Real Estate Law Exam2

Card Set Information

Author:
msshantiray
ID:
141461
Filename:
Real Estate Law Exam2
Updated:
2012-03-13 21:38:07
Tags:
Chapter 11
Folders:

Description:
Chapter 8-11
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user msshantiray on FreezingBlue Flashcards. What would you like to do?


  1. Deed of Conveyance
    • •A written instrument that transfers ownership of property from a grantor to a grantee
    • • Attested to by at least two witnesses, one of whom is a notary public
    • •Supported by good and valuable consideration
    • •Properly signed and delivered to the grantee, who accepts it
    • The form and content of deeds vary among states, and the laws of the state in which the subject real property is located will govern the types of deed available.
    • Our discussion focuses on the requirements of deeds in Georgia.
    • A deed creates a contractual relationship between the grantor and the grantee, so the deed must also comply with the rules of contract validity that were discussed in a previous chapter, such as consideration, which is something of value being given by each party
  2. Vesting
    Deed
    • •A party's vesting deed is the deed by which that party takes title to real property
    • •Every past and current owner of a parcel of real property has his own vesting deed for that property

    • Georgia recognizes several different types of deeds of conveyance, with the most common being general warranty deeds, limited warranty deeds and quitclaim deeds.
    • In the context of a purchase and sale, a well-written purchase and sale agreement will specify which type of deed is to be signed by the grantor at closing to convey title to the grantee.
    • Georgia also recognizes specific-use deeds that apply in certain types of situations, such as in the event of death of the grantor where the property is passing from the grantor's estate.
  3. Deed
    Covenants
    • •Promises
    • made by the grantor in a deed of conveyance

    • •Regarding
    • title to the real estate

    • •Gives
    • a warranty to protect the grantee's interest in the real property if one of
    • these covenants fails
  4. Covenant of Seisin
    • The
    • grantor has legal ownership of the property
  5. Covenant of Right to Convey
    • The
    • grantor has the right to sell the property
  6. Covenant of Quiet Enjoyment


    • There
    • are no unresolved claims or issues that could interfere with the grantee's use
    • and enjoyment of the property
  7. Covenant Against Encumbrances
    • There
    • are no outstanding liens, judgments or other matters, apart from known title
    • defects, that could adversely impact the grantee's ownership
  8. Covenant of
    Further Assurances
    • The
    • grantor will defend the grantee's title to the real property, by cooperating
    • with the grantee's defense efforts and supplying evidence or testimony, against
    • all persons whomsoever, in the event that the grantee's title to the property
    • is challenged
  9. Covenant to Warrant Forever
    • The
    • grantor will not do anything to negatively impact the grantee's title to the
    • property once title has transferred from the grantor to the grantee
  10. Effect
    of Deed Covenants
    • •These
    • deed covenants vest in the grantee the power to pursue legal action against the
    • grantor if any deed covenants fail

    • •These
    • covenants may be limited by the type of deed executed (signed) by the grantor

    • •There
    • are also statutory time limits on bringing an action for breach of deed
    • covenant


    • Although
    • these deed covenants and the warranties supplied by the grantor are important
    • for the protection of a grantee, there are statutory time limits and liability
    • limits on a grantor’s obligations under these covenants that limit a grantor’s
    • responsibility for defending a grantee’s title to the property. O.C.G.A. § 44-5-66.
  11. Warranty
    Clause
    • •Contains
    • the grantor's warranty to defend the grantee's title in the event of a failure
    • of one or more of the deed covenants



    • •Effect
    • of warranty clause
  12. Caption
    • •Indicates
    • the county and state where the deed was executed by the grantor



    • •The
    • caption does not necessarily reflect the county and state where the real
    • property is located.
  13. Preamble
    • •Contains
    • the date of the deed

    and

    • •the
    • identity of the grantor(s) and grantee(s)
  14. Granting
    Clause
    • •Contains
    • a recital of consideration

    • •Nominal
    • Consideration recital is used in Georgia

    • •The
    • most common amounts of nominal consideration are $1.00 and $10.00

    • "love
    • and affection"


    • The
    • grantor's consideration is the conveyance of title to real property, and the
    • grantee's consideration is the payment of the purchase price in exchange for
    • the receipt of the real property. The
    • deed is the document that memorializes the actual transfer of property
    • ownership.



    • Notice
    • that the sample deed does not refer to the actual purchase price of the
    • property; this is true for most deeds.
    • Instead, deeds use a nominal consideration recital
    • saying, for example, "for $10.00 and other good and valuable
    • consideration".

    • If
    • the conveyance being made is a gift, then the consideration recital will
    • provide that grantee’s substitute for consideration is
  15. Legal
    Description
    • •An
    • exact description of the location and boundaries of the property



    • •Encompasses
    • more than just the property’s street address


    • Sometimes,
    • the legal description is too long to fit on page one of the deed; in this case,
    • the deed preparer may attach a second page as an exhibit for the legal
    • description. On the face of the deed would be written "See Exhibit
    • A," and in Exhibit A, the legal description would appear. This will cause the deed to be two pages,
    • instead of one page, which is perfectly legal, although it will be slightly
    • more expensive to record the deed in the public records.

    • Later
    • in the course, you will study legal descriptions in more detail
  16. Habendum
    Clause
    • •Begins
    • with "To Have and to hold"



    • •Indicates
    • what type of estate is being transferred


    • The
    • most common form of estate granted is fee simple
  17. Testimonium
    • •The
    • area of the deed in which it is signed

    • •Signed
    • by grantor(s)

    • •Grantee(s)
    • do not sign

    • •Grantor’s
    • signature must be witnessed by two people, one of whom is a notary public.


