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Do You Really Own Your Property?

Read and Record Your Deed

Although commercial real estate represents a major investment and can pose significant risk, many real estate investors don’t bother to read their deeds. Some even fail to record them in the county recorder’s office.

If someone challenges your ownership, you must be prepared to defend the deed. Your familiarity with the deed and title may help you avoid disputes, or at least resolve conflicts before they get expensive. And recording your deed gives you more legal protection than just stashing it in a safe deposit box.

What Could Go Wrong?

Deeds present two kinds of threats: crooks and defects. Crooks have been known to sell the same real estate to more than one buyer. If you are one of those buyers, how will you prove you are the rightful owner? A thorough review of the title and deed before you close a transaction might uncover a fraudulent offer or sale while you can still fix it. And after the transaction is complete, promptly recording the deed could give you an advantage over other claims to the property -- whether or not they’re legitimate. In some states, winning the race to the county recorder’s office makes you the presumed owner.

Deed-related defects include missing or incomplete information, misfiled records, fraud, forgery, mistakes in recording a document, and documents executed by a disabled or incapacitated person. Issues related to creditors and inheritances can also cast a cloud over a title or deed. Properly recording a deed might not clear up all defects, but it can serve notice to potential competing claimants that you consider yourself the only legitimate owner and are prepared to defend your rights. Title insurance companies often detect title defects, so insist on title insurance.

Definitions

Before we discuss reviewing and recording procedures, let’s be sure we have a precise definition of the deed and its variations.

A deed is the legal document that conveys title to (ownership of) real property from the seller (grantor) to the buyer (grantee). A property sale is not complete until the deed is delivered to the buyer or its authorized agent -- typically at closing.

A deed contains an accurate description of the property being conveyed, as well as the seller’s and buyer’s names and signatures. A deed must be notarized or witnessed in accordance with state law where the property is located.

Variations

You can use different kinds of deeds to convey title. The most common include:

A grant deed. This transfers ownership free and clear, guaranteeing that the title has not been otherwise transferred or encumbered (except as stated in the deed).

A quitclaim deed. This transfers all of one owner’s interest in a property, if it is less than 100%. The deed doesn’t guarantee the extent of the seller’s interest, only that it represents the transfer of all that person’s interest. This deed is useful when parties haven’t yet established the seller’s titled interest. If the seller actually holds no interest, this deed conveys nothing.

A warranty deed. This transfers ownership and also promises to address particular transaction problems.

A trust deed. Despite its name, this type isn’t used to transfer property ownership. Rather, it puts a title in the hands of a trustee -- usually a trust or title company -- as security for a loan.

Whatever the deed type, its quality depends first on the title’s marketability. A title is marketable when the seller can prove property ownership without undisclosed interests by third parties. The best way to ensure marketability is to buy title insurance. If you finance a real estate purchase with debt, your lender generally will require you to buy title insurance. But title insurance is a good idea even if you don’t borrow, even if you know the seller well and even though title searches don’t necessarily reveal all defects.

Do the Deed

As soon as possible after you receive a deed, review it and ask your lawyer to explain any provisions that you don’t understand. If you discover any unresolved issues or potential conflicts, the sooner you resolve them the better your chances of prevailing in a dispute.

To record a deed, take the original document to the land records office in the county where the property is located. In some states the office is called the county recorder or land registry. It’s usually housed in the county courthouse.

Typically, an office clerk stamps and dates the original, makes a photocopy of the deed for the county’s files, and returns the original to you. Recording fees are nominal.

Prevent Losses

Many real estate owners and investors live their whole lives without having to defend a deed or prove title to a property. But do you want to gamble that you’ll be one of them?

The deed’s reviewing and recording costs -- even the expense of hiring a lawyer to review it and advise you -- is miniscule compared to the cost of a lawsuit over ownership. If you haven’t reviewed all your deeds, please call us for assistance.