “Stamps”/Deed Tax/Deed Transfer
Tax. Many states impose a transfer/deed tax, and a
form is usually required attesting to the details of the
transfer. This tax is based on the consideration paid
(ex. $2.00 per $500; $4.00 per $1,000; etc.). This is
commonly paid as an expense of the grantor, by local
practice and/or contract provision.
(b) Transfer Tax. Many state or local
jurisdictions impose their own tax on transfers,
typically based on consideration paid. This is over
and above the “Stamps”/Deed Tax/Transfer Tax cited
above, can range often from 1% to 3% of the
consideration and is commonly paid as an expense of
the grantor. Some people refer to it as a “departure
tax.”
(c) Mansion Tax. Some jurisdictions have imposed a
“mansion tax” that is imposed on high priced transfers
(ex. 1% of the consideration in excess of $1Million.). It
varies, but this “tax” is often levied against the
grantee/buyer.
(d) Equalization Forms. Many jurisdictions, usually
counties or states, require another form that cites the
details of the transfer. The governmental body then
inputs this information into its data bank to track the
relation of assessed valuation of property conveyed to
actual market value.
8. OTHER TERMS AND ISSUES
1. Legal Description. As cited above herein, for
a deed to transfer title, it must contain an adequate legal
description. This requirement can be met by utilizing a
number of devices and/or a combination of same.
While a municipal Tax Map Block and Lot might be a
sufficient legal description, a street address alone is
typically deemed insufficient.
(a) Metes and Bounds Description.
This description starts at a Point Of Beginning (POB)
and travels around the property’s boundaries various
metes (distances) and bounds directions/angles).
(b)
Reference to Governmental
Survey System. This description uses latitude and
longitude designations to encompass a property.
(c) Section, Block and Lot. This
description cites a filed map or a “plat map” in the
public records of a County where the land is located,
and identifies parcels by subdivision(s) therein.
2. Covenants and Restrictions. Occasionally,
an owner of property might wish to create certain
conditions or restrictions on future use of property
being conveyed. For example, to insure orderly
development of a property, a developer may put a
number of rules in a subdivision plan, such as:
limitation on square footage of improvements; setback requirements; limitations/prohibitions on other
than residential use; and even the color scheme of the
siding on homes built within the subdivision. These
restrictions would be placed in the deed(s) to the
property, and would bind all future owners thereof,
and it is therefore said that these covenants and
restrictions “run with the land.” Restrictions that are
based on race, color or creed, or that violate other
constitutional protections, have been and would be
declared as void and unenforceable.
3. Easements. An easement is the right to
make use of another person’s land, while a license is a
personal, revocable privilege. An easement benefits
or burdens property, and continues to benefit or
burden future owners of the property (“runs with the
land”). Easements come in various categories (not
discussed here), and are often created by inclusion in
deeds. For example, if a party wanted to convey title
to a piece of property, but wanted to retain the ability
to cross over the conveyed property to allow him
access to the lake, river or forest beyond the property
conveyed, that retained easement would be created by
language in the deed of conveyance. Again, legal
advice should be sought in either retaining an
easement over property conveyed, or acquiring
property that is subject to an easement.