    • Another
    • word for “sign” is “execute”

    • If
    • a business entity is the grantor, the individual(s) signing for the entity must
    • have legal authority to bind the entity.
    • We will discuss in detail the format of signature blocks in Chapter 11.

    • If
    • more than one grantor signs the deed, the same witness and notary may be used
    • for both signatures, so long as both grantors signed in the presence of the
    • witness and notary.
  18. Other
    Deed Components
    • •Return
    • Instructions

    • –Address where the original deed should be
    • returned after it has been recorded in the public records



    • •Limiting
    • Language

    • –Limits the scope of grantor’s
    • warranty. For example, “This conveyance
    • is made subject to all zoning, ordinances, easements and restrictions of
    • record.”


    • Return
    • Instructions - although in reality the closing attorney should include a
    • self-addressed, stamped envelope with the documents to be returned.



    • Limiting
    • Language - This type of "subject to" language is also referred to as limiting
    • language, and
    • may be included in a warranty deed as a means of limiting the scope of the
    • grantor’s covenants with regard to matters of public record. Our sample deed is made subject to "all
    • zoning ordinances, easements and restrictions of record."
  19. General
    Warranty Deeds
    • •Also
    • known as “Warranty Deeds”

    • •Contain
    • a general warranty regarding the deed covenants

    • •The
    • grantor will defend grantee’s title “against the claims of all persons
    • whomsoever”

    • •Most
    • commonly used in residential real estate sales in Georgia


    • Look
    • at the sample general warranty deed in your textbook and see if you can find
    • the language that makes it a general warranty deed
  20. Limited
    Warranty Deeds
    • •A
    • limited warranty deed means the grantor limits the scope of the warranty being
    • given regarding defending grantee’s title under the deed covenants

    • •Common
    • limited warranty deed language “The grantor will defend grantee’s title in the
    • property against persons claiming by, through, or under the grantor”

    • •In
    • Georgia, limited warranty deeds are the most common type of deed used in
    • commercial real estate conveyances


    • The
    • second type of deed available in Georgia is the limited warranty deed. The equivalent to a limited warranty deed in
    • some states is called a “special” warranty deed.

    • “By,
    • through or under the grantor” means people that have claims arising out of the
    • time that the grantor owned the property, i.e., under grantor’s watch

    • But,
    • it doesn’t extend to anyone whose claim arose prior to grantor owning the
    • property.
  21. Quitclaim
    Deeds
    • •Conveys
    • whatever title the grantor possesses

    • •Does
    • not warrant that the title is valid

    • •Does
    • not offer any deed covenants

    • •Consideration
    • recital

    • •Commonly
    • used in gifts, divorce settlements, or
    • other intra-family type transfers


    • Offers
    • a grantee the lowest amount of protection because it offers no warranty as to
    • the quality of title. If the grantor has
    • faulty title or no title, then the grantee will receive these title defects and
    • have no recourse against the grantor. If
    • the grantor possesses clear title, then the grantee will receive clear
    • title. Apart from the significant lack
    • of deed covenants, a quitclaim deed contains largely the same components as the
    • general warranty deed and the limited warranty deed.

    • A
    • second feature that distinguishes quitclaim deeds from other types of deeds is
    • the consideration recital. Since many
    • quitclaim deeds involve the gifting of property in which money does not change
    • hands, the consideration recital will typically say "for
    • Love and Affection" instead of a dollar amount.

    • Quitclaim
    • deeds are also commonly used in divorce settlements where an ex-spouse removes
    • himself from title, and in cases where a lien or other interest needs to be
    • removed from title, such as when a lender releases its interest in real
    • property after a mortgage loan has been satisfied in full.



    • Refer
    • to the sample quitclaim deed in the exhibit to your textbook. Take a moment to understand the concurrent
    • ownership arrangement that results from this quitclaim deed.
  22. Other
    Types of Deeds
    •Executor’s Deed

    • –conveys title out of the estate of a
    • deceased person whose last will and testament was probated

    •Administrator's deed

    • –conveys title out of the estate of a
    • deceased person who did not have a will probated

    •Trustee's deed

    • –conveys title by a trustee under the
    • terms of a trust

    •Guardian's deed

    –conveys title on behalf of a minor.

    •Corrective deed

    • –fixes an error in a conveyance in a
    • property's chain of title


    • In certain situations, a specialized deed
    • will be used to transfer ownership of real property. In some of these instances, a court order
    • must be obtained granting permission for the conveyance. Other types of special
    • purpose deeds will be discussed later in the course.
  23. Transfer
    Tax
    • •Georgia
    • imposes a transfer
    • tax on
    • most conveyances of real property

    • •The
    • tax is based upon either the purchase price of the property or the estimated
    • fair market value of the property

    • •Certain
    • types of conveyances are exempt from the payment of transfer tax


    • GA
    • transfer tax statute is O.C.G.A. § 48-6-1. The statute should be consulted for
    • the most current formula for calculating transfer tax.



    • Examples
    • of exemptions from transfer tax - For example, a gift deed and a deed that is
    • granted in the course of a divorce do not require the payment of transfer
    • tax. O.C.G.A. § 48-6-2.
  24. PT-61
    Form: Declaration of
    Transfer Tax
    • •A
    • transfer tax declaration, known as the PT-61 Real Estate Transfer Tax Form,
    • must be completed electronically for every transfer of real property in Georgia

    • •No
    • fee for electronic filing of the PT-61 form

    • •A
    • hard copy of the completed PT-61 form must also be submitted along with the
    • deed to the clerk’s office

    • •Even
    • if there is no transfer tax due on the transaction, a PT-61 must be submitted
    • to notify the taxing authority of the transfer of ownership of the property and
    • its exempt status from the payment of transfer taxes.

    • •While
    • the hard copy of the PT-61 is submitted with the deed, the PT-61 is not
    • recorded in the public records.


