Chapter 3 Conveying Real Property Interests Real Estate

Chapter 3 Conveying Real Property Interests Real Estate FIN 331

SOURCES OF COMPLEXITY IN CONVEYING REAL PROPERTY A. Real property is a complex bundle of rights B. Rights to land are enduring: Rights available today depend on transactions long ago C. Land is a continuous surface a. Boundaries are not obvious or natural b. Boundary errors always hurt someone

DEEDS – CONVEYING REAL PROPERTY A. Deed: A special, written contract for conveying a permanent interest in real property B. Requirements for a Deed 1. Grantor (with signature) and grantee grantor must be of legal age and competent 2. Recital of consideration: “for [ten] dollars and other good and valuable consideration…” 3. Words of conveyance: “does hereby grant, bargain, sell, and convey unto…”

DEEDS – CONVEYING REAL PROPERTY B. Requirements for Deed (cont. ) 5. Habendum clause: defines or limits the type of interest being conveyed 6. Exceptions and reservations class (if any) 7. Description of land: legal descriptions are metes and bounds, subdivision plat and block number: i. e. , government rectangular survey 8. Acknowledgment (by signature + witness) 9. Delivery: a deed must be “delivered” in order to be valid

DEEDS – CONVEYING REAL PROPERTY C. Covenants 1. Covenant of seizin: promise that grantor truly has good title and right convey it. 2. Covenant against encumbrances: no liens, easements, or other limitations except as noted in the document (deed). 3. Covenant of quiet enjoyment: the premise that property cannot be claimed by someone else with a better title.

TYPES OF DEEDS A. General warranty deed: All three covenants; seizin, no encumbrances, and quiet enjoyment B. Special warranty deed: identical to general warranty deed except as limited to the time of the grantor’s ownership

TYPES OF DEEDS C. Deed of bargain and sale: No covenants, but still is regarded as implying ownership D. Quitclaim deed: No covenants and makes no assertions about grantor’s interest E. Judicial Deeds and Trustee’s Deeds 1. Judicial deeds are the result of a court ordered proceeding. 2. Trustee’s deeds are issued by the trustee in a court supervised disposition of property

Modes of Conveyance of Real Property A. Voluntary conveyance by deed 1. Ordinary sale and transfer of title. B. Voluntary conveyance without a deed 1. Implied easement: i. e. , utility easements 2. Easement by estoppel: permission to use by adjacent landholder. 3. Dedication: When a developer dedicates street rights-of-way and open spaces

Modes of Conveyance of Real Property C. Involuntary conveyance by deed 1. 2. 3. 4. 5. Probate (distribution of estate) Bankruptcy Divorce settlement Condemnation Foreclosure

Modes of Conveyance of Real Property C. Involuntary conveyance without a Deed 1. Landowner involuntarily and unknowingly gives up rights to land 2. Easement by prescription Implied easements granted after the dominant estate has used the property in a hostile, continuous and open manner for a statutorily prescribed number of years. Prescriptive easements differ from adverse possession by not requiring exclusivity.

Modes of Conveyance of Real Property 3. Title by adverse possession The legal doctrine known as "adverse possession" allows trespassers who openly inhabit and improve an otherwise abandoned piece of property to gain title to that property after certain conditions are met. North Carolina's adverse possession laws require an individual to open and publicly occupy an otherwise neglected property publicly for at least 20 years, or seven years with "color of title" (meaning he or she has reason to believe they have the right to possess the property).

Modes of Conveyance of Real Property F. Gain rights to land through the action of water (accretion, reliction) 1. Accretion: enlargement by natural action 2. Reliction: gradual change of water line on real property which gives the owner more dry land.

Importance of Public Records A. Doctrine of constructive notice: Cannot be bound by claims or rules he or she has no means of knowing B. Statute of Frauds (1677): Contracts conveying a real property interest must be written to be enforceable, signed by the party to be charged, with sufficient content to evidence of the contract. [UCC: Goods $500 or more]

Importance of Public Records C. Recording statutes: A contract recorded in public records is considered known D. Actual notice: Open, continuous, actual possession of property E. Public records provide information for a “Title” search

Defining “Title” A. Title: Collection of evidence indicating a particular person(s) as holder of the “fee” B. Title search: Examining public records to construct “chain of title” C. Chain of title: the sequence of conveyances passing ownership down through time

