Real Property: CONVEYANCING

VI. CONVEYANCING

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B.    DEEDS—FORM AND CONTENT

Transfer of title to an interest in real property occasionally occurs through operation of law; but in most circumstances, transfer can be accomplished only by a deed that satisfies various formalities required by statute.

1.    Formalities

 

a.    Statute of Frauds

The Statute of Frauds requires that a deed be in writing and signed by the grantor.

b.    Description of Land and Parties

A deed must identify the land. The description need not be formal, and it may incorporate extrinsic information, but it must be unambiguous. The parties (grantor and grantee) must also be identified. This may be done by name, or by describing them in some other way (e.g., “I grant this land to my eldest daughter,” or “I convey this land to the present members of the law review at State University”). If the deed is delivered with the identity of the grantee left blank, the courts will presume that the person taking delivery has authority to fill in the name of the grantee, and if she does so, the deed is valid. But if the land description is left blank, no such authority is presumed, and the deed is void unless the grantee was explicitly given authority to fill in the description, and did so. The grantee must actually exist; hence, a deed delivered to a grantee who is in fact dead at the time of the delivery is void.

c.    Words of Intent

The deed must evidence an intention to transfer realty, but technical words are unnecessary. The word “grant” by itself is sufficient in many states.

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f.    Attestation and Acknowledgment Generally Unnecessary

Attestation by witnesses is generally unnecessary, as is an acknowledgment. But note: Either or both might be required for the deed to be recorded.

g.    Signature

A deed must be signed by the grantor. The grantor may designate an agent to sign on the grantor’s behalf, but if the signing is not done in the grantor’s presence, the Statute of Frauds generally requires that the agent’s authority be written. In the case of deeds by corporations, statutes usually provide for execution by two officers of the corporation and the affixing of the corporation’s seal. If the deed represents a conveyance of all or a substantial part of the corporation’s assets, a resolution of the board of directors approving the transfer may be necessary. The grantee’s signature is not necessary even if the deed contains covenants on her part. Her acceptance of the deed (called a “deed poll” when signed only by the grantor) is sufficient to make the covenants enforceable.

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C.    DELIVERY AND ACCEPTANCE

 

1.    Delivery—In General

A deed is not effective to transfer an interest in realty unless it has been delivered. Physical transfer of a deed is not necessary for a valid delivery. Nor does physical transfer alone establish delivery (although it might raise a presumption thereof). Rather, “delivery” refers to the grantor’s intent; it is satisfied by words or conduct evidencing the grantor’s intention that the deed have some present operative effecti.e., that title pass immediately and irrevocably, even though the right of possession may be postponed until some future time.

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b.    Presumptions Relating to Delivery

As a matter of theory, a deed may be delivered by words without an act of physical transfer. Delivery is presumed if the deed is: (i) handed to the grantee, or (ii) acknowledged by the grantor before a notary and recorded. Unless there is some clear expression of intent that the grantor envisioned the passage of title to the grantee without physical delivery, the continued possession of the deed by the grantor raises a presumption of nondelivery and therefore no passage of title. Conversely, possession by a grantee of a properly executed deed raises a presumption that the delivery requirement has been satisfied. Note, however, that the presumptions involved are rebuttable.

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4.    Acceptance

 

a.    Usually Presumed

There must be an acceptance by the grantee in order to complete a conveyance. In most states, acceptance is presumed if the conveyance is beneficial to the grantee (whether or not the grantee knows of it). In other states, acceptance is presumed only where the grantee is shown to have knowledge of the grant and fails to indicate rejection of it. Acceptance is presumed in all states if the grantee is an infant or an incompetent.

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E.    RECORDING

At common law, in nearly all cases priority was given to the grantee first in time. Thus, if O conveyed Blackacre to A and then made an identical conveyance to B, A prevailed over B on the theory that after the first conveyance O had no interest left to convey.

1.    Recording Acts—In General

Statutes known as “recording acts” require a grantee to make some sort of recordation so as to give “notice to the world” that title to certain property has already been conveyed, and thus to put subsequent purchasers on guard. These statutes are in effect in some form in every state. Basically, recording acts set up a system by which any instrument affecting title to property located in a certain county can be recorded in that county. These acts seek to protect all subsequent BFPs from secret, unrecorded interests of others.

a.    Purpose of Recordation—Notice

Recordation is not essential to the validity of a deed, as between the grantor and grantee. However, if a grantee does not record her instrument, she may lose out against a subsequent BFP. By recording, the grantee gives constructive (or “record”) notice to everyone. Hence, as stated earlier, proper recording prevents anyone from becoming a subsequent BFP.