    • The
    • PT-61 form may be accessed online and submitted electronically through the
    • website for the Georgia Superior Court Clerks Cooperative Authority (which at
    • the time of print is www.gsccca.org).
    • The clerk’s office will forward the hard copy of the PT-61 to the taxing
    • authority.
  25. Recording
    Deeds in the Public Records
    • •Deed
    • must be recorded, or filed, in the public records

    • •File
    • deed in the county where the real property is located

    • •The
    • Superior Court Clerk for each county maintains the public records for that
    • county

    • •The
    • fee to record documents in Georgia is standardized across the state and is
    • calculated according to the number of pages per document

    • •The
    • original documents must be sent for recording.
    • Photocopies are not acceptable and will be rejected


    • •Must
    • include a check to cover recording fees

    • •The
    • check for recording fees may include the total amount of recording fees due for
    • all documents that are being recorded in connection with the closing.

    • •The
    • PT-61 form should not be included in the recording fees calculation, since this
    • form is not recorded in the public records.


    • •A
    • second check must be submitted with the documents made payable to the Georgia
    • Department of Revenue to cover any transfer tax due on the transaction.

    • •The
    • transfer tax and the recording fees may not be combined on one check.


    • •Required
    • 3-inch margin at the top of the first page of every real estate document
    • recorded in the public records

    • •If
    • a deed is faulty for any reason, in substance or format, the attorney who
    • handled the transaction must take corrective measures to fix the error
  26. Recording
    of Deeds, Cont.
    • After
    • the deed of conveyance is executed by the grantor, and witnessed and notarized,
    • it should be recorded, or filed, in the public records of the county in which
    • the property is located. The legal
    • description of the property will indicate the county to which the deed should
    • be sent.



    • Current
    • recording
    • fees
    • should be confirmed before sending documents for recording in the public
    • records.


    • A
    • check for recording fees should be made payable to the county and must
    • accompany the real estate documents to be recorded.



    • The
    • PT-61 form should not be included in the recording fees calculation, since this
    • form is not recorded in the public records.



    • As
    • mentioned previously, a hard copy of the electronically filed PT-61 form and
    • any check for transfer tax should be sent to the clerk’s office, who will
    • forward them to the Georgia Department of Revenue.


    • Pursuant
    • to O.C.G.A. § 15-6-61, a three-inch margin must appear at the top of the first
    • page of every real estate record, including deeds, sent for recording.

    • In
    • the event a real estate record is rejected by the recorder’s office for
    • noncompliance with recording rules or procedures, the closing attorney’s office
    • must correct the error and re-send the document for recording.
  27. Deed Preparation
    • •Attention
    • to detail



    • •What
    • if a mistake is made?



    • •Methods
    • to correct deed errors
  28. Re-record Original Deed
    • •The
    • original deed is re-recorded in the public records

    • •Make
    • a notation at the top of the deed as to the errors that have been
    • corrected

    • •If
    • the original execution and witnessing of the deed was done properly, there is
    • no need for the parties to re-sign the deed
  29. Record a Corrective Deed
    • •Record
    • a new, replacement deed in the public records



    • •A
    • corrective deed is signed by the grantor



    • •States
    • the errors being corrected



    • •References
    • the recording information of the original deed


    • The
    • corrective deed fixes any error made in a previous deed in the property’s chain
    • of title
  30. Record a Scrivener’s Affidavit
    • •A
    • sworn statement made under oath to correct non-substantive errors in a deed



    • •Must
    • state the errors being corrected



    • •Must
    • reference the original deed



    • •Record
    • the scrivener's affidavit in the public records


    • These
    • minor typographical errors made by the attorney in a prior recorded deed did
    • not affect the substance or validity of the deed, but nonetheless are errors
    • that should be corrected to preserve the integrity of the chain of title to the
    • property.



    • The
    • attorney should use his professional judgment in determining whether a
    • scrivener's affidavit is the appropriate corrective measure. A lot of attorneys don’t like to use a
    • scrivener’s affidavit, because it’s an admission of a mistake. Although, in reality, any corrective measure
    • taken to fix deeds is the result of some type of error, usually made by the
    • attorney in the preparation of the deed or the overseeing of signatures on the
    • deed.



    • Closing
    • attorneys must use their judgment when deciding which of the three above
    • methods of deed correction is most appropriate in a given situation.
  31. Introduction
    to Recording Statutes
    • •To
    • keep an accurate record of the real estate transactions within the state

    and

    • •to
    • determine whether third party interests attached to real property prior to or
    • after a conveyance of the property to a new owner


    • For
    • example, recording statutes are used to determine ownership priority between
    • two grantees to which the same piece of property has purportedly been conveyed
    • by the same grantor.
  32. Introduction
    to Recording Statutes
    • •To
    • keep an accurate record of the real estate transactions within the state

    and

    • •to
    • determine whether third party interests attached to real property prior to or
    • after a conveyance of the property to a new owner
  33. Types
    of Recording Statutes
    • •race
    • statutes



    • •notice
    • statutes (also known as pure notice)



    • •race-notice
    • statutes
  34. Race
    Recording Statutes
    • •The
    • simplest type of recording statute to grasp



    • •But,
    • the fewest number of states utilize this type of recording statute



    • •Which
    • party wins the “race to the courthouse”?
  35. Application of Race Recording Statute to
    our Hypothetical
    • •Who
    • is the owner of the property?

    Answer: Charles



    •Why?

    • Answer:
    • Charles recorded his deed before Betty recorded her deed. Therefore, he “won the race to the
    • courthouse.”


    • While
    • Betty would not own the property, she would have a claim for breach of contract
    • against Arlo.



