Real Estate Law Deeds

1. Real Estate Law Deeds

2. Deeds • Subjects Covered: • Legal Requirements of a Deed • Deed Clauses • Common Types of Deeds • Special Purpose Deeds • Recording Deeds and Other Real Estate Documents

3. Deeds Definition: Written instrument by which owner of real property intentionally conveys to Purchaser his right, title or interest in parcel of real property.

4. Legal Requirements of a Deed • Writing and Execution Required by the Statute of Frauds (M.G.L. Chapter 183, Section 4) • Competent Grantor and Named Grantee • Date • Consideration “Valuable” consideration (i.e., money) or “good” consideration (e.g., love and affection)

5. Legal Requirements of a Deed (cont’d) • Words of Conveyance Every deed must show a present intent on part of Grantor to transfer his interest to Grantor. • Legal Description of Land Must be as precise and clear as possible. Purpose of legal description is to fix the boundaries of land intended to be sold. Types of legal descriptions: Metes and Bounds, Plats, Government Survey. In Massachusetts, legal description must include street or address of the property, metes and bounds description, and reference description.

6. Legal Requirements of a Deed (cont’d) • Exceptions and Reservations (if applicable) Exception = Part of real estate which will not be conveyed because it has already been excepted from property. Reservations = Part of the real estate which Grantor carves out for himself or others at time property is conveyed. • Release of Homestead and/or Elective Share Rights (if applicable)

7. Legal Requirements of a Deed (cont’d) • Delivery and Acceptance A deed is delivered when Grantor does or says something to show intention to pass ownership of land to Grantee. Must make delivery during lifetime of Grantor.

8. Delivery BASIC PRINCIPLES: • Delivery to Grantee. Delivery is presumed when Grantee takes physical possession of deed, but presumption can be rebutted by evidence. Also, no delivery if Grantor retains possession of deed, but again evidence can be introduced to rebut presumption.

9. Delivery (cont’d) • Delivery to Grantee on Oral Condition. Conditions are OK, but must be written down. • Delivery to Third Party Agent. If delivery is made to agent of Grantee -- then good delivery. If delivery is made to agent of Grantor -- no delivery since there is no intention to transfer ownership.

10. Delivery (cont’d) • Delivery to Third Party with Conditions. Escrow arrangement Deed is delivered in escrow when it is deposited with third party with directions to deliver to Grantee upon performance of some condition set forth in escrow instructions, not in deed. Requirements for valid escrow: • Must be a valid and enforceable contract for sale of land. The escrow itself may serve as contract for land. • Escrow agreement must contain a condition -- something that must be done before Buyer's money is paid to Seller. • Deed must otherwise be valid. • Escrow holder must be third party.

11. Other Requirements of a Deed To be recordable in Massachusetts, the deed must also: • Clearly and completely state the purchase price or full value of the consideration – this must be disclosed for the purpose of purchasing transfer tax stamps. (2010 Massachusetts Excise Tax on real property transfers is $2.28 per each $500 of consideration; there is no tax on transfers where the consideration is less than $100.) • Be acknowledged before a Notary Public.

12. Non-Requirements of a Deed The following are not required in Massachusetts: • Witnesses • Seal • Recording (except Registered Land)

13. Deed Clauses • Premises clause: The opening paragraph of a deed, setting forth the date of execution of the deed, the parties to the deed, and, in states that so require, the addresses of the parties. • Granting clause: A clause that contains the words of conveyance expressing the grantor’s intention of transferring the real property. It also includes the recital of consideration and description of the property to be conveyed. • Tenendum clause: A clause indicating the improvements that are being conveyed together with the land, such as the buildings built on the land.

14. Deed Clauses (cont’d) Example of combined Premises, Granting, and Tenendum clause: ________________________________, [an individual, partnership, or corporate entity], with an address of __________________________ (“Grantor”), for consideration paid, and in full consideration of ___________________, grants to _______________________, [an individual or corporate entity], having a mailing address of ____________________________ (“Grantee”), with [TYPE OF DEED] COVENANTS, that certain parcel of land, together with the improvements thereon located at [Property Address] in [City, County, State], And being described as: [Full legal description of property]

15. Deed Clauses • Encumbrance clause: A clause setting forth any encumbrances on the real property conveyed, such as mortgages, leases, liens, easements, or restrictions. Example: The above-described premises also are conveyed subject to and with the benefit of all agreements, easements, appurtenances and restrictions of record insofar as now in force and applicable. The above-described premises are also conveyed subject to all taxes for fiscal year ___________.

16. Encumbrances Definition: Charge or burden on property that may diminish its value or obstruct use of property, BUT does not necessarily prevent transfer of title. Two Types of Encumbrances • Monetary encumbrances or liens -- affect title • Non-monetary encumbrances -- affect physical condition and use of property

17. Monetary Encumbrances Liens Real Estate Taxes Mortgages Mechanic’s Liens Judgments Nonmonetary Encumbrances Encroachments Licenses Deed Restrictions/Covenants Easements Appurtenant In Gross By Necessity By Prescription Encumbrances

18. Deed Clauses • Testimonium clause: A clause in which the deed is executed Example: EXECUTED under seal this ___ day of ________________, _____. [ENTITY NAME IF NECESSARY] ________________________________ Name: __________________________ Title: ____________________________ [if appropriate]

19. Deed Clauses • Habendum clause: A clause describing the type of estate being conveyed to the grantee(s). In Massachusetts, if not otherwise stated, presumption is Fee Simple Absolute; if to more than one party and not otherwise stated, presumption is Tenancy in Common. • Seisin clause: A clause whereby the grantor warrants that he/she is the rightful owner of the property in question and thereby has the right and power to convey the property to the grantee. It is found in general warranty deeds and special warranty deeds. • Reddendum clause: A clause reserving some right in the real property for the grantor or imposing a restriction on use of the property by the grantee.

