Rights in real property - Creation

Learning Outcomes

This article addresses the methods by which rights in real property are created. It covers the requirements for valid deeds, including execution and delivery, the application of the Statute of Frauds to land contracts, and the doctrine of adverse possession as a means of acquiring title. After reading this article, you will be able to identify the essential elements for creating enforceable interests in land and analyze common MBE scenarios involving deeds, land sale contracts, and adverse possession.

MBE Syllabus

For the MBE, you must understand the fundamental methods of creating rights in real property. This includes formal transfers via deeds, contractual rights to acquire property, and acquisition through operation of law like adverse possession. You should be prepared to:

• Identify the requirements for a valid deed (writing, signature, description, intent, delivery, acceptance).
• Analyze issues related to the delivery and acceptance of deeds.
• Apply the Statute of Frauds to contracts for the sale of land.
• Recognize exceptions to the Statute of Frauds, particularly the doctrine of part performance.
• Understand the concept of marketable title as an implied condition in land sale contracts.
• Identify the elements required to establish title by adverse possession (actual, exclusive, open & notorious, hostile, continuous).
• Distinguish between permissive and hostile possession.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is NOT typically required for a valid deed?
   1. A description of the property.
   2. The grantor's signature.
   3. Consideration.
   4. Words indicating an intent to transfer title.
2. A contract for the sale of land generally must be in writing to be enforceable under:
   1. The doctrine of equitable conversion.
   2. The Rule Against Perpetuities.
   3. The Statute of Frauds.
   4. The doctrine of merger.
3. To acquire title by adverse possession, the possessor's use of the land must be, among other things:
   1. Permissive.
   2. Secretive.
   3. Intermittent.
   4. Hostile.
4. Delivery of a deed requires:
   1. Physical transfer of the deed to the grantee.
   2. Recordation of the deed.
   3. The grantor's intent to make the deed presently effective.
   4. The grantee's signature on the deed.

Introduction

Interests in real property are created through various legal mechanisms. The most common method involves a formal transfer of title using a deed. Additionally, enforceable rights to acquire property arise through land sale contracts, which themselves must typically comply with the Statute of Frauds. Finally, title can be acquired through operation of law, most notably by adverse possession, where one possesses property in a specified manner for a statutory period. Understanding the requirements for each method is essential for analyzing property rights creation.

Creation by Deed

A deed is a written instrument that transfers an interest in real property. For a deed to effectively transfer title, it must meet several requirements related to its form, execution, and delivery.

Formal Requirements

1. Writing: A deed must be in writing, as required by the Statute of Frauds.
2. Signed by Grantor: The grantor (the person transferring the property) must sign the deed. The grantee's signature is not required.
3. Identify Parties: The deed must identify the grantor and the grantee.
4. Describe Property: The deed must contain an adequate description of the property being conveyed. While a formal legal description is best, any description that reasonably identifies the property is sufficient (e.g., street address). Parol evidence may be admissible to clarify ambiguities, but not if the description is wholly inadequate.
5. Words of Transfer: The deed must contain words indicating a present intent to transfer the real property (e.g., "grant," "convey").

Key Term: Deed A formal written instrument used to transfer an interest in real property from a grantor to a grantee.

Consideration is NOT required for a deed to be valid. Property can be transferred by gift deed.

Delivery and Acceptance

Transfer of title via deed requires both delivery and acceptance.

1. Delivery: Delivery refers to the grantor's intent to make the deed presently effective, meaning the grantor intends to immediately divest herself of title and vest it in the grantee. Physical transfer of the deed document is common evidence of this intent but is neither required nor sufficient on its own.
   • Intent is Key: The essential factor is the grantor's manifested intent that the deed operate immediately. Recording a deed creates a presumption of delivery. Retaining the deed generally creates a presumption of non-delivery.
   • Conditional Delivery to Grantee: Delivering a deed directly to the grantee with an oral condition generally makes the delivery absolute; the oral condition is disregarded.
   • Delivery to Third Party (Escrow): A grantor can deliver a deed to a third party (an escrow agent) with instructions to deliver it to the grantee upon the occurrence of specified conditions (e.g., payment of the purchase price). This is a valid conditional delivery. Title passes automatically upon satisfaction of the conditions.

Key Term: Delivery (of a Deed) The grantor's expression of intent to make a deed operative and pass title immediately. It does not necessarily require physical transfer of the document.

1. Acceptance: The grantee must accept the deed. Acceptance is usually presumed if the conveyance is beneficial to the grantee (e.g., for consideration or a gift). Rejection by the grantee defeats the transfer. Once accepted, returning the deed document to the grantor has no effect on title.

Worked Example 1.1

Grantor executes a deed conveying Blackacre to Grantee. Grantor keeps the deed in his safe deposit box with a note saying, "For Grantee upon my death." Grantor tells Grantee about the deed and the note. Grantor dies. Has delivery occurred?

Answer: No. Grantor did not manifest the intent to make the deed presently effective. By stating it was "upon my death," he indicated an intent for the deed to operate like a will, which requires testamentary formalities. Keeping the deed also raises a presumption of non-delivery.