    • Note
    • that the fact that Charles has no knowledge of the prior transfer to Betty does
    • not affect the analysis of who will hold valid title to the property. Even if Charles was aware of Arlo's
    • earlier transfer of the property to Betty, by winning the race to the
    • courthouse Charles would be deemed to be the owner of the property. If Charles had waited until March 5 to record
    • his deed, then Betty would be the owner of the property, since she recorded on
    • March 4.
  36. Notice
    Recording Statutes
    • •Must
    • look at the facts and determine which party or parties is a bona
    • fide purchasers for value

    • •A
    • bona fide purchaser for value (BFP) is a party who purchases property in
    • good faith and for
    • valuable consideration,
    • without
    • notice of
    • any prior claims on the property

    • •To
    • qualify as a bona fide purchaser, a transferee must not have constructive or
    • actual knowledge of any prior transfers.


    • Approximately
    • 18 states utilize a notice-type recording statute.



    • The
    • notice statute tends to be the hardest of the 3 types of recording statutes for
    • students to grasp



    • Under
    • a notice statue, to determine the priority of ownership of real property
    • purportedly conveyed to two or more grantees by a common grantor, it is
    • necessary to determine whether the grantees qualify as bona fide purchasers for
    • value.




    • In
    • notice statute jurisdictions, the most recent transferee who qualifies as a
    • bona fide purchaser for value will be deemed to be the owner of the property,
    • regardless of when his deed is recorded.
  37. Bona Fide Purchasers for Value (BFPs)
    • •In
    • a notice recording statute, if there is more than one BFP, the most recent BFP
    • is deemed to be the owner of the property



    • •It
    • does not matter when a previous BFP or subsequent BFP recorded his deed


    • Whether
    • a subsequent transferee has actual knowledge of any prior transfers will be a
    • question of fact for the court to decide.
    • Whether a subsequent transferee has constructive knowledge of a prior
    • transfer will be determined by the date the prior deed was recorded. If a prior transferee recorded his deed
    • before the date a subsequent transferee receives his deed, then the subsequent
    • transferee would be deemed to have constructive knowledge of the previous deed
    • (because the public is charged with constructive knowledge of all publicly
    • recorded deeds), and would therefore not qualify as a bona fide purchaser for
    • value.
  38. Questions to Ask
    • (1) Did
    • the subsequent transferee have constructive knowledge of the prior transfer
    • (had the prior deed been recorded at the time the subsequent purchase received
    • his deed)?



    • (2) Did
    • the subsequent transferee have actual knowledge of the prior transfer?


    • When
    • analyzing a fact scenario in which title to a parcel of property is purported
    • to be transferred to two different transferees by a common grantor, under a
    • notice statute the two factors to examine are: (factors are listed on the
    • slide)

    • If
    • the answer to either of these questions is "yes," then the second
    • transferee will fail to qualify as a bona fide purchaser for value, and
    • ownership will vest in the original transferee.
    • If the answer to both questions is "no," then the second
    • transferee will qualify as a bona fide purchaser for value, and will be deemed
    • to have valid title.
  39. Application
    of Notice Recording Statute to our Hypothetical
    • •Who
    • is the owner of the property?

    • Answer: Charles,
    • since

    • (1) Charles did not have constructive notice
    • of Betty's deed, because it had not been recorded on the date Charles received
    • his deed, and


    • (2) Charles did not have actual knowledge of Arlo's
    • prior transfer to Betty



    •Why?

    • Answer: Even
    • though Betty was also a BFP, Charles is the more recent BFP, and under a notice
    • statute, the more recent BFP owns the property
  40. Race-Notice
    Recording Statutes
    • •The
    • Georgia recording statute appears below:


    • Every deed conveying lands shall be
    • recorded in the office of the clerk of the superior court of the county where
    • the land is located. A deed may be
    • recorded at any time; but a prior unrecorded deed loses its priority over a
    • subsequent recorded deed from the same vendor when the purchaser takes such
    • deed without notice of the existence of the prior deed.


    O.C.G.A. § 44-2-1
  41. Notice”
    Aspect of Race-Notice Statute
    • 1) Did the subsequent transferee have constructive knowledge of
    • the prior transfer (had the prior deed
    • been recorded at the time the subsequent
    • purchase received his deed?


    • (2) Did the subsequent transferee have actual
    • knowledge of the prior transfer?



    (3) Of the bona fide purchasers for value, who was the first to record his or her deed?
  42. Application
    of Race-Notice Statute to our Hypothetical
    • •Who
    • is the owner of the property?

    • Answer: Charles,
    • since

    • (1) Charles did not have actual or
    • constructive notice of Betty's deed, and

    (2) Charles won the race to the courthouse

    •Why?

    • Answer: Of
    • the two BFPs, Charles beat Betty to the courthouse
  43. Highlights
    •A written deed of conveyance accomplishesthe transfer of ownership of real property from a grantor to a grantee. •• Deeds must be recorded in the publicrecords in order to put the public on constructive notice of the deed and toensure the grantee’s ownership rights with regard to the property.

    • •Georgia law recognizes several types of
    • deeds of conveyance - general warranty deed, limited warranty deed, quitclaim
    • deed and other specific-use deeds.


    • •The type of deed signed by the grantor
    • determines the level of warranty being given with regard to the quality of
    • title (as encompassed in the deed covenants) being transferred.


    • •In addition to including all of the
    • essential components in a written deed of conveyance, proper steps must be
    • taken to properly record the deed in the public records and pay any fees
    • associated with the recording.



    • •Recording deeds in the public records is
    • a requirement in Georgia per its Race-Notice statute.

