Chapter 3
Conveying Real Property Interests
Real Estate
FIN 331
Fall 2015
SOURCES OF COMPLEXITY IN
CONVEYING REAL PROPERTY
A. Real property is a complex bundle of
rights
B. Rights to land are enduring: Rights
available today depend on transactions
long ago
C. Land is a continuous surface
a. Boundaries not obvious or natural
b. Boundary errors always hurt someone
DEEDS – CONVEYING REAL PROPERTY
A. Deed: A special, written contract for conveying a permanent
interest in real property
B. Requirements for a Deed
1.
Grantor (with signature) and grantee
grantor must be of legal age and competent
2.
3.
4.
Recital of consideration: “for [ten] dollars and other good and
valuable consideration…”
Words of conveyance: “does hereby grant, bargain, sell, and
convey unto…”
Covenants
a. Covenant of seizin: promise that grantor truly has good title and right
convey it
b. Covenant against encumbrances: no liens, easements, or other
limitations except as noted in the date
c. Covenant of quiet enjoyment: the premise that property cannot be
claimed by someone else with a better title
DEEDS – CONVEYING REAL PROPERTY
5. Habendum clause: defines or limits the type
of interest being conveyed
6. Exceptions and reservations class (if any)
7. Description of land: legal descriptions are
metes and bounds, subdivision plat and block
number, in government rectangular survey
8. Acknowledgment
9. Delivery: a deed must be “delivered” in order
to be valid
TYPES OF DEEDS
A. General warranty deed: All three covenants;
seizin, no encumbrances, and quiet
enjoyment
B. Special warranty deed: identical to general
warranty deed except as limited to the time
of the grantor’s ownership
C. Deed of bargain and sale: No covenants, but
still is regarded as implying ownership
D. Quitclaim deed: No covenants and makes no
assertions about grantor’s interest
TYPES OF DEEDS
E. Judicial Deeds and Trustee’s Deeds
1. Judicial deeds are the result of a court
ordered proceeding
2. Trustee’s deeds are issued by the trustee in a
court supervised disposition of property
Modes of Conveyance of Real Property
A. Voluntary conveyance by deed
1. Ordinary sale and transfer of title
B. Voluntary conveyance without a deed
1. Implied easement: utility easements
2. Easement by estoppel: permission to use by
adjacent landholder
3. Dedication: When a developer dedicates
street rights-of-way and open spaces
Modes of Conveyance of Real Property
C. Involuntary conveyance by deed
1.
2.
3.
4.
5.
Probate (distribution of estate)
Bankruptcy
Divorce settlement
Condemnation
Foreclosure
D. Involuntary conveyance without a Deed
1. Landowner involuntarily and unknowingly gives
up rights to land
2. Easement by prescription
3. Title by adverse possession
Modes of Conveyance of Real Property
E. Gain rights to land through the action of
water (accretion, reliction)
1. Accretion: enlargement by natural action
2. Reliction: gradual change of water line on
real property which gives the owner more
dry land.
Importance of Public Records
A. Doctrine of constructive notice: Cannot be bound
by claims or rules he or she has no means of
knowing
B. Statute of Frauds (1677): Contracts conveying a
real property interest must be written to be
enforceable
C. Recording statutes: A contract recorded in public
records is considered known
D. Actual notice: Open, continuous, actual possession
of property
E. Public records provide information for a “Title”
search
Defining “Title”
A. Title: Collection of evidence indicating a
particular person(s) as holder of the “fee”
B. Title search: Examining public records to
construct “chain of title”
C. Chain of title: the sequence of conveyances
passing ownership down through time
D. Evidence of Title
1. Title abstract together with an attorney’s opinion of
title
2. Title insurance commitment
3. Title insurance protects the grantee against the legal
costs of defending the title and against loss of the
property in case of an unsuccessful defense
Defining “Title”
E. Potential Problems with Titles: (Motives
for Title Insurance)
1. Conveyance of partial interest or adverse
possession
2. Inconsistent property descriptions
3. Missing signatures
4. Faulty separation of mineral or water rights
Property [Land] Description
A. Metes and Bounds: specifying the location of its
boundaries
1. Monuments: natural objects such as boulders, trees,
rivers or man-made objects such as roads or survey
markers.
