-
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
-
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.
-
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
-
Covenant of Seisin
- The
- grantor has legal ownership of the property
-
Covenant of Right to Convey
- The
- grantor has the right to sell the property
-
Covenant of Quiet Enjoyment
•
- There
- are no unresolved claims or issues that could interfere with the grantee's use
- and enjoyment of the property
-
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
-
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
-
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
-
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.
-
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
-
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.
-
Preamble
- •Contains
- the date of the deed
and
- •the
- identity of the grantor(s) and grantee(s)
-
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
- 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
-
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
-
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
-
Testimonium
- •The
- area of the deed in which it is signed
- •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.
-
Other
Deed Components
- –Address where the original deed should be
- returned after it has been recorded in the public records
–
- –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."
-
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
-
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.
-
Quitclaim
Deeds
- •Conveys
- whatever title the grantor possesses
- •Does
- not warrant that the title is valid
- •Does
- not offer any deed covenants
- •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.
-
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.
-
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.
-
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.
-
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
-
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.
-
Deed Preparation
•
- •What
- if a mistake is made?
•
- •Methods
- to correct deed errors
-
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
-
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
-
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.
-
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.
-
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
-
Types
of Recording Statutes
•
- •notice
- statutes (also known as pure notice)
•
-
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”?
-
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.
-
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.
-
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.
-
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.
-
Application
of Notice Recording Statute to our Hypothetical
- •Who
- is the owner of the property?
- (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
-
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
-
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?
-
Application
of Race-Notice Statute to our Hypothetical
- •Who
- is the owner of the property?
- (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
-
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.
-
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
-
•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
-
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
-
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
-
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.
-
Information Needed to Perform a Title
Exam
- •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
-
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
-
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
-
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
-
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
-
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
-
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”
-
Step 4: Other Records to Examine
•Lien Books
•Uniform Commercial Code (UCC) Index
•Lis Pendens
•Probate Court Records
-
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
-
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)
-
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
-
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
-
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
-
Who may be issued a title 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
-
Components of a Title Commitment
- •Schedule
- A (general information)
- •Schedule
- B-1 (requirements)
- •Schedule
- B-2 (exceptions to coverage)
-
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)
-
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
-
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
-
Examples of Exceptions to Coverage
- •Endorsements can
- be purchased at additional cost to provide expanded coverage under a title
- policy
-
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
-
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
-
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
-
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
-
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
-
Covered Risks
•Defects, Liens and Encumbrances
•Marketable Title
•Access to a Public Road
•Lender’s Priority Interest
-
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
-
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.
-
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.
-
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
-
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
-
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)
-
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.
-
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
-
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
-
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.
-
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.”
-
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;
-
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.
-
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”
-
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
-
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
-
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]
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
-
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
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