    • •You should be able to distinguish between
    • the three types of recording statutes and apply them to fact patterns to
    • determine which party would own the property.
  44. Title to Real Property
    •“Title" refers to property ownership

    • •Encumbrances and governmental interests
    • that attach to real property can adversely affect the quality of title

    • •Title insurance is a
    • type of insurance policy that protects a policyholder against losses resulting
    • from defects in title

    • •A title insurance company
    • issues title insurance policies and defends property owners and lenders against
    • adverse third party claims to real property
  45. •Good and marketable title is title to
    real property that a reputable title insurance company is willing to
    insure


    •Does not refer to the physical condition
    of real property

    •Does not refer to real estate market
    conditions
    “Good and Marketable” Title
  46. How do we ascertain the quality of title?
    • •By performing a title
    • examination, or
    • search, of the real property records for the county in which a parcel of real
    • property is located

    • •Individuals who perform title searches
    • are called title
    • examiners

    • •A property’s chain
    • of title is a
    • public record of the history of conveyances between all current and past owners
    • of the property

    • •Chain of title also reveals how current
    • and past owners’ actions have affected the property’s title
  47. Problems discovered during a title exam
    • •Title defect -
    • the
    • absence of something necessary for the total validity of title


    • •More serious title defects can delay or
    • prevent a real estate transaction from being consummated and are called clouds
    • on title


    •Examples of clouds on title
  48. Actual
    and Constructive Knowledge
    • •Actual knowledge -
    • matters that we see, learn about or are told about


    • •Constructive knowledge -
    • matters that by law we are presumed to know.
    • In the context of real estate, the public is deemed to have constructive
    • knowledge of all matters contained in the public records.
  49. Information Needed to Perform a Title
    Exam
    • •Legal
    • description

    • •Name
    • of the current owner (also known as the record title holder)

    • •The
    • current owner’s and his vesting deed should be the most recent deed in the
    • chain of title

    • •A full
    • title search
    • covers the most recent 50 years of a property chain of title; a limited
    • title search
    • covers fewer years
  50. Steps to Perform a Title Exam
    • •Step
    • 1: Tax Assessor's Office

    • - information
    • on property transfers

    • - status
    • of real property taxes


    Delinquent real property taxes take priority over other encumbrances
  51. Step 2: Plat Index
    • -
    • Alphabetical listing of all subdivisions in the county

    • - A plat
    • is an aerial drawing of the subdivision's roads,
    • common areas and individual lots

    • - Depicts
    • lot sizes and the minimum amount of space
    • required to be maintained between buildings
    • and property lines

    • - Easements
    • are sometimes shown

    • - Restrictive
    • covenants are typically referenced on
    • the plat
  52. Step 3: Grantee Index and
    Grantor Index
    • The Grantee Index is
    • an alphabetical listing of all recipients who have obtained a
    • real property interest within a certain time period


    • - The Grantor
    • Index is
    • an alphabetical listing of all persons or entities who have conveyed a
    • property interest within a certain time period
  53. Grantee Index
    • •An alphabetical index by last name (or
    • entity name) of all parties who have been granted a real property interest
    • during a given time period


    • •Work backwards from the present to the
    • past
  54. Grantor Index
    • •An alphabetical index by last name (or
    • entity name) of all parties who have granted a real property interest during a
    • given time period


    • •Title examiner works his way forward in
    • time through the Grantor Index from the past to the present
  55. Other Information About the Deed Room
    • •Every day, the clerk’s office will post
    • an effective
    • date to
    • notify the public of the day through which real estate records have been
    • recorded

    • •To cover the gap in time between the
    • effective date and the current date, the title examiner will return to the deed
    • room to update the title search as close to the closing date as possible

    • • The updating process is sometimes
    • referred to as a “date down”
  56. Step 4: Other Records to Examine
    •Lien Books


    •Uniform Commercial Code (UCC) Index


    •Lis Pendens


    •Probate Court Records
  57. Creating a Title Report
    • •Title examiner will prepare a title
    • report, or
    • a title abstract, to summarize the results of the title exam


    • In
    • some instances, a closing attorney will be asked by the title insurance company
    • or the borrower's lender to issue` a title opinion
    • letter, which is the attorney's professional judgment as to the status of the
    • title
  58. What is a commitment for title insurance?
    • •A
    • document that sets forth the terms under which a title insurance company will
    • issue title insurance on real property



    • •The
    • format of title commitments is created by the American Land Title Association
    • (ALTA)
  59. Who prepares the title commitment?
    • •In
    • residential real estate, the closing attorney handling the purchase and sale or
    • refinance will typically prepare the title commitment

    • •The
    • closing attorney acts as an agent for the title insurance company

    • •Attorneys
    • frequently delegate to a paralegal the task of preparing a title commitment

    • •Commitments
    • are generated on the computer using software provided by the title company
  60. Information used to prepare
    a title commitment
    • General
    • Information:
    • Title commitments contain general language applicable to all properties

    • Property-Specific
    • Information:
    • The results of a title examination are used to ascertain:

    –Chain of title information

    –Encumbrances

    –Clouds on Title
  61. Other information relied upon by the
    title company
    • •Tax Records
    • - Need to ascertain the status of real property
    • taxes for the parcel

    •Survey (mostly in commercial real estate)

    •Affidavits

    • - Sworn
    • statement made under oath by the current property owner about items that could
    • adversely affect the property's title
  62. Who may be issued a title commitment?
    • •Owner’s
    • Commitment

    -for the property owner

    • •Loan
    • Commitment (lender’s commitment)

    -protects a lender

    • •An
    • owner’s and lender’s commitment may be generated, instead of two separate
    • commitments
  63. Components of a Title Commitment
    • •Schedule
    • A (general information)


    • •Schedule
    • B-1 (requirements)


    • •Schedule
    • B-2 (exceptions to coverage)
  64. Schedule A:
    General Information
    • •Type
    • of title insurance policy to be issued

    • •Name
    • of the proposed insured (owner and/or lender)

