Title is described as the right to or ownership of the land and also serves as evidence of that ownership.
Title to real estate may be transferred voluntarily by sale or gift (voluntary alienation). Alternatively, title may be transferred involuntarily by operation of law (involuntary alienation).
Title is transferred with a deed, a document by which an owner of real estate conveys the right, title, or interest owned in the parcel of real estate to someone else. All deeds must me in writing.
TYPES OF DEEDS
GENERAL WARRANTY DEED
Provides the buyer with the greatest amount of protection because it could offer the buyer the longest warranty period.
Presumed to be delivered and accepted when the deed is recorded by the grantee.
Comes with warranties like to Covenant of Seisin, Covenant against Encumbrances, Covenant of Further Assurances, Covenant of Quiet Enjoyment and Covenant of Warranty Forever.
The grantor defends the title against all those who previously held title
SPECIAL WARRANTY DEED
Limits the grantor's defense of the title transferred by warranting
Can only prove that the property was not encumbered during the time the grantor held title, except as otherwise noted in the deed.
The purchase of title insurance typically is viewed as providing adequate additional protection to the grantee.
Sometimes used by a grantor who has acquired title at a tax sale
BARGAIN AND SALE DEED
Implication that the grantor holds title and possession
Contains no express warranties against encumbrances
Grantee has little legal recourse if title defects appear later.
Equivalent to a special warranty deed
QUITCLAIM DEED
Used to convey any title interest held by the owner or to cure a title defects, the cloud on the title
Provides the grantee with the least protection of any deed
Sellers looking to keep liability to a minimum would use a quitclaim
Commonly used to transfer property from one family member or co-owner to another
DEED OF TRUST
A trustor conveys real estate to a trustee for the benefit of a beneficiary.
The real estate is held by the trustee to fulfill the purpose of the trust.
RECONVEYANCE DEED
Used by a trustee to return title to the trustor
When a loan secured by a deed of trust has been fully paid, the beneficiary notifies the trustee
TRUSTEE'S DEED
A deed executed by a trustee
Used when a trustee conveys real estate held in the trust to anyone other than the trustor.
TYPES OF LEASES
GROSS LEASE
Used commonly by residential and commercial office leases signed as a lease
Tenant Pays: Fixed rent & some or all of the utility expenses
Landlord Pays: All taxes, insurance, repairs, and other charges connected to the property
NET LEASE
Used commonly for entire commercial and industrial buildings and the land which it is located.
Tenant Pays: All of the property expenses: rent, insurance, taxes, maintenance
Landlord Pays: Property charges, Net the monthly rent after operating costs have been paid
PERCENTAGE LEASE
Used commonly in retail business leases could be a net or a gross lease. Rent is the minimum fixed rate rental fee plus a percentage of gross income received.
Tenant Pays: Rent and Percentage of the gross receipts of the money the business makes
VARIABLE LEASE
Landlord can increase the rent over the life of the lease
INDEX LEASE
Allows rent to be increased or decreased periodically based on changes in the consumer price index or some other indicator
STEP-UP LEASE
Establishes future price increases for the lessee at set times throughout the life of the contract.
ESCALATOR LEASE
Provides that if the rent regulations are altered during the time of the lease, the tenant must pay the new rental fee computed pursuant to the revised regulations.
REAPPRAISAL LEASE
Rent is adjusted based on an independent appraisal of the value of the property; frequently seen with long-term ground leases
GROUND LEASE
Landlord leases land to someone who plans to build on it, generally not net leases.
Typically involve separate ownership of the land and the buildings
They often run for terms of 50 to 99 years
SALE - AND - LEASEBACK
Owners sell the property & then lease it back for an agreed period and rental.
Example: Company owns its office building but needs cash for business expansion.
LEASE PURCHASE
Tenant wants to purchase the property but is not able to do so yet.
Both parties hope that, by the time the lease expires, the tenant’s issues have been resolved and financing can be obtained or the tenant can purchase the property outright.
There is so much more to deeds and leases than the various types. However, this guide is geared to be an ideal place to start to begin familiarizing new real estate students with concepts that will on the test. I have shares additional concepts below that I have come across in my studies to further expand on our understanding of deeds and leases.
MORTGAGE/LEASE CLAUSES & MORE
The DEFEASANCE CLAUSE
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition
Example: Used when cancelling a mortgage upon repayment of the mortgage loan.
THINK: (Defeasance = Defeat the mortgage)
CONDEMNATION ACTION
Action used by an adverse possessor to file and claim title to the property after the statutory period of time has been reached
ESCALATOR CLAUSE
Section in a real estate contract that states that a prospective buyer is willing to raise their offer on a home should the seller receive a higher competing offer.
Can be found in both a commercial index lease and an adjustable rate mortgage (ARM)
NON-DISTURBANCE CLAUSE
Protects tenants from owner foreclosure
1031 EXCHANGE
Allows sellers avoid paying capital gains taxes when selling an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.
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