Quiz 3: Conveying Real Property Interests
Title insurance protects a grantee against the legal cost of defending the title and against the loss of the property in case of an unsuccessful defense. It protects against legal attacks on the owners title by someone else or a claim that diminishes the owner's right of use. In most localities the seller is responsible to purchase the title insurance unless that is negotiated away. For a mortgage, the borrower pays to protect the lender. It is not hazard insurance and will not protect against physical damage to the property. Title insurance typically excepts from coverage any restrictions that a survey of the property reveals, or that the owner would know by inspection of the property. Also title insurance normally does not insure against claims of title through eminent domain, or limitations of the property placed by government the exercise of police power.
A deed is generally used to transfer permanent interest in a real property. It is a special kind of written contract. Its origin can be traced in England, when the English Parliament in the year 1677 passed the "Statute for the Prevention of Frauds and Prejuries". A deed can be used to transfer many kinds of title depending upon the wording used in it. It can be used to transfer the full right or lesser right like easement or a conditional life. The correct answer is option b. Explanation is provided below. In writing: A deed is generally used to transfer permanent interest in a real property. It is a special kind of written contract. Thus, the option c. is incorrect. Habendum clause: This is known as the limit clause, and it is used in a deed to limits the interest to be transferred. Thus, the option d. is incorrect. Delivery: it is one of the major requirements for a deed to be valid. If there is no observable and verifiable intent of the delivery then the deed will not be valid. Thus, the option e. is incorrect. In case of contract both parties of the contract, grantor and the grantee should legally competent as per law of the land to form a valid contract, but in the case of deed it is not necessary that the grantee should be legally competent like the grantor. Thus, the option a. is incorrect, and option b. is the correct answer.
The "Covenant of Seizin" is a promise that the grantor truly has good title and the right to convey it. The covenant of seizin is required to establish a Warranty Deed. The grantor is legally liable to defend the title or make the buyer whole. Title insurance protects the grantee from the costs of defending title. In case of fraud the grantor can still be held liable and sued by the title company.