    • •Monetary
    • amount of coverage (purchase price or loan amount)

    • •Effective
    • date of the commitment (date of the title exam)
  65. Schedule B-1:
    Requirements
    • •Lists
    • items that must be fulfilled or resolved for the title policy to be issued

    • •Example
    • – the proposed insured (i.e., the buyer) must actually buy the property

    • •Example
    • – taxes must be paid and other clouds on title must be removed

    • •These
    • issues must be resolved prior to or at closing
  66. Schedule B-2:
    Exceptions to Coverage
    • •Items
    • that are specifically exclude from coverage


    • •If
    • there is a problem with title that originates from one of these exceptions to
    • coverage, the title insurance company will deny coverage under the title
    • insurance policy
  67. Examples of Exceptions to Coverage
    • •Gap
    • exception

    • •Survey
    • exception

    • •Loan
    • exception

    • •Known
    • encumbrances

    • •Endorsements can
    • be purchased at additional cost to provide expanded coverage under a title
    • policy
  68. Purpose of title insurance
    • •Provides coverage in the event title to a
    • piece of real estate must be defended against an adverse claimant

    • •Physical damage to property is not
    • covered

    •Not recorded in public records

    • •Does not guarantee that the policy holder
    • will not lose the property

    • •Pays to defend the policy holder’s
    • interest in the property and reimburses the property owner if the property is
    • lost or for other financial losses as a result of the adverse claim
  69. Why purchase title insurance?
    •Mistakes made by the title examiner

    • •Mistakes made by the clerk’s office when
    • indexing real estate records

    •Fraud, forgery

    •Missing heirs

    • •The deed covenants in a warranty deed
    • made by a seller might not offer
    • adequate protection
  70. Types of Title Insurance Policies
    • •Owner’s policy -
    • insures the owner of the property for monetary losses up to the owner's equity
    • in the home, plus expenses incurred in the process of defending title. Protects
    • the policyholder and his devisees and heirs for so long as an interest is
    • retained in the property

    • •Loan policy -
    • insures the lender while the loan is outstanding. Coverage amount decreases as the amount of
    • outstanding loan decreases
  71. Cost of Title Insurance
    •No statewide set rate in Georgia

    •Range of $1 - $3 per $1,000 of coverage

    • •Simultaneous issue –
    • Can reduce costs if an owner’s policy and loan policy are generated at the same
    • time
  72. Time Period Covered by Title Insurance
    •“Backwards looking”

    • –insures
    • against title defects that were created prior to the issuance of the title
    • policy and whose existence becomes known after the closing


    • –Differs
    • from other types of insurance that are “forward looking” and cover events that
    • happen after the issuance of the policy
  73. Covered Risks
    •Defects, Liens and Encumbrances


    •Marketable Title


    •Access to a Public Road


    •Lender’s Priority Interest
  74. Exceptions to Coverage in a Standard
    Title Insurance Policy
    •Zoning and Other Governmental Regulations

    •Eminent Domain

    •Known Unrecorded Title Defects

    •Matters Resulting in No Loss

    •Title Defects Created After Closing

    •Environmental Matters
  75. Transferability of Title Insurance
    Policies
    • •Owner’s policy -
    • not transferable to a subsequent purchaser of the real property


    • •Loan policy
    • - transferable if the original lender
    • sells its loan to another lender on the secondary loan market. The loan
    • policy is tied to the loan, not the lender.
  76. Filing a Title Insurance Claim
    • •Notify
    • title insurance company of challenge to title

    • •If
    • title insurance company agrees it’s a covered risk, the company will handle
    • negotiations and pay the policyholder (up to the policy amount) for financial
    • losses

    • •If a
    • lawsuit is brought by a third party against the policyholder, the title
    • insurance company will provide the policyholder’s defense.
  77. Brief Summary of Title Insurance
    • •A property’s chain of title reveals
    • current and past owners of the property and encumbrances that affect the
    • property

    • •Results of a title search are compiled
    • into a title report, which is used to prepare a commitment for title insurance

    • •Clear title (good and marketable title)
    • is title that a reputable title insurance company is willing to insure

    •Any Schedule B-2 requirements should be resolved prior to or at the closing

    • •A title insurance policy protects the
    • insured against many, but not all, types of title defects

    • •Loan policies protect the lender’s
    • interest in the real estate, while owner’s policies protect the owner’s
    • interest in the real estate
  78. Legal
    Descriptions
    • •A
    • property’s legal
    • description is
    • an exact description of the location and boundaries of a parcel of
    • property


    • •A
    • legal description encompasses more than just the property’s street
    • address


    • •Many
    • real estate documents are required to include a legal description
  79. Types
    of Legal Descriptions
    • •Short
    • legals
    • (used for subdivided property in Georgia and some other states)

    • •Long
    • legals,
    • i.e., metes and bounds legals
    • (used for non-subdivided property in Georgia and some other states)

    • •Government
    • Rectangular Survey descriptions (not used in Georgia)
  80. Short
    Legal Descriptions
    • •Used
    • to legally describe property located within a recorded subdivision

    • •Short
    • legal descriptions are usually brief

    •Sample short legal description:

    • ALL THAT TRACT OR PARCEL OF LAND lying
    • and being in Land Lot 60 of the 16th District, Cobb County, Georgia, being Lot
    • 7, Block E, Phase II, of Plumeria
    • Heights Subdivision, as per plat recorded in Plat Book 17, Page 128, of the
    • Cobb County, Georgia records.
  81. Long
    Legal Descriptions
    • •Also
    • known as “metes and bounds” legal descriptions

    • •The
    • property is not subdivided, so every boundary line must be described

    • •Surveys
    • are used as the basis for a long legal description

    • •A
    • survey is
    • an aerial-view drawing of real property
  82. Types
    of Surveys
    • •Boundary survey -
    • depicts a property’s boundaries and topographical characteristics

    • •As-built survey -
    • more detailed and depicts the location of any natural and man-made structures
    • or easements located on the property

    • •ALTA/ACSM survey standards -
    • surveys should be prepared accoring to these
  83. General
    Format of a “Long Legal”
    • Part
    • 1 –
    • Describes the general location of the property by reference to a land lot,
    • district, section, if applicable, and county (this is the same first step in a
    • short legal description).