Creation by Land Sale Contract

A land sale contract creates an equitable right in the buyer to obtain title to the property upon payment of the purchase price.

Statute of Frauds

Contracts for the sale of an interest in land must satisfy the Statute of Frauds.

Key Term: Statute of Frauds (Land Contracts) The requirement that contracts for the sale of an interest in land must be in writing, signed by the party to be charged, and contain essential terms (parties, property description, price/payment terms) to be enforceable.

• Essential Terms: The writing (or memorandum) must identify the parties, adequately describe the property, and state the price and manner of payment (if agreed upon).
• Signature: It must be signed by the party against whom enforcement is sought.

Exceptions to Statute of Frauds

An oral land sale contract may still be specifically enforced under the doctrine of part performance.

Key Term: Part Performance (Land Contracts) An exception to the Statute of Frauds allowing specific enforcement of an oral land contract if the buyer performs certain acts unequivocally referable to the existence of a contract.

• Acts Required: Most jurisdictions require at least two of the following three acts by the buyer:
  1. Payment of all or a substantial part of the purchase price.
  2. Taking possession of the property.
  3. Making substantial improvements to the property.
• Remedy: Part performance generally allows only specific performance, not money damages.

Worked Example 1.2

Seller orally agrees to sell Buyer her house for $200,000. Buyer pays Seller$20,000 as a down payment, moves into the house with Seller's permission, and spends $5,000 painting the interior. Seller then refuses to complete the sale. Can Buyer enforce the oral contract?

Answer: Yes, likely. Buyer has performed acts (payment, possession, improvements) that unequivocally indicate the existence of a contract. Under the doctrine of part performance, Buyer can likely obtain specific performance despite the lack of a writing satisfying the Statute of Frauds.

Marketable Title

Every land sale contract contains an implied covenant that the seller will provide marketable title at closing.

Key Term: Marketable Title Title reasonably free from doubt, meaning title that a reasonably prudent buyer would accept. It is free from defects that present an unreasonable risk of litigation.

• Defects Rendering Title Unmarketable: Encumbrances (mortgages, liens, easements, covenants), defects in the chain of title (e.g., adverse possession title not yet quieted), significant encroachments, and zoning ordinance violations typically render title unmarketable.
• Timing: The seller must furnish marketable title only at the closing. The buyer cannot rescind before closing based on unmarketability unless the defects are incurable.
• Remedy: If title is unmarketable at closing, the buyer can rescind, sue for damages, or seek specific performance with an abatement of the purchase price.

Creation by Adverse Possession

Title to real property can be acquired by adverse possession if a person occupies the property in a certain manner for the statutory period.

Key Term: Adverse Possession A method of acquiring title to real property by possessing it for a statutory period under certain conditions (actual, exclusive, open & notorious, hostile, continuous).

Elements

1. Actual Possession: The possessor must physically occupy the land in a manner consistent with how a reasonable owner would use it.
2. Exclusive Possession: Possession cannot be shared with the true owner or the public generally.
3. Open and Notorious Possession: Possession must be sufficiently visible and obvious to put a reasonable true owner on notice that a trespass is occurring.
4. Hostile Possession (Claim of Right): Possession must be without the true owner's permission. The possessor's state of mind (good faith belief in ownership vs. knowing trespass) is irrelevant in most jurisdictions. If possession starts permissively (e.g., tenant), it does not become hostile until the possessor clearly repudiates the permission.
5. Continuous Possession: Possession must be continuous throughout the statutory period, although constant use is not required if intermittent use is typical for the property type (e.g., seasonal use of a vacation home). Tacking of possession periods between successive adverse possessors is allowed if there is privity (e.g., deed, will, intestate succession).

Key Term: Hostile Possession Possession without the true owner's consent, required for adverse possession. It does not imply animosity.

### Exam Warning

Remember that adverse possession requires possession that is hostile, meaning without the owner's permission. If the owner gives permission (e.g., creates a license or lease), the possession is not hostile and cannot ripen into title by adverse possession, unless the possessor clearly repudiates the permission.

Key Point Checklist

This article has covered the following key knowledge points:

• A valid deed requires a writing, signature by the grantor, identification of parties, property description, and words of intent. Consideration is not required.
• Delivery of a deed requires the grantor's present intent to transfer title. Acceptance by the grantee is also necessary (usually presumed).
• Land sale contracts generally must satisfy the Statute of Frauds (writing, signed by party to be charged, essential terms).
• The part performance doctrine is a key exception allowing specific enforcement of oral land contracts based on the buyer's acts (possession, payment, improvements).
• Sellers implicitly covenant to provide marketable title (title reasonably free from doubt/litigation risk) at closing.
• Adverse possession requires actual, exclusive, open & notorious, hostile, and continuous possession for the statutory period.
• Possession must be hostile (non-permissive); the possessor's subjective state of mind is usually irrelevant.

Key Terms and Concepts

• Deed
• Delivery (of a Deed)
• Statute of Frauds (Land Contracts)
• Part Performance (Land Contracts)
• Marketable Title
• Adverse Possession
• Hostile Possession