Rights in real property - Transfer

Learning Outcomes

After reading this article, you will be able to identify and explain the legal requirements for transferring rights in real property. You will understand the rules for deed delivery, the effect of recording statutes, and the principles of title assurance. You will be able to apply these concepts to MBE-style questions and distinguish between valid and invalid transfers.

MBE Syllabus

For the MBE, you are required to understand the legal principles governing the transfer of rights in real property. This includes the formalities of deed delivery, the operation of recording acts, and the mechanisms for ensuring good title. You should be prepared to:

• Distinguish between valid and invalid deed delivery.
• Explain the requirements for a valid deed and the effect of recording.
• Apply the rules of notice, race, and race-notice statutes.
• Analyze the consequences of transfers involving bona fide purchasers.
• Recognize the role of title assurance, including covenants for title and title insurance.

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 required for a valid transfer of real property by deed?
   1. The deed must be recorded.
   2. The deed must be delivered with the intent to transfer present interest.
   3. The deed must be notarized.
   4. The deed must be signed by both parties.
2. Under a notice recording statute, who prevails if a grantor conveys Blackacre to A, who does not record, and then to B, a bona fide purchaser who records?
   1. A, because first in time prevails.
   2. B, because B had no notice of A’s deed.
   3. A, because A received the first deed.
   4. B, only if B records before A.
3. What is the effect of a quitclaim deed on the implied covenant of marketable title?
   1. It eliminates the requirement for marketable title.
   2. It has no effect; marketable title is still required at closing.
   3. It guarantees good title.
   4. It prevents the buyer from rescinding the contract.

Introduction

A transfer of rights in real property requires strict compliance with legal formalities. The law demands not only a valid deed, but also proper delivery and, in most cases, recording to protect the transferee’s interest. Understanding these requirements is essential for answering MBE questions on property transfer.

Deed Requirements

A deed is the primary instrument for transferring legal title to real property. For a deed to be valid, it must:

• Identify the grantor and grantee.
• Adequately describe the property.
• Contain words of present transfer.
• Be signed by the grantor.

Key Term: Deed A written instrument that transfers legal title to real property from one party (the grantor) to another (the grantee).

Delivery of the Deed

Delivery is a critical element. The grantor must intend for the deed to have present legal effect. Physical transfer is not required, but the grantor must relinquish control and intend the deed to operate immediately.

Key Term: Delivery The grantor’s intent that the deed take present effect, transferring title to the grantee.

Acceptance

Acceptance by the grantee is presumed if the transfer is beneficial. If the grantee rejects the deed, no transfer occurs.

Recording Statutes

Recording statutes protect subsequent purchasers and creditors. There are three main types:

• Notice Statute: A subsequent bona fide purchaser (BFP) prevails if they had no notice of a prior unrecorded deed.
• Race Statute: The first party to record prevails, regardless of notice.
• Race-Notice Statute: A subsequent BFP prevails only if they record first and had no notice of a prior unrecorded deed.

Key Term: Bona Fide Purchaser (BFP) A person who acquires property for value and without notice of any prior unrecorded interests.

Key Term: Recording Statute A law that determines priority of interests in real property based on notice and/or order of recording.

Title Assurance

Buyers want assurance that they are receiving good title. This is achieved through:

• Covenants for Title: Promises in the deed regarding the quality of title.
• Title Insurance: A policy protecting against defects in title not revealed by the public record.

Key Term: Marketable Title Title free from reasonable doubt or risk of litigation, required at closing unless waived.

Worked Example 1.1

O conveys Blackacre to A, who does not record. O then conveys Blackacre to B, a bona fide purchaser who has no notice of A’s deed and records immediately. The jurisdiction has a notice recording statute. Who owns Blackacre?

Answer: B owns Blackacre. Under a notice statute, a subsequent bona fide purchaser who takes without notice of a prior unrecorded deed prevails, even if the first grantee records later.

Worked Example 1.2

Seller delivers a deed to Buyer but tells Buyer, “Do not record or use this deed until I die.” Buyer takes the deed home and locks it in a safe. Has delivery occurred?

Answer: No. Delivery requires intent for the deed to take present effect. If the grantor intends the deed to operate only upon death, the deed is testamentary and invalid unless it complies with the requirements for a will.

Worked Example 1.3

A buyer discovers after closing that the property is subject to an undisclosed easement. The seller conveyed by quitclaim deed. Can the buyer rescind the contract?

Answer: Yes. The implied covenant of marketable title applies at closing, regardless of the type of deed. A quitclaim deed does not excuse the seller from delivering marketable title unless the buyer expressly waives the requirement.

Exam Warning

In MBE questions, always check the type of recording statute described in the jurisdiction. Do not assume the statute is notice, race, or race-notice—read the language carefully.

Revision Tip

Remember: Delivery is about intent, not just physical transfer. If the grantor intends the deed to take effect only in the future, there is no valid delivery.

Key Point Checklist

This article has covered the following key knowledge points:

• A valid deed requires identification of parties, property description, present intent, and grantor’s signature.
• Delivery requires the grantor’s intent for the deed to take present effect.
• Acceptance is presumed if the transfer benefits the grantee.
• Recording statutes protect subsequent purchasers and creditors; know the difference between notice, race, and race-notice statutes.
• A bona fide purchaser for value without notice may prevail over prior unrecorded interests.
• Marketable title is required at closing unless waived, regardless of the deed type.
• Title assurance is provided by covenants for title and title insurance.

Key Terms and Concepts

• Deed
• Delivery
• Bona Fide Purchaser (BFP)
• Recording Statute
• Marketable Title