    • Part
    • 2 -
    • Describes the location of the Point of Beginning (“POB”), which is located
    • somewhere on the property and serves as the starting place for the outline of
    • the property’s boundary lines. Surveyors
    • use a variety of methods to ascertain a property’s POB.


    • Part
    • 3 -
    • Traces around the boundary of the property, starting and ending at the
    • "POB." As with a short legal
    • description, you might also include the property's street address.


    • Part
    • 4 -
    • References the survey that was used to prepare the long legal, and sometimes
    • also gives the total acreage of the property.
  84. How
    to Read a Survey
    • •Each
    • boundary line depicted on the survey will be described in the long legal by a call
    • which includes the course, or direction, of the line, and the distance, or
    • length, of that line.

    • •Sample
    • call: “Thence run North 52°72’21” West a distance of 34.23 feet to an iron
    • pin.”
  85. Sample
    Long Legal Description, part 1
    • ALL
    • THAT TRACT OR PARCEL OF LAND lying and being in Land Lot 107, 17th District, Fulton County, Georgia, being
    • more particularly described as follows:
    • COMMENCE at the point of intersection of the northerly right-of-way line
    • of 14th Street (variable right-of-way width) and
    • the westerly right-of-way line of Fowler Street (40 foot right-of-way width);
    • thence run northerly along and coincident with the westerly right-of-way line
    • of Fowler Street, a distance of 269.00 feet to an iron pin set, said pin being
    • the TRUE POINT OF BEGINNING;
  86. Sample
    Long Legal, part 2
    • FROM
    • THE TRUE POINT OF BEGINNING AS THUS ESTABLISHED, thence leave the westerly
    • right-of-way line of Fowler Street and run North 89°37'13" West, a
    • distance of 120.47 feet to a 1" solid pipe found; thence run North
    • 01°21'38" West, a distance of 49.36 feet to a 1/2" rebar found;
    • thence run North 89°59'38" East, a distance of 121.84 feet to a 1/2"
    • rebar found on the westerly right-of-way line of Fowler Street; thence run
    • along and coincident with the westerly right-of-way line of Fowler Street South
    • 00°13'49" West, a distance of 50.16 feet to an iron pin set, said pin
    • being the TRUE POINT OF BEGINNING. The
    • said property is also known as 1200 Fowler Street, Atlanta, Georgia, per the current
    • system of numbering houses in Fulton County, Georgia. Said legal description having been prepared
    • according to the survey of the 0.138 acre property by Surveyor Specialists,
    • dated November 25, 1999.
  87. Government
    Rectangular Surveys
    • •Based
    • upon the U.S. Public Land Survey System

    • •Divides
    • land into a series of rectangles by using intersecting hypothetical lines

    • •Further
    • divides areas into sections, townships, and ranges

    • •Example:
    • “The southeast quarter of the northeast quarter of Section 32, Township 1
    • North, Range 65 West of the Seventh Principal Meridian”
  88. Terms
    • •Execution - describes
    • the act of signing documents

    • •Signature blocks - the
    • area of the document where the parties’ signatures appear

    • •Witness/Unofficial Witness -
    • someone who attests that the signatures on a document are authentic

    • •Notary public (an
    • “official witness”) – someone who attests under oath that the signatures on a
    • document are authentic
  89. Warranty Deed Signature Block for
    Individual
    • IN
    • WITNESS WHEREOF, the undersigned has hereunto set hand and seal the day and
    • year first above written.

    • Signed,
    • sealed and delivered
    • in the presence of:

    • ______________ _____________(SEAL)
    • Witness Sally Seller

    • ______________
    • Notary Public
  90. Warranty Deed Signature Block for a
    Corporation
    • IN
    • WITNESS WHEREOF, the undersigned has hereunto set hand and seal the day and
    • year first above written.

    • Signed,
    • sealed and delivered
    • in the presence of: Big Country, Inc., a Delaware
    • corporation
    • ______________ By:_____________(SEAL)
    • Witness Betsy Briggs, President


    • ______________ Attest:
    • _____________(SEAL)
    • Notary Public Bo Smith, Secretary


    [Corporate Seal]
  91. Warranty Deed Signature Block
    for an LLC
    • IN
    • WITNESS WHEREOF, the undersigned has hereunto set hand and seal the day and
    • year first above written.

    • Signed,
    • sealed and delivered
    • in the presence of: Big Country, L.L.C., a GA
    • limited liability company
    • ______________ By:_____________(SEAL)
    • Witness Name: Jon Madison
    • Title: Manager ______________
    • Notary Public
  92. Warranty Deed Signature Block for a
    Limited Partnership
    • IN
    • WITNESS WHEREOF, the undersigned has hereunto set hand and seal the day and
    • year first above written.

