Title


Title is the legal evidence of ownership of a property.  Title is transferred when a deed has been delivered and accepted.


The primary purpose of a deed is to transfer title or rights of ownership from one party to another.


Equitable title is the present right to possession with the right to acquire legal title once a preceding condition has been met.


Legal title is usually title without ownership rights such as the title placed in a trustee under a Deed of Trust or the title in a vendor under a land contract.


In a Deed of trust the trustee receives legal title witch gives them the right to sell incase of default.


Sales contracts, land contracts and deeds of trust represent equitable title of the buyer.


The buyer is expected to receive legal title at some point in the transaction



When a lender puts a lien on the property the lender is said to have given constructive notice.


Constructive notice is Notice of certain facts which are implied bylaw to a person because he could have discovered the fact by reasonable diligence or by inquiry into public records.


Actual notice is Notice a party receives in fact or in realty, as compared with constructive notice witch is implied or inferred.


An example of actual notice would be the reading of a legal notice in a newspaper.


A title search would reveal a chain of title.  A chain of title is an analysis of the transfers of title throughout the history of the property.


If all deeds have been recorded then each owner is linked to the previous owner.  If the deed was not recorded then the chain would be broken and a gap would be created in the chain.


For example, when Reyna died she left her property to her daughter Jessica.  Jessica did not record the deed and three years later she gave the property to her son Joe who recorded his deed.  Several years later he decided to sell the property.  The title search would reveal a gap because Jessica did not record her deed. 


An abstract of title is a summary of the conveyances, transfers and other facts appearing of record and relied upon as evidence of title to real property.


The research of title could help discover a cloud on title.


A cloud on title is a defect in the title of property which prevents the title from being good and marketable.  And example of a cloud on title would be if a woman got married.  For Example if Amanda Bauer owns a property as single woman than marries Stephen Belkin and takes on Stephens’s last name.  She is now Amanda Belkin, However on title it still says Amanda Bauer, and this would be a cloud on title.


Once the situation is cleared they she would have clear title.  Clear title is title that is good and marketable, meaning free from encumbrances such as liens.


Title insurance


Title insurance protects the policy holder from losses arising in defects of title.

Documents may have been forged, liens may have not been recorded who knows what other defects may be found during the title search.  Therefore there cannot be a guarantee of title.  That’s why lender requires the borrowers to purchase title insurance and why borrowers should purchase there own policy


No title policy covers everything.  An example of an item that is not covered by any policy would be changes in land use brought about by zoning.


To satisfy a claim a title insurance company will require the policyholder to subrogate their rights to the title company.  Subrogation is the substitution of once creditor for another.  Subrogation allows the title insurance company to sue the guilty party in order to recover any claims they have paid to the seller to settle a title claim.


There are two types of title insurance policies the lenders policy and the borrowers policy.


A premium is paid one time only regardless of which policy is being purchased. The lenders policy covers the lender and the initial coverage covers the lenders balance.


As the principal loan amount decreases the lenders coverage decreases.  That is until the final payment is made and then the lender no longer has coverage.


The owner’s policy protects the owner and is for the homes value.  If there is a defect in title witch was covered by the title policy the title company will defend the policy holder and pay attorneys fees.


Title insurance can have standard or extended coverage.


Standard coverage includes:

Defects that are found in public records

Forged documents

Incompetent grantors

Incorrect marital statements

Improper delivery of deeds


Extended coverage include everything in a standard policy plus defects found in a property inspection.  Which would include unrecorded rights of parties in possession, examination of survey. unrecorded liens, not known by a policy holder.



Forms of ownership


Title can be held in Severalty or as a concurrent estate.


Severalty is sole or independent ownership by a person or entity.  That means there is only one name on the deed.

A concurrent estate or co-tenancy is a concept in property law, particularly derived from the common law of real property, which describes the various ways in which property can be owned by more than one person at a given time.

The type of ownership determines the rights of the parties to sell their interest in the property to others, to will the property to their devisees , or to sever their joint ownership of the property. Just as each of these affords a different set of rights and responsibilities to the co-owners of property, each requires a different set of conditions in order to exist.

Three types of concurrent estates are:

Tenancy in Common

Joint Tenancy

Community property


Tenancy in common

Tenancy in common is the most common type of ownership.