Defining “Title” D. Evidence of Title 1. Title abstract together with an attorney’s opinion of title 2. Title insurance commitment 3. Title insurance protects the grantee against the legal costs of defending the title and against loss of the property in case of an unsuccessful defense

Defining “Title” E. Potential Problems with Titles: (Motives for Title Insurance) 1. Conveyance of partial interest or adverse possession 2. Inconsistent property descriptions 3. Missing signatures 4. Faulty separation of mineral or water rights

Property [Land] Description A. Metes and Bounds: specifying the location of its boundaries 1. Monuments: natural objects such as boulders, trees, rivers or man-made objects such as roads or survey markers. 2. Courses: directions in the form of compass headings. a. Compass bearings as deviations from north or south Dr. D. P. Echevarria All Rights Reserved 18

Property [Land] Description A. Metes and Bounds (cont. ) 3. Distances: measured in any convenient unit of length (feet, meters, etc. ) 4. Property description must specify a point of beginning and is followed by a series of courses and distances.

Property [Land] Description A. Government Survey Descriptions (rectangular or public land survey system) 1. Land description by reference to a grid of lines. 2. Used primarily west of the Mississippi following the Land Ordinance Act of 1785. Dr. D. P. Echevarria All Rights Reserved 20

Property [Land] Description 3. Grid composed of two sets of lines a. One set running north and south, the second set running east and west. b. Each grid identified by a Principal Meridian (north -south) and a Base Line (east-west) c. 35 principal meridians and 32 baselines comprise the GS system d. The east-west lines are called township lines and north-south lines are called range lines and run at intervals of 6 miles.

Property [Land] Description A. Government Survey Descriptions (cont. ) 4. Townships: the area encompassed by two adjacent range and township lines = 36 square miles 5. Tract = 16 townships Dr. D. P. Echevarria All Rights Reserved 22

Property [Land] Description A. Townships (cont. ): Comprised of 36 sections (each = 1 sq. mile) 1. Each section = 640 acres 2. 1 Acre = 43, 560 sq. ft. 3. Sections numbered consecutively from 1 to 36 Dr. D. P. Echevarria All Rights Reserved 23

Property [Land] Description 4. Sections may be subdivided into smaller parcels a. Quarter section = 160 acres b. Quarter-Quarter section = 40 acres c. Q-Q-Q section = 10 acres 5. Metric Land Measure a. Hectare = 2. 471 acres b. Hectare = 100 m x 100 m c. Hectare = 10, 000 sq meters Dr. D. P. Echevarria All Rights Reserved 24

Principal Meridians and Base Lines Dr. D. P. Echevarria All Rights Reserved 25

Chapter 3 Recap A. Deeds 1. General Warranty Deed: Grants the greatest protection to the grantee 2. Special Warranty Deed: scope is limited to defects that arose during the grantor's tenure 3. Grant Deed: used in the few states instead of warranty deeds 4. Bargain and Sale Deed: offers the grantee no guarantees or covenants. 5. Quitclaim Deed: contains no warranties of any kind. Does not imply that the grantor owns the property. Dr. D. P. Echevarria All Rights Reserved 26

Chapter 3 Recap A. Requirements for a valid deed 1. 2. 3. 4. 5. 6. 7. 8. 9. It must be in writing Must identify the parties The grantor must be legally competent Have a living grantee Be signed by the grantor Include an adequate description of the property Recite consideration exchanged Contain the words of conveyance Define the interest conveyed [the independent clause] 10. State any exclusions or reservations Dr. D. P. Echevarria All Rights Reserved 27

HOMEWORK ASSIGNMENT A. Key terms: Accretion – Reliction, Adverse Possession, Covenant of Seizin, Types of Deeds (7), Doctrine of Constructive Notice, Easement by Estoppel, Encroachment, Habendum Clause, Metes and Bounds, Title Abstract / Insurance B. Study Questions: 1, 2, 4, 5 C. Issues to Ponder: Smith bought a repossessed property from the bank. A year later, Smith decides to have the property surveyed. Smith discovers that the adjoining neighbor’s fence is actually on Smith’s property. What are the issues involved?