    • Signed,
    • sealed and delivered
    • in the presence of: Big Country, LP, a Delaware
    • limited partnership
    • ______________ By:_____________(SEAL)
    • Witness Briggs Madison

    • General Partner
    • ______________ By: _____________(SEAL)
    • Notary Public Shawna Glee-Thomas

    General Partner
  93. What is a Business Entity?
    • •A
    • business entity is a legal "person" that has an identity separate and
    • apart from its owners


    • •All
    • business entities exist through statute


    • •Business
    • entities may enter into contracts to buy, sell and lease personal and real
    • property, and they may sue or be sued in their own name
  94. Types of Business Entities in Real Estate
    Transactions
    •Corporations

    •limited liability companies

    •limited partnerships


    • •While it is much less likely, you may
    • also encounter general partnerships or sole proprietorships
  95. Corporations
    • •A corporation is a
    • legal entity that may issue stock and is owned by its shareholders

    • •Formed by filing Articles
    • of Incorporation
    • with the Secretary of State and taking other organizational actions required by
    • state law

    • •Bylaws not
    • filed and govern the corporation’s management and operations. Bylaws are not filed with the Secretary of
    • State
  96. Corporations
    • •A corporation is a
    • legal entity that may issue stock and is owned by its shareholders

    • •Formed by filing Articles
    • of Incorporation
    • with the Secretary of State and taking other organizational actions required by
    • state law

    • •Bylaws not
    • filed and govern the corporation’s management and operations. Bylaws are not filed with the Secretary of
    • State
  97. Limited Liability Companies
    • •A limited
    • liability company
    • is a business entity that is owned by its members, whose liability to the
    • entity is limited to the amount of their capital investment in the LLC

    • •Typically
    • abbreviated "LLC" or "L.L.C.“

    • •File Articles
    • of Organization
    • with the Secretary of State

    • •Operating
    • agreement not
    • filed and governs the management and operation of the entity
  98. Partnerships
    • •A partnership is
    • the association of two or more individuals or business entities who jointly own
    • and carry on a business for profit


    • •A Partnership Agreement governs
    • the management and operation of the entity
  99. General Partnerships
    • •Each partner controls and manages the
    • business and assumes personal liability for its debts and actions

    • •A sole proprietorship is
    • essentially a general partnership comprised of only one person who controls the
    • business and assumes personal liability for its debts and actions
  100. Limited Liability Partnerships
    • •A very popular alternative to a basic
    • general partnership


    • •Typically abbreviated "LLP,"
    • "L.L.P.," or "Ltd."

    • •All of the partners control the business
    • without assuming risk of personal liability for its debts and actions

    • •Form by filing an Election
    • of Limited Liability Partnership with the Clerk of Superior Court of any
    • county in which the partnership has an office
  101. Limited Partnerships
    • •In a limited partnership,
    • there are one or more general partners, and the other partners are limited
    • partners

    • •Typically abbreviated "LP" or
    • L.P.“

    • •Formed by filing a Certificate
    • of Limited Partnership
    • with the Secretary of State

    • •Partnership Agreement not
    • filed and governs the management and operation of the entity
  102. Limited Partnership, Cont.
    • •General partners run the business and are
    • personally liable for debt


    • •Limited partners are “silent” partners
    • whose exposure is limited to their capital investment


    • •Georgia also recognizes an entity known
    • as a limited
    • liability limited partnership (typically abbreviated "LLLP"
    • or "L.L.L.P."), in which the general partners are not personally
    • liable for the debts and obligations of the entity
  103. Existence and Good Standing
    • •The Secretary of State (or
    • its equivalent office) for each state serves as custodian of corporate
    • records


    • •All businesses (except general
    • partnerships and sole proprietorships) must
    • file with the Secretary of State in order to be recognized as a valid
    • entity
  104. Secretary of State Requirements, Cont.
    • •To remain in good
    • standing, the
    • business entity must pay annual fees to the state to keep its registration
    • current


    • •If an entity conducts business in any
    • state other than the state of its formation, the entity must also be registered
    • as a foreign
    • entity in
    • that state
  105. Authority to Legally Bind an Entity
    • •A
    • person has legal
    • authority to
    • bind a business entity when that person has been properly authorized in
    • accordance with the terms of the entity’s organizational documents


    • •If a
    • person lacks legal authority to bind an
    • entity, then any contract, deed or other document signed by that person
    • will not be legally enforceable against the entity
  106. Business Entities Checklist
    • (1) Ascertain the proper name of the
    • business entity

    •Corporation: Look at the Articles of Incorporation

    •LLC: Look at the Articles of Organization

    • •LLP: Look at the Election of Limited Liability
    • Partnership contains the proper name of an LLP.

    • •Limited
    • Partnership (LP or LLLP):
    • Look at the Certificate of Limited Partnership
  107. Business Entities Checklist, Cont.
    • (2) Confirm the entity is in good
    • standing

    • •Corporation,
    • LLC and Limited Partnership (LP or LLLP):
    • Request
    • a good standing certificate from the Secretary of State


    • •LLP: LLPs do not have ongoing registration
    • fees with the Clerk of Superior Court in order to remain in good standing. Therefore, for a domestic (i.e.,
    • Georgia-formed LLP), there is no good standing certificate to obtain. However, if a foreign LLP is transacting
    • business in Georgia, that entity is required under Georgia law to register with
    • the Secretary of State of Georgia to obtain a certificate of authority to
    • transact business in Georgia
  108. Business Entities Checklist, Cont.
    • (3) Determine who has the legal
    • authority to sign documents on behalf of the business entity

    • •Corporation:
    • Check the bylaws or the minutes from a Board
    • of Directors meeting

    •LLC: Check the operating agreement

    • •LLP,
    • LP, or LLLP:
    • Check the partnership agreement
  109. Who Typically Has Authority to Bind an
    Entity?
    • •Corporation: President, chief executive officer or
    • vice-president solely or in conjunction with one or more other officers, such
    • as a secretary or treasurer

    • •LLC: One
    • or more managers of the LLC

    • •LLP,
    • LP, or LLLP:
    • One or more partners in an LLP, or one or more general partners in an LP
    • or an LLLP

What would you like to do?

Home > Flashcards > Print Preview