Public Recording System

State law determines the procedures for recording a deed with the County Recorder's Office for thepurpose of giving public notice and providing a way of maintaining the original form of the document. The recorded documentation is "PublicInformation" and because anyone is able to go into the and look up therecordings and records, it is less likely and more difficult for anotherperson to claim a right to a piece of Real Property, which makes arecorded claim more secure to the owner.The deed does NOT have to be recorded to be valid (if not recorded, another party can potentially claim ownership)

Recording Process

Notes the date & time the document is filed, and a unique recording numberCopy the document into the public recordList the document in the grantor and grantee indexesThey'll return the original document to the indicated party (usually to the Title company)

Constructive or legal Notice

Establishes priority of interests (first in time, first in right) based on the date/time of recording. EXCEPT property tax lien is the most powerful lien and will always supersede other liens no matter when it is filed.If you take out mortgages, they will be recorded in the public record to support (not prove) ownership

Due diligence

Inspect the property for visible claims and actual notice, such as parties in possession of encroachments (home inspections).Inspect public records for constructive/legal notice, such as liens and person on the title (public records search)Part of the buyer's due diligence is to have someone inspect both the property and public recordsUsually, Title or Abstract companies are hired to do this

Requirements for Recording

- Deeds, mortgages, and deeds of trust, contracts for deed, easements, and long-term leases are among the types of documents that are usually recorded- Recorded documents should be executed (signed) (most states require documents to be acknowledged (NOTARIZED) to be recorded. this confirms that the transfer is voluntary and not under duress)- A deed that is not recorded lacks CONSTRUCTIVE or legal notice of ownership-Creates a cloud on title- Recording fee and transfer taxes are determined by state law (known as: deed tax, documentary fees, tax stamp, mortgage registry tax, and who pays. Typically paid when the deed is recorded. )

Marketable (Merchantable) Title

A buyer would buy it because it is free from reasonable doubt. (e.g. It would be hard to sell a bike in poor condition that lacks a title, therefore it isn't considered marketable. )- Good or clear title, reasonably free from the risk of litigation over possible defects- Buyers goal is to obtain marketable title-Brokers & Salespeople MUST KNOW THE REQUIREMENTS to make documents valid including: * What makes a title marketable * How ownership issues may impact the transfer of title (e.g. a man tries to sell a property but he is separated from his wife....This is an issue bc she is a co-owner & he can't just sell the property on his own) * The essential elements of contracts and deeds * Who is required to sign each document in the transaction

title search

The examination of public records by a title examiner relating to real estate to determine the current state of the ownership. Establishes a CHAIN OF TITLE-Identifies ownership, wills, judicial proceedings, and other encumbrances that may affect title-The search is conducted from the present to the past/original source of title. *The original source may be a land grant or U.S. patent

Marketable Title Act

The act is designed to eliminate obsolete defects in a chain of title. If a chain of title can be traced back for a period of years (e.g. 30,60) without a problem, it becomes a marketable title.

Chain of Title

History of successive recorded ownership documents linked togetherThe examiner seeks an unbroken chain If there is a gap, the person or their heirs may have an unknown interest in the property. Makes the property less marketable

Abstract of Title

The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.- Created by a title search- The seller is expected to furnish an updated abstract, which shows all CURRENT AND PAST recorded interests.- buyers attorney examines the abstract and traces the chain of title to determine marketability - After tracing the chain of title, the attorney renders a title opinion: *Shows the current status of rights * Lists objections * Often called a certificate of title

Cloud on Title

Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed (small issues like an unrecorded name change) or lawsuit to quiet title (larger issues).

standard exceptions to a title insurance policy

Those exceptions to a certificate of title or attorney opinion are prepared by an attorney. They are NOT covered.It is the buyer's responsibility to do ACTUAL NOTICE due diligence and look to see if there are any- Unrecorded mechanic's liens- Current possession (insurance only covers current ownership)- do a survey to see encroachments, zoning compliance, and building regulation violations

Special Exceptions

Constructive Notice (not covered by title insurance)Encumbrances found during an examination of the abstract of title are and can include:-restrictive covenants (houses in a subdivision look the same)-Utility easements- outstanding mortgage (which the seller needs to agree to pay w the proceeds from the closing)- taxes (current & not in lien status). The buyer may offer objections before closing

Title Insurance

A policy that protects the insured against loss or damage due to defects in title.- Best method for insuring Marketable Title (bc an attorney may make a mistake & you'd have to sue them which may be difficult. BUT if a title insurer makes a mistake, they'll cover it)-Title search performed by examiner -Then title insurance company issues a title report and commitment *The commitment lists policy exceptions (standard and special exceptions which are not covered), recorded defects, and encumbrances

Title Report/Certificate of Title

A report issued after a title search by a title insurance company, listing all defects and encumbrances of record. Shows only the CURRENT STATUS of ownership. it does NOT show the history of owners or history of encumbrances bc it is NOT an Abstract of Title

Title Insurance Company

Conducts a title search, reviews the abstract of title and issues a title report that shows current ownership, encumbrances, Standard exceptions, special exceptions and marketability.

Types of Title Insurance Policies

Buyers should get both types, owner's policy & lender's policystandard OWNER'S POLICY extended OWNERS COVERAGE POLICYLENDER'S POLICYThe insurance premium is paid for ONCE at closing

Standard Owner's Policy

- Protects the buyers and their heirs against problems discovered after closing except for the exceptions/problems listed in the title report. It covers matters of record including errors in the title examination, the abstract, public record (such as misfiled documents), and hidden defects in the public records (forgery, incompetency, misrepresented marital status, and improperly prepared deeds) .- Cost of coverage is determined by the sale price of the property- Paid by the seller or buyer as per the purchase contract (if the seller loses the abstract of title, they can negotiate w the buyer & pay for the title insurance)-Coverage continues until the property changes ownershipTakes effect after closing

Extended Owner's Policy

adds protection against problems that are not a matter of public record but would probably be discovered through inspection (Actual notice) of the property such as: * Some Standard Exceptions are INCLUDED in the extended policy bc the title company will usually send someone to do Actual notice. * includes possession or adverse possession issues * includes survey to see encroachments * Gap period - covers from title commitment through recording the deed after closing when the title policy is usually issued * unrecorded liens (e.g. mechanic liens)

Lender's Policy

Title insurance issued for the unpaid mortgage amount to protect the lender against title defects.- Protects the lender/mortgagee- Coverage is based on the loan amount- often paid for by the buyer but the seller can also pay- Coverage diminishes with each loan payment and ceases to exist when the load is satisfied

Items not covered in any Title Insurance Policy

All exceptions listed in the commitment or policy including liensDefects known to the buyer and sellerZoning use or changes

Suit to Quiet Title

A court hearing to determine ownership, recognize valid claims, and quiet invalid claims. - Used to clear clouded title- Establishes ownership under adverse possession You will sue all parties that could possibly have an interest in a disputed piece of land and require them to bring evidence of ownership. The Court will review the evidence, make a judgement, and put it in the court record.Steps:1. A lis pendens is filed (recorded notice of a pending lawsuit affecting title to property)2. All parties with a claim must present evidence of the claim in court3. The court will hear/judge the claims4. Once the court order is recorded, the cloud on the title is CLEARED

Race Notice

Term referring to the fact that the date and time of recording determines priority of recorded documents, liens, etc. Comes from a "race" to the courthouse. (Example: If Jones buys a property on January 1, 2006, and Smith buys the same property from the same seller on April 10, 2006 and records his deed first, Smith owns the property.)