Learning Outcomes
After reading this article, you will be able to explain the legal requirements for transferring rights in real property, including valid deed delivery, the effect of recording, and the main forms of title assurance. You will understand the difference between legal and equitable title, the role of covenants for title, and be able to apply these principles to MBE-style questions.
MBE Syllabus
For the MBE, you are required to understand the rules governing the transfer of rights in real property. This includes the formalities for valid transfer, the effect of recording statutes, and the mechanisms for protecting purchasers. You should be able to:
- Identify the requirements for a valid deed and effective delivery.
- Distinguish between legal and equitable title.
- Explain the effect of recording statutes and the rights of bona fide purchasers.
- Recognize the main types of title assurance, including covenants for title and title insurance.
- Apply these principles to fact patterns involving disputes over ownership and priority.
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.
-
Which of the following is NOT required for a valid transfer of legal title to real property?
- A written deed signed by the grantor
- Delivery of the deed with intent to transfer
- Consideration paid by the grantee
- Identification of the parties and property
-
In a notice jurisdiction, who prevails if O conveys Blackacre to A (who does not record), then to B (who pays value and has no notice of A), and then A records before B?
- A
- B
- O
- Title is void
-
What is the main purpose of a recording statute?
- To validate defective deeds
- To protect bona fide purchasers from prior unrecorded interests
- To guarantee marketable title
- To prevent all future disputes
Introduction
Transferring rights in real property requires strict compliance with legal formalities. The law distinguishes between legal and equitable title, and provides mechanisms to protect purchasers from hidden claims. Understanding the requirements for a valid deed, the effect of recording, and the available forms of title assurance is essential for MBE success.
Requirements for a Valid Deed
A deed is the legal instrument used to transfer title to real property. For a deed to be valid, it must:
- Be in writing and signed by the grantor.
- Identify the grantor, grantee, and the property with reasonable certainty.
- Contain words of present transfer (e.g., "grant," "convey," "give").
- Be delivered with the present intent to transfer title.
Key Term: Deed
A written instrument signed by the grantor that transfers legal title to real property to the grantee.
Delivery requires that the grantor intend for the deed to have immediate legal effect. Physical transfer is not required, but the grantor must relinquish control.
Key Term: Delivery (of Deed)
The act or conduct by which a grantor demonstrates intent for a deed to take immediate effect, transferring legal title to the grantee.
Acceptance
Acceptance by the grantee is presumed if the transfer is beneficial. Once delivered and accepted, title passes to the grantee and cannot be revoked by returning the deed.
Recording Statutes
Recording statutes are designed to protect purchasers from undisclosed prior interests. There are three main types:
- Race: The first to record wins, regardless of notice.
- Notice: A subsequent bona fide purchaser (BFP) without notice of a prior unrecorded interest prevails.
- Race-Notice: A subsequent BFP without notice who records first prevails.
Key Term: Bona Fide Purchaser (BFP)
A person who acquires property for value and without notice of any prior unrecorded interest.
Recording a deed gives constructive notice to the world. However, recording does not validate a void deed or protect against interests arising by operation of law (such as adverse possession).
Title Assurance
Buyers seek assurance that they are acquiring good title. The main forms are:
- Covenants for Title: Promises in the deed regarding the quality of title (e.g., general warranty, special warranty, quitclaim).
- Title Insurance: A policy protecting against losses from title defects not excepted in the policy.
- Recording Acts: Statutory protection for BFPs.
Key Term: Covenant for Title
A promise in a deed that relates to the grantor's authority to convey and the quality of the title transferred.
Types of Deeds
- General Warranty Deed: Contains all six covenants for title, protecting against all title defects.
- Special Warranty Deed: Warrants only against title defects arising during the grantor's ownership.
- Quitclaim Deed: Contains no covenants; conveys whatever interest the grantor has.
Delivery and Conditional Delivery
A deed must be delivered to be effective. Delivery to a third party (escrow) with instructions to deliver to the grantee upon a condition is valid if the grantor cannot revoke the deed before the condition occurs.
Recording and Priority
Recording a deed protects the grantee against subsequent purchasers. However, a grantee who fails to record risks losing priority to a subsequent BFP. The effect of recording depends on the jurisdiction's statute.
Marketable Title
A seller must provide marketable title—title reasonably free from doubt and risk of litigation—at closing. Title acquired by adverse possession or subject to undisclosed encumbrances is generally not marketable.
Worked Example 1.1
O conveys Blackacre to A, who does not record. O then conveys Blackacre to B, who pays value and has no notice of A's deed. B records. In a notice jurisdiction, who owns Blackacre?
Answer: B owns Blackacre. In a notice jurisdiction, a subsequent BFP without notice of a prior unrecorded deed prevails, even if the prior grantee records later.
Worked Example 1.2
O executes a deed to A but keeps it in his desk. Later, O dies and A finds the deed. Is title transferred to A?
Answer: No. There was no delivery, as O did not intend for the deed to have immediate legal effect. Title remains with O's estate.
Worked Example 1.3
Seller delivers a deed to Buyer, but the deed is not recorded. Buyer discovers a prior unrecorded mortgage on the property after closing. Is Buyer protected?
Answer: No. Unless Buyer is a BFP protected by the recording statute, Buyer takes subject to prior unrecorded interests. Recording is essential for protection.
Exam Warning
In a race-notice jurisdiction, a subsequent BFP must both lack notice of the prior interest and record first to prevail. Failing to record promptly can result in loss of priority, even if the purchaser paid value and had no notice.
Revision Tip
Always identify the type of recording statute in the jurisdiction before answering priority questions. Look for facts indicating notice, value, and the order of recording.
Key Point Checklist
This article has covered the following key knowledge points:
- A valid deed requires writing, signature, identification of parties and property, present intent, and delivery.
- Delivery means the grantor intends the deed to take immediate legal effect.
- Acceptance by the grantee is presumed if beneficial.
- Recording statutes protect bona fide purchasers from prior unrecorded interests.
- Three types of recording statutes: race, notice, and race-notice.
- Recording does not validate a void deed or protect against all claims.
- Title assurance is provided by covenants for title, title insurance, and recording acts.
- Marketable title must be provided at closing.
- Priority disputes depend on the type of recording statute and the facts of notice and recording.
Key Terms and Concepts
- Deed
- Delivery (of Deed)
- Bona Fide Purchaser (BFP)
- Covenant for Title