20. Common Types of Deeds Quit Claim Deed • Contains NO warranties. • Conveys only Grantor's present interest in land. (i.e., whatever title or interest Grantor has). • Most common form of deed.

21. Common Types of Deeds (cont’d) General Warranty Deed Seller provides Purchaser with 3 warranties. These covenants transfer with the land to all successors in interest of Grantee. (i.e., A gives general warranty deed to B. B sells to C. A is liable to C on any future covenants.) • Covenant of Title • Covenant Against Encumbrances • Covenant of Quiet Enjoyment

22. Common Types of Deeds (cont’d) Special Warranty Deed Grantor covenants only against lawful claims of all persons that arise "under, by or through" Grantor. (i.e., claims arising through acts of Grantor himself, not acts of others.) Bargain and Sale Deed A deed that transfers the real property itself rather than transferring any particular interest in the property.

23. Special-Purpose Deeds • Corrective Deeds • Deeds Conveying Government-Owned Property • Fiduciary Deeds • Personal Representatives’ Deeds • Guardians’ Deeds • Sheriffs’ or Referees’ Deeds

24. Recording Definition: Delivering a document to the appropriate government official for transcription into a plat book, deed book mortgage book, or official records book. Purpose: To put the public on notice regarding the information contained in the document. • Constructive notice: notice legally presumed because of the recording of documents in the public records. • Actual notice: direct knowledge a person has about the ownership and condition of the real property.

25. Notice Concepts All Buyers and Lenders are charged with constructive notice Contrast with actual notice -- everything the Buyer has direct knowledge of ILLUSTRATION Bill mortgages land to Jane. Jane does not record mortgage, but she does take possession of land. Bill later mortgages same land to Ed, who knows of earlier mortgage to Jane. Thus, Ed is charged with actual knowledge, so his mortgage is second to Jane's mortgage. ILLUSTRATION Bill conveys land to Jane, who records deed. Then Bill persuades Ed to buy the same land, telling Ed he owns land. Ed fails to examine title. Ed has constructive notice of deed to Jane, Jane has priority.

26. Recording Statutes Definition: A statute that prescribes the requirements for recording a document and that determines the priority of rights to real property if there are conflicting claims. • Bona fide purchaser for value: Someone who purchases property in good faith and for valid consideration.

27. Recording Statutes (cont’d) Three types of recording statutes: • Race statute: A recording statute whereby priority of claim of title of real property is determined literally by a race to the recording office. Unrecorded deed not valid against later bona-fide purchasers - bona-fide purchasers win.

28. Recording Statutes (cont’d) • Notice statute: A recording statute whereby the notice a subsequent purchaser has of a previous purchaser’s deed is imperative in determining the priority of title to the real property. Later Bona-Fide Purchaser only has priority if he records first. Thus, subsequent purchasers must be (1) bona-fide purchasers, and (2) record first to have priority.

29. Recording Statutes (cont’d) • Race-notice statute: A recording statute premised on protecting a bona fide purchaser for value without notice if he/she is the first to record the deed to real property. First to record wins, therefore has title. No need for subsequent purchaser to be bona-fide. (This is the most common form of recording statute.)

30. Recording Statutes (cont’d) • Massachusetts' recording statute is a race-notice statute and is based on title theory. • The statute (M.G.L. Chapter 183, Section 4)provides that a conveyance is not valid against any person except the grantor, his heirs and devisees and persons having actual knowledge of the transfer, unless it is recorded in the Registry of Deeds in the County in which the land to which it relates is located.

31. Recording • Two categories of land records: • Recorded Land • Registered Land

32. Recorded Land System • The traditional common law system of land records. • Each document filed is entered in order of receipt, and referenced by its sequential book and page number of recording. • In the Recorded Land system, a deed is evidence of the transferee’s title. • The vast majority of land in Massachusetts (about 94%) is recorded land.

33. Torrens (Registered Land) System • A method of registering land developed in Australia by Robert Torrens in 1858. • Upon petition, the Land Court conducts a thorough search of title called an action to quiet title – the objective is to establish ownership. • A Certificate of Title is issued as of a certain date – future title searches only have to go back to this date. • When property is transferred, the previous certificate is canceled and a new certificate is issued to the transferee – the certificate (not the deed) is evidence of the transferee’s title. • Only about 6% of land in Massachusetts is registered land.

34. Quiz True/False • If personal property is to be sold with the real property, it should be included in the deed. • The granting clause includes the legal description of the property. • The reddendum clause describes the type of estate being conveyed. • As long as a deed remains in the possession of the grantor, there is a rebuttable presumption that the transfer of ownership has not taken place. • To determine title to property by the Torrens system, a lawsuit must be brought. F T F T T

35. Quiz (cont’d) • A bargain and sale deed does not transfer interest in land. • A corrective deed relates back to the date of the original deed. • Generally, if the contract for sale and purchase does not specify otherwise, a general warranty deed is used. • Constructive notice refers to direct knowledge a person has about the ownership and condition of title to real property. • The most common form of notice statute is the race-notice statute. T T T F T