2. Courses: directions in the form of compass headings.
a. Compass bearings as deviations from north or south
3. Distances: measured in any convenient unit of length
(feet, meters, etc.)
4. Property description must specify a point of
beginning and is followed by a series of courses and
distances.
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Property [Land] Description
A. Government Survey Descriptions (rectangular or
public land survey system)
1. Land description by reference to a grid of lines.
2. Used primarily west of the Mississippi following the
Land Ordinance Act of 1785.
3. Grid composed of two sets of lines
a. One set running north and south, the second set running
east and west.
b. Each grid identified by a Principal Meridian (north-south)
and a Base Line (east-west)
c. 35 principal meridians and 32 baselines comprise the GS
system
d. The east-west lines are called township lines and north-south
lines are called range lines and run at intervals of 6 miles.
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Property [Land] Description
A. Government Survey
Descriptions (cont.)
1. Townships: the area
encompassed by two
adjacent range and
township lines = 36
square miles
2. Tract = 16 townships
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Property [Land] Description
1. Townships (cont.):
Comprised of 36
sections (each = 1 sq.
mile)
2. Each section = 640
acres
3. 1 Acre = 43,560 sq ft
4. Each section is
numbered
consecutively from 1
to 36
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Property [Land] Description
1. Sections may be subdivided into smaller
parcels
a. Quarter section = 160
acres
b. Quarter-Quarter section
= 40 acres
c. Q-Q-Q section = 10 acres
2. Metric Land Measure
a. Hectare = 2.471 acres
b. Hectare = 100m x 100m
c. Hectare = 10,000 sq
meters
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Principal Meridians and Base Lines
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Chapter 3 Recap
A. In real property law, The word estate refers to an
interest in land that is or may become possessory.
B. Estate's fall into two categories:
1. Freehold estates: do not have a fixed duration
2. Leasehold estates: have limited duration
C. Freehold estates
1. Fee simple absolute (infinite duration plus full
bundle of rights)
a. Exception: Life estate freehold limited to life of person or
persons
2. Fee simple defeasible (grantee’s estate has
conditions)
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Chapter 3 Recap
A. Leasehold Estate: a tenant who does not own
the property
1. Estate for years: tenancy for fixed term of time.
2. Periodic Tenancy: period to period with no fixed
termination date
a. Serial renewal of an apartment lease
3. Tenancy at Will: tenant has possession for an
indefinite period of time with the landlords
consent.
4. Tenancy at Sufferance: when tenant stays on
after the lease has expired
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Chapter 3 Recap
A. Deeds
1. General Warranty Deed: Grants the greatest
protection to the grantee
2. Special Warranty Deed: scope is limited to
defects that arose during the grantor's tenure
3. Grant Deed: used in the few states instead of
warranty deeds
4. Bargain and Sale Deed: offers the grantee no
guarantees or covenants.
5. Quitclaim Deed: contains no warranties of any
kind. Does not imply that the grantor owns the
property.
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Chapter 3 Recap
A. Requirements for a valid deed
1. It must be in writing
2. Must identify the parties
3. The grantor must be legally competent
4. Have a living grantee
5. Be signed by the grantor
6. Include an adequate description of the property
7. Recite consideration exchanged
8. Contain the words of conveyance
9. Define the interest conveyed [the independent clause]
10. State any exclusions or reservations
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Foreclosure or Other Notice
Article 11. Lis Pendens
§ 1-116. Filing of notice of suit.
(a) Any person desiring the benefit of constructive
notice of pending litigation must file a separate,
independent notice thereof, which notice shall be
cross-indexed in accordance with G.S. 1-117, in all of
the following cases:
(1) Actions affecting title to real property.
(2) Actions to foreclose any mortgage or deed of trust or to
enforce any lien on
real property.
(3) Actions in which any order of attachment is issued and
real property is
attached.
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Foreclosure or Other Notice
Lis Pendens
(b) Notice of pending litigation shall contain:
(1) The name of the court in which the action has been commenced or is
pending;
(2) The names of the parties to the action;
(3) The nature and purpose of the action; and
(4) A description of the property to be affected thereby.