Real Estate Supplemental Material FIN 331 Real Estate

Foreclosure or Other Notice Article 11. Lis Pendens § 1 -116. Filing of notice of suit. (a) Any person desiring the benefit of constructive notice of pending litigation must file a separate, independent notice thereof, which notice shall be cross-indexed in accordance with G. S. 1 -117, in all of the following cases: (1) Actions affecting title to real property. (2) Actions to foreclose any mortgage or deed of trust or to enforce any lien on real property. (3) Actions in which any order of attachment is issued and real property is attached. Dr. D. P. Echevarria All Rights Reserved 30

Foreclosure or Other Notice Lis Pendens (b) Notice of pending litigation shall contain: (1) The name of the court in which the action has been commenced or is pending; (2) The names of the parties to the action; (3) The nature and purpose of the action; and (4) A description of the property to be affected thereby. (c) Notice of pending litigation may be filed: (1) At or any time after the commencement of an action pursuant to Rule 3 of the Rules of Civil Procedure; or (2) At or any time after real property has been attached; or (3) At or any time after the filing of an answer or other pleading in which the pleading party states an affirmative claim for relief falling within the provisions of subsection (a) of this section. Dr. D. P. Echevarria All Rights Reserved 31

Foreclosure or Other Notice Lis Pendens (d) Notice of pending litigation must be filed with the clerk of the superior court of each county in which any part of the real estate is located, not excepting the county in which the action is ending, in order to be effective against bona fide purchasers or lien creditors with respect to the real property located in such county. Dr. D. P. Echevarria All Rights Reserved 32

Some Legal Definitions Real Estate FIN-331

Appurtenance A. Anything attached to a piece of land or building such that it becomes a part of that property, and is passed on to a new owner when the property is sold. It may be something tangible like a garage, septic system, water tank, or something abstract such as an easement or right of way.

Estoppel A. A legal principle that bars a party from denying or alleging a certain fact owing to that party's previous conduct, allegation, or denial. 1. Promissory estoppel is a contract law doctrine. It occurs when a party reasonably relies on the promise of another party, and because of the reliance is injured or damaged. 2. Estoppel by laches precludes a party from bringing an action when the party knowingly failed to claim or enforce a legal right at the proper time.

Legal Estoppel A. Estoppel by deed, a party to a property deed is precluded from asserting, as against another party to the deed, any right or title in derogation of the deed, or from denying the truth of any material fact asserted in the deed. 1. If O conveys property she doesn't own to A by warranty deed, but O later acquires title to that land, then title immediately passes to A.

Legal Estoppel 2. However, if, as above, O conveys property she doesn't own to A by warranty deed, but O later acquires title to that land, A may elect to treat O's lack of title at the time of the conveyance as a breach of the covenants of seizin and right to convey (two of the six traditional forms of Covenants for Title that are contained in a general warranty deed), and sue O for damages. A cannot be forced to accept O's after-acquired title if she wishes instead to receive damages. [4][5] 3. If O conveys property she doesn't own to A by quitclaim deed, but O later acquires title to that land, then A owns nothing. This is because O passed her interest to A with a quitclaim deed; at the time of the conveyance, O's interest was nothing, so she passed nothing.

HOMEWORK ASSIGNMENT A. Key terms: Accretion – Reliction, Adverse Possession, Covenant of Seizin, Types of Deeds (7), Doctrine of Constructive Notice, Easement by Estoppel, Encroachment, Habendum Clause, Metes and Bounds, Title Abstract / Insurance B. Study Questions: 1, 2, 4, 5 C. Issues to Ponder: Smith bought a repossessed property from the bank. A year later, Smith decides to have the property surveyed. Smith discovers that the adjoining neighbor’s fence is actually on Smith’s property. What are the issues involved?

North Carolina Power of Sale Foreclosure Procedure © Rogers Townsend Attorneys at Law [Fair Use Doctrine Applies] Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law 39

Documents Needed at Referral Foreclosure Process Copy of Recorded Deed of Trust (DOT) • Copy of Note with Endorsements • Copy of Title Policy • Copy of Assignments/Allonges (an attachment to a legal document that can be used to insert language or signatures when the original document does not have sufficient space for the inserted material) • Copy of Appraisal • NCGS 45 -93 Written Compliance response • Payoff figures for NCGS 45 -21. 16(c)(5 a) notice * This letter also includes the Fair Debt Collection Practices information. • Home Loan/Non-Home Loan Certificate, if applicable • 45 day pre-foreclosure notice and/or 30 day breach letter • If our office sends the 45 -day pre-foreclosure notice for you, we need a reinstatement figure. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

