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Chapter 4Transfer of Title to Real Property

Learning Objectives

List the methods of transferring title:• By descent• Four categories of alienation• Voluntary, involuntary, during life, or at death

List and describe the essential elements of deeds in North Carolina Describe the three primary types of deeds used in North Carolina List the types of special purpose deeds used in North Carolina Describe Excise Tax, defining the rate and calculating the amount of tax Describe the process of title examination Describe title insurance and the types of coverage Describe the importance and process of title recordation Describe the systems of property description used in North Carolina



Property Description

Adequacy of Description:• Real property must be described in a legally and professionally acceptable

manner• Ambiguity in a real property description will likely result in a cloud on the

title to the property Methods of describing real property:• Metes and Bounds –Method most often used in North Carolina:• Based on distances and direction• Metes - distance from point to point in the description• Bounds - direction from one point to another in the description

• Government Rectangular Survey – Not used in North Carolina:• Divides the country into ranges (6 square miles) using:• North-south lines called principal meridians, and• East-west lines called base lines




Methods of describing real property:• Government Rectangular Survey – not used in North Carolina:• Divides ranges into townships (1 mile square)• Divides townships into sections (640 acres) which may be further

subdivided• Description by Reference:• Reference to recorded plat (lot and block):• Refers to the plat which determines the exact location and

dimensions of the real property from the metes and bounds• Often used for real property within subdivisions

• Informal Reference:• Typically a street address• Never to be used in a deed or deed of trust



Example #1: How many acres are in the NE ¼ of the SW ¼ of the NW ¼ of a given section?



Property Description Property Survey: • Determination of location and boundaries of a specific tract of land

with location of buildings, fences, any other structures, and locations of easements and rights-of-way

• Surveys should be performed by a licensed surveyor or engineer• Surveys will typically disclose existence of any encroachments

A metes and bounds descriptions can only be made from a survey performed by a licensed, registered land surveyor




Point of Beginning (POB):• The point of beginning and ending in a metes and bounds

description Real property description:• May contain a statement as to the number of acres or quantity

of land being conveyed• Number of acres or quantity must yield to the description of

land as defined in the metes and bounds



Methods of Transferring Title

By Descent (Intestate Succession) By Will By Deed (Voluntary Alienation) By Involuntary Alienation

• Lien Foreclosure Sale• Adverse Possession• Escheat• Condemnation under Eminent Domain

Transfer of Title to Real Property

Essential Elements of a Valid Deed

Must be in writing according to the Statute of Frauds Grantor – Conveys the deed Grantee – Receives the deed Property Description: • Important that the description distinguishes the subject property from all

other properties Words of Conveyance: • Words demonstrating the grantor’s intention to transfer the title to the

named grantee Execution: • Each grantor must sign conveying his/her interest to the grantee• The grantee is not required to sign but must be identifiable

Delivery and Acceptance: • The valid and executed deed must be delivered by the grantor to the

grantee • Grantee must accept the deed voluntarily


Chapter 4



Non-Essential Elements of a Valid Deed

Acknowledgment (Notarized):• Does not have to be acknowledged or recorded to be valid and

enforceable• Acknowledgement is necessary before the deed can be recorded, but not

for the validity of the deed Consideration:• The deed does not need to recite the specific consideration given

Seal: • Deeds do not have to be sealed in North Carolina to be valid

Recording: • Gives constructive notice of grantee’s title to all the world• Provides protection to the grantee from everyone, including subsequent

purchasers of the same property from the same grantor



Non-Essential Elements of a Valid Deed

Witnessed:• In North Carolina, it is not necessary for the grantor’s signature

(execution) to be witnessed Date: • Deeds do not have to contain the date to be valid• The acknowledgement, if any, will provide the date• A gift deed must be recorded within two years to remain valid• A date is needed to establish the time of the gift in order to avoid

confusion about the two year period



Types of Deeds

General Warranty Deed:• Provides most liability for the Grantor• Least risk for the Grantee• Covers all claims, even though preceding the Grantor’s ownership of

property• There are six covenants of a General Warranty Deed:

1. Seisin (Seizin)2. Right to Convey 3. Against Encumbrances 4. Quiet Enjoyment 5. Warranty6. Grantees Rights to Recovery



Types of Deeds

Special Warranty Deed:• Warrants against claims arising during the grantor’s period of ownership• Does NOT warrant claims arising prior to grantor’s ownership

Quitclaim Deed (Non-Warranty):• Used when no warranty is expected or necessary • Often used to clear a cloud on a title• Provides least liability for grantor and most risk for grantee• Typically used for a Special Purpose Deed:• Deed of Correction (Confirmation)• Deed of Release• Deed of Surrender• Deed of Gift• Judicial Deed



Excise Tax

Excise Tax (Revenue or Transfer Stamps):• Amount based on consideration received by the seller in the

sale of the real property by deed• Excise tax is $1 for every $500 (or portion thereof) of the

full purchase price• Typically paid for by the seller at closing



Title Assurance

Covenants of Title in Deeds:• General Warranty Deed covenants – most assurance• Special Warranty Deed covenants – less assurance• Quitclaim Deed covenants – no assurance

Title Examination Procedures:• Title Examination – used to determine the owner and quality of title.

Limited to recorded documents on public record• Chain of Title – list of owners during the statutory time period• Attorney’s Opinion of Title – opinion of who is the legal owner and the

quality of their title



Title Assurance

Title Insurance – coverage that protects the purchaser or mortgagee from losses due to title defects• Owner’s Policy:

• Written for the protection of the owner• Coverage in the amount that the owner paid for the property• Policy remains in effect for the duration of the insured’s ownership

of the property• Continues in effect after the owner conveys the property to protect

policy holder from claims of subsequent grantee• Claims arising during policy holder’s ownership are not covered

during his ownership or against claims of subsequent grantee



Title Assurance

Title Insurance:• Mortgagee’s Policy:

• Mortgagee is insured against defects in the title pledged as security in the mortgage

• Coverage is limited to the outstanding balance of the mortgage

• Leasehold Policy: • Written to protect a lessee (leaseholder) and/or a

mortgagee against defects in the lessor’s title• The policy is issued to a mortgagee if the mortgagor has

pledged a leasehold interest instead of a fee simple title as security for the mortgage debt



Title Assurance

Title Recordation: • Recordation is not required in North Carolina• Recordation provides “constructive notice” to third parties

The Connor Act: • Certain real estate documents are not valid against third parties until

recorded• Documents are still valid between the grantor and grantee• Makes North Carolina a “pure race” state• Good rule of thumb is if a document has to be in writing according to the

Statute of Frauds it has to be records to protect that interest



Title Assurance

Marketable Title Act: • The Statute of Limitations for most title defects is 30 years

The Torrens System: • Titles for real property are registered in a manner similar to motor

vehicles• A change in the status of the property requires that the old registration

certificate be destroyed and replaced with a new one• Advantage – eliminates possibility of someone claiming title by adverse

possession

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