(c) Notice of pending litigation may be filed:
(1) At or any time after the commencement of an action pursuant to Rule 3
of
the Rules of Civil Procedure; or
(2) At or any time after real property has been attached; or
(3) At or any time after the filing of an answer or other pleading in which
the
pleading party states an affirmative claim for relief falling within the
provisions of subsection (a) of this section.
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Foreclosure or Other Notice
Lis Pendens
(d) Notice of pending litigation must be filed
with the clerk of the superior court of each
county in which any part of the real estate is
located, not excepting the county in which
the action is ending, in order to be effective
against bona fide purchasers or lien
creditors with respect to the real property
located in such county.
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Some Legal Definitions
Real Estate
FIN-331
Appurtenance
A. Anything attached to a piece of land or
building such that it becomes a part of
that property, and is passed on to a new
owner when the property is sold. It may be
something tangible like a garage, septic
system, water tank, or something abstract
such as an easement or right of way.
Estoppel
A. A legal principle that bars a party from
denying or alleging a certain fact owing to
that party's previous conduct, allegation, or
denial.
1. Promissory estoppel is a contract law doctrine. It
occurs when a party reasonably relies on the
promise of another party, and because of the
reliance is injured or damaged.
2. Estoppel by laches precludes a party from
bringing an action when the party knowingly
failed to claim or enforce a legal right at the
proper time.
Legal Estoppel
A. Estoppel by deed, a party to a property deed is precluded from
asserting, as against another party to the deed, any right or title in
derogation of the deed, or from denying the truth of any material
fact asserted in the deed.
1.
2.
3.
1. If O conveys property she doesn't own to A by warranty deed, but O
later acquires title to that land, then title immediately passes to A.
2. However, if, as above, O conveys property she doesn't own to A by
warranty deed, but O later acquires title to that land, A may elect to
treat O's lack of title at the time of the conveyance as a breach of the
covenants of seizin and right to convey (two of the six traditional forms
of Covenants for Title that are contained in a general warranty deed),
and sue O for damages. A cannot be forced to accept O's after-acquired
title if she wishes instead to receive damages.[4][5]
3. If O conveys property she doesn't own to A by quitclaim deed, but O
later acquires title to that land, then A owns nothing. This is because O
passed her interest to A with a quitclaim deed; at the time of the
conveyance, O's interest was nothing, so she passed nothing.
HOMEWORK ASSIGNMENT
A. Key terms: Accretion – Reliction, Adverse
Possession, Covenant of Seizin, Types of Deeds (7),
Doctrine of Constructive Notice, Easement by
Estoppel, Encroachment, Habendum Clause,
Metes and Bounds, Title Abstract / Insurance
B. Study Questions: 1, 2, 4, 5
C. Issues to Ponder: Smith bought a repossessed
property from the bank. A year later, Smith
decides to have the property surveyed. Smith
discovers that the adjoining neighbor’s fence is
actually on Smith’s property. What are the issues
involved?
North Carolina Power of Sale
Foreclosure Procedure
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Documents Needed at Referral
Foreclosure Process
Copy of Recorded Deed of Trust (DOT)
• Copy of Note with Endorsements
• Copy of Title Policy
• Copy of Assignments/Allonges (an attachment to a legal document
that can be used to insert language or signatures when the original
document does not have sufficient space for the inserted material)
• Copy of Appraisal
• NCGS 45-93 Written Compliance response
• Payoff figures for NCGS 45-21.16(c)(5a) notice
* This letter also includes the Fair Debt Collection Practices
information.
• Home Loan/Non-Home Loan Certificate, if applicable
• 45 day pre-foreclosure notice and/or 30 day breach letter
• If our office sends the 45-day pre-foreclosure notice for you, we need
a reinstatement figure.