Foreclosure Process A. Substitution of Trustee (SOT): executed by holder of the note B. Notice of Hearing (NOH): to person(s) directed in deed of trust C. Service: certified mail or in person by Sheriff – 20 days on property, 10 days to mortgagor (borrower) D. Clerk of Court is presiding official E. Affidavit of Indebtedness Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

Hearing before the Clerk of Court To authorize the foreclosure sale, the Clerk must find the existence of: 1. A valid debt of which the party seeking to foreclose is the holder; 2. Default; 3. Right to foreclose under the instrument; 4. Notice to those entitled to notice; 5. That the underlying mortgage debt is not a home loan as defined in G. S. 45 -101(1 b), or if the loan is a home loan under G. S. § 45101(1 b), that the pre-foreclosure notice under G. S. § 45 -102 was provided in all material respects, and that the periods of time established by Article 11 of Chapter 45 of the General Statutes have elapsed; 6. That the property is occupied by the borrower as his/her principal residence and the lender has complied with the requirements of G. S. § 45 -21. 16 C or that the property is not occupied by the borrower as his/her principal residence and therefore G. S. § 45 -21. 16 C is inapplicable; and 7. That the sale is not barred by G. S. 45 -21. 12 A. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

Contested Issues/Appeals 2 issues that are contested most often are: • Whether the party seeking to foreclose is the holder of the Note; and • Whether the borrower is in default. • In North Carolina, the amount of the default is not relevant for a Clerk’s foreclosure hearing. If the borrower is $1. 00 behind, the Clerk shall enter the Order allowing the foreclosure sale to proceed. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

NC G. S. § 45 -21. 16 C provides the Clerks with the authority to continue a foreclosure hearing for up to 60 days if the residence being foreclosed is the borrower’s principal residence and the Clerk determines there is good cause to believe that additional time or additional measures have a reasonable likelihood of resolving the delinquency without foreclosure Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

Notice of Sale A copy of the Notice of Sale is posted at the courthouse immediately after the hearing before the Clerk of Court takes place. • We send a copy of the Notice of Sale by First Class Mail to the following: √Any person who has filed a Request for Notice (RFN). A person that has filed a RFN is entitled to notice of the sale at least 20 days prior to the sale taking place. √Current Occupant. The current occupant of the property must be given 20 days notice of the sale of the property. √Large Judgment. If there is a large judgment, we send a copy of the Notice of Sale to the judgment holder. √Junior Lienholder. • We send a copy of the Notice of Sale by U. S. Certified Mail, return receipt requested to the IRS. If an IRS lien was filed 30 or more days prior to the sale date, we are required to provide the IRS with notice of the sale at least 25 days prior to the sale date. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

Sale A. The sale takes place at the courthouse. If a third party bidder is the high bidder, he is required to deposit 5% of his bid in certified funds with the person holding the sale. We generally give a third party bidder 30 days to pay the full balance of his bid. B. • There is a 10 day redemption and upset bid/confirmation period in N. C. that run concurrently. A sale is not “confirmed” until there have been 10 consecutive days with no upset bids having been filed. Once the sale has confirmed, the rights of the parties become fixed and the purchaser is entitled to a Trustee’s Deed upon payment of the balance of the bid. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

Sale A. Redemption: During this 10 day period, the borrower has the right to pay the loan in full and “redeem” the property. B. Upset Bid: During this 10 day period, any person may file an upset bid with the Clerk of Court. The upset bid must be at least 5% more than the last bid and the person placing the bid must deposit 5% of his bid with the Clerk’s office. The 10 day period starts over again after each upset bid is placed and continues until 10 consecutive days have passed without an upset bid having been filed Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

NCCOB Rule 702 NC Commissioner of Banks Under this rule, mortgage servicers must: (1) Acknowledge, in writing, a borrower’s request for loss mitigation no later than ten (10) business days after the request. (2) Respond to a loss mitigation request from a borrower no later than thirty (30) business days after the receipt of all information necessary from the borrower to assess whether or not a borrower qualifies for any loss mitigation programs offered by the servicer. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.

NCCOB Rule 702 (3) Include in a final response denying a loss mitigation request the reason for the denial and contact information for a person at the servicer with authority to reconsider the denial. Fair Use Doctrine Applies © Rogers Townsend Attorneys at Law http: //www. rttlaw. com/public/files/docs/Nort h%20 Carolina%20 Foreclosure.