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3.    Who Is Protected by Recording Acts

Only bona fide purchasers (“BFPs”) are entitled to prevail against a prior transferee under “notice” and “race-notice” statutes. To attain this status, a person must satisfy three requirements. The person must:

(i)    Be a purchaser (or mortgagee or creditor if the statute so allows);

(ii)    Take without notice (actual, constructive, or inquiry) of the prior instrument; and

(iii)    Pay valuable consideration.

Note: If these requirements are not met, the person is not protected by the recording acts, so that the common law rule of first in time prevails.

Example:       O, the owner of Blackacre, executes a contract of sale of the land to A on Monday. A immediately records the contract. On Tuesday, O deeds the land to B. B pays valuable consideration for the land, but is not a BFP because B is held to have constructive notice of A’s rights. Result: A is entitled to enforce the contract against B, paying B the rest of the price and compelling B to deliver a deed to A. (If A had failed to record the contract, and B had no other notice of it, B would have taken free of A’s contract rights. A would have an action in damages against O for breach of contract, but would not have a claim for specific performance against B.)

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5.    Effect of Recordation

Proper recordation gives all prospective subsequent grantees constructive notice of the existence and contents of the recorded instruments; i.e., there can be no subsequent BFPs. Recordation also raises presumptions that the instrument has been validly delivered and that it is authentic. These presumptions are rebuttable, not conclusive.

a.    Does Not Validate Invalid Deed

As stated earlier, recordation is not necessary for a valid conveyance. Nor does recordation validate an invalid conveyance, such as a forged or undelivered deed.

b.    Does Not Protect Against Interests Arising by Operation of Law

Furthermore, recordation does not protect a subsequent purchaser against interests that arise by operation of law, rather than from a recordable document (e.g., dower rights; prescriptive and implied easements; title by adverse possession). Because there is no instrument to record in order to perfect such interests, the recording acts do not apply, and subsequent purchasers take subject to the interests. (Remember: If the recording act is inapplicable, the common law priority rules apply.)

Example:       O is the record owner of Blackacre. X adversely possesses Blackacre for the period of the statute of limitations. O then conveys Blackacre to A, a BFP. Even though X’s interest has never been recorded, X prevails against A.

1)    Exception

A court may protect a subsequent BFP from an unrecorded implied easement that is not visible upon inspection of the premises (e.g., an underground sewer).

c.    Recorder’s Mistakes

An instrument is considered recorded from and after the time it is filed at the recorder’s office, irrespective of whether it is actually listed on the indexes. If the recorder’s office has made an error in recording, the subsequent purchaser has an action against the recorder’s office. There is a strong minority view that protects the searcher.

d.    Effect of Recording Unacknowledged Instrument

As discussed above, the recording acts require that before an instrument can be recorded, it must be acknowledged by the grantor before a notary. What happens if the recorder, by oversight, records a deed that has not been acknowledged or has been defectively acknowledged?

1)    No Acknowledgment—No Constructive Notice

Because an unacknowledged deed does not qualify for recordation, it does not give constructive notice to subsequent purchasers. Hence, unless the subsequent purchaser has other notice of the earlier deed, the subsequent purchaser will prevail.

Example:       O conveys Blackacre to A by a deed that is not acknowledged, but the recorder nevertheless records it. Later, O conveys to B by an acknowledged deed, which B records. B prevails over A unless B had actual notice of the deed from O to A (which she might have if she searched the title records) or inquiry notice (as she would have if A was in possession of Blackacre).

2)    Compare—Defective Acknowledgment

When a recorded instrument has been acknowledged, but the acknowledgment is defective for some reason not apparent on the face of the instrument, the better view is that the recordation does impart constructive notice. Rationale: A hidden defect in the acknowledgment should not be allowed to destroy the constructive notice that the document otherwise clearly imparts. Purchasers should be entitled to rely on what appears to be a perfectly recorded document.

Example:       A deed bears what appears to be a valid acknowledgment but is in fact invalid because the notary was disqualified to act or because the grantor did not appear personally in front of the notary to acknowledge her signature, as required by law.

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