Ownership is assumed to be a tenancy in common unless stated otherwise.

A tenancy in common is a form of ownership of title to real estate by two or more persons in which, although they have a unity of possession, they each have separate and distinct titles.  In the event that one of the tenants in common dies, his or her title passes not to the other tenant in common but to his or her estate or heirs.


Joint tenancy

Joint tenancy is a form of ownership in which the tenants own a property equally. If one dies, the other automatically inherits the entire property. This is known as the right of survivorship.


Thus somebody cannot will a joint tenancy, and probate is not necessary under a joint tenancy.  A person could not take a property as a join tenant with a corporation.  It would be taken as a tenant in common.  If Joint tenant dies owing debts, the surviving joint tenants are free of the unsecured debts.


Joint tenants cannot be created by law; therefore the parties who wish to be joint tenants must make it clear in the conveyance document.


A joint tenant has the right to sell, mortgage or transfer the interest without the consent of the other joint tenants


To create Joint tenancy there has to be unity of time, title, interest and possession.


Joint tenant would be terminated if any one of the four unities is destroyed.  Therefore a person who buys interest of a joint tenant would be a tenant in common with the other joint owners.


For example, if Stephen, Vivian and Carol purchase a home in the hills and they take the title as joint tenants.


Stephen gets transferred to another state.


He sells his property to David


Vivian and carol are still joint tenants


And David is a tenant in common.


Community property

In a community property jurisdiction, most property acquired during the marriage (except for gifts or inheritances) is owned jointly by both spouses and is divided upon divorce, annulment or death.  Joint ownership is automatically presumed by law in the absence of specific evidence that would point to a contrary conclusion for a particular piece of property. The community property system is usually justified by the idea that such joint ownership recognizes the theoretically equal contributions of both spouses to the creation and operation of the family unit.

Division of community property may take place by item, by splitting all items or by value. In some jurisdictions, such as California , a 50/50 division of community property is mandated by law; in others, such as Texas, a divorce court may decree an "equitable distribution" of community property, which may result in an unequal division of such. In non-community property states property may be divided by equitable distribution. Generally speaking, the property that each partner brings into the marriage or receives by gift, bequest or devise during marriage is called separate property (i.e., not community property). See division of property. Division of community debts may not be the same as division of community property. For example, in California, community property is required to be divided "equally" while community debt is required to be divided "equitably".

Property that is owned by one spouse before the marriage is the separate property of that spouse, unless the property is "transmuted" into community property. The rules for this vary from jurisdiction to jurisdiction.


In community property states, property owned and controlled entirely by one spouse in a marriage. At divorce, separate property is not divided under the state's property division laws, but is kept by the spouse who owns it. Separate property includes all property that a spouse obtained before marriage, through inheritance or as a gift. It also includes any property that is traceable to separate property -- for example, cash from the sale of a vintage car owned by one spouse before marriage-and any property that the spouses agree is separate property.

Separate property can be transferred without non-owning spouses consent or signature


A partition is a court action to divide ownership interest if the owners cannot reach an agreement.  Partitions can be used by tenants in common or joint tenants to dissolve ownership interest


Trust

A trust is an arrangement where legal title is transferred from a trustor to a trustee.

The trustee will hold title and manage the property for a benefit of another party called the beneficiary


A trust is very often used as an estate planning tool or to provide animinity to a true owner of the property.


There are several other items which are associated with a trust.  A testamentary trust is created by a will,  and becomes effective upon the death of the testator

Many times parents with minor children will set up a testamentary trust that will become effect should they both pass simultaneously.


A living trust is also known as a inter vivos trust, or a trust that is to become effective during the life of the trustor.  Please be aware of the difference between a living trust and a living will.  A living will is a document that allows a person to refuse medical treatment.


When a land trust is created, only real estate can be transferred into the trust.

The trustee holds legal and equitable title to the real estate.


The beneficiary retains the power to direct the trustee, manage the property and draw income from the trust.



Introduction

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Property Transfer

    Deeds   

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Title   

Title insurance   

Forms of ownership   

Tenancy in common   

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Trust   

Subdivisions   

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Liens   

Appraisal   

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Market Value   

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Financing   

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Types of Loans   

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Investing   

Construction Terms   

Test Taking Tips