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Foreclosure Process
A. Substitution of Trustee (SOT): executed by
holder of the note
B. Notice of Hearing (NOH): to person(s)
directed in deed of trust
C. Service: certified mail or in person by
Sheriff – 20 days on property, 10 days to
mortgagor (borrower)
D. Clerk of Court is presiding official
E. Affidavit of Indebtedness
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Hearing before the Clerk of Court
To authorize the foreclosure sale, the Clerk must find the existence of:
1. A valid debt of which the party seeking to foreclose is the holder;
2. Default;
3. Right to foreclose under the instrument;
4. Notice to those entitled to notice;
5. That the underlying mortgage debt is not a home loan as defined in
G.S. 45-101(1b), or if the loan is a home loan under G.S. § 45-101(1b),
that the pre-foreclosure notice under G.S. § 45-102 was provided in all
material respects, and that the periods of time established by Article
11 of Chapter 45 of the General Statutes have elapsed;
6. That the property is occupied by the borrower as his/her principal
residence and the lender has complied with the requirements of G.S. §
45-21.16C or that the property is not occupied by the borrower as
his/her principal residence and therefore G.S. § 45-21.16C is
inapplicable; and
7. That the sale is not barred by G.S. 45-21.12A.
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Contested Issues/Appeals
2 issues that are contested most often are:
• Whether the party seeking to foreclose is
the holder of the Note; and
• Whether the borrower is in default.
• In North Carolina, the amount of the default
is not relevant for a Clerk’s foreclosure hearing.
If the borrower is $1.00 behind, the Clerk shall
enter the Order allowing the foreclosure sale to
proceed.
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NC G.S. § 45-21.16C
G.S. § 45-21.16C provides the Clerks with the
authority to continue a foreclosure hearing
for up to 60 days if the residence being
foreclosed is the borrower’s principal
residence and the Clerk determines there is
good cause to believe that additional time or
additional measures have a reasonable
likelihood of resolving the delinquency
without foreclosure
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Notice of Sale
A copy of the Notice of Sale is posted at the courthouse immediately
after the hearing before the Clerk of Court takes place.
• We send a copy of the Notice of Sale by First Class Mail to the
following:
√Any person who has filed a Request for Notice (RFN). A person that
has filed a RFN is entitled to notice of the sale at least 20 days prior to
the sale taking place.
√Current Occupant. The current occupant of the property must be
given 20 days notice of the sale of the property.
√Large Judgment. If there is a large judgment, we send a copy of the
Notice of Sale to the judgment holder.
√Junior Lienholder.
• We send a copy of the Notice of Sale by U.S. Certified Mail, return
receipt requested to the IRS. If an IRS lien was filed 30 or more days
prior to the sale date, we are required to provide the IRS with notice of
the sale at least 25 days prior to the sale date.
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Sale
A. The sale takes place at the courthouse. If a third party
bidder is the high bidder, he is required to deposit 5% of
his bid in certified funds with the person holding the
sale. We generally give a third party bidder 30 days to
pay the full balance of his bid.
B. • There is a 10 day redemption and upset
bid/confirmation period in N.C. that run concurrently. A
sale is not “confirmed” until there have been 10
consecutive days with no upset bids having been filed.
Once the sale has confirmed, the rights of the parties
become fixed and the purchaser is entitled to a Trustee’s
Deed upon payment of the balance of the bid.
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Sale
A. Redemption: During this 10 day period, the
borrower has the right to pay the loan in full and
“redeem” the property.
B. Upset Bid: During this 10 day period, any person
may file an upset bid with the Clerk of Court. The
upset bid must be at least 5% more than the last
bid and the person placing the bid must deposit
5% of his bid with the Clerk’s office. The 10 day
period starts over again after each upset bid is
placed and continues until 10 consecutive days
have passed without an upset bid having been
filed
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NCCOB Rule 702
NC Commissioner of Banks
Under this rule, mortgage servicers must:
(1) Acknowledge, in writing, a borrower’s
request for loss mitigation no later than ten (10)
business days after the request.
(2) Respond to a loss mitigation request from a
borrower no later than thirty (30) business days
after the receipt of all information necessary
from the borrower to assess whether or not a
borrower qualifies for any loss mitigation
programs offered by the servicer.
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NCCOB Rule 702
(3) Include in a final response denying a loss
mitigation request the reason for the denial and
contact information for a person at the servicer
with authority to reconsider the denial.
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