Transactions – Ehlert & Associates http://2020.ehlertlaw.com Reliable excellence in legal areas of Real Estate, Business, Commercial, Probate, and Disputes. Wed, 22 Jul 2020 13:51:35 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.4 http://2020.ehlertlaw.com/wp-content/uploads/2020/04/cropped-EHLERTlogo_4c-small-1-32x32.jpg Transactions – Ehlert & Associates http://2020.ehlertlaw.com 32 32 Texas Deeds http://2020.ehlertlaw.com/texas-deeds/ Wed, 22 Jul 2020 13:51:26 +0000 http://2020.ehlertlaw.com/?p=1287

Deeds in Texas and the Real Estate Investor

deed definition

Texas Deeds

A warranty deed conveys to a grantee a fee simple estate in real property with certain covenants of war­ranty, subject to reservations and exceptions stated in the instrument. The granting clause, habendum clause, and warranty clause compose the core components in a traditional deed. The granting clause grants the property with its related rights and appurtenances, beginning with “grants, sells, and conveys.” The habendum clause defines the extent of property ownership conveyed to the grantee, beginning with “to have and to hold.” The warranty clause describes the warranties of title made by the grantor, beginning with “Grantor binds.”

As for requirements, no particular form is required, but the Texas Property Code suggests that any form that sub­stantially the same “conveys a fee simple estate in real property with a covenant of general war­ranty.” Tex. Prop. Code § 5.022. A deed must name the grantor (the one conveying), the grantee (the one receiving), use words showing intent to convey title to real property, and adequately describe the property sufficient to identify the subject matter of the grant. Harlan v. Vetter, 732 S.W.2d 390 (Tex. App.—Eastland 1987, writ ref’d n.r.e.). Deeds must be in writing, subscribed, and delivered to the grantor. Tex. Prop. Code § 5.021.

An unrecorded deed is binding on grantors conveying title, but is void as to creditors and subsequent purchasers for value without notice. For this reason, the old practice of “getting the deed,” then tearing it up if the deal didn’t pan out is very dangerous.

Marital property is another hazard for intrepid real estate investors. Texas follows the community property system of rights of spouses, and the inception of title doctrine sets the character of property as separate or community at the time of acquisition. Real property acquired during marriage is presumed to be community property, unless the spouse acquired title by gift, devise, or descent. There are methods to rebut this presumption, but if you seek to purchase real estate acquired while married, would-be purchasers are wise to get both spouses to sign.

General Warranty Deeds

There are six warranties in a warranty deed, three present and three future:

Present Covenants

    • covenant for seisin,
    • covenant of the right to convey, and
    • covenant against encumbrances.

Future Covenants

    • covenant for quiet enjoyment,
    • covenant of general warranty, and
    • covenant for further assurances.
Deed

So what does that even mean? Seisin is a custom going back to pre-literate England and was used as a means to embed transfer and ownership into the community’s collective memory. The covenants of seisin assure that the grantor is the owner and can convey. Together with the covenant against encumbrances, means the grantee takes the highest estate the grantor has, except for any reservations already disclosed. Quiet enjoyment means no one else will come and dispossess the grantee of ownership. The covenant of general warranty means the grantor will defend the grantee from claims, should they arise. And the covenant for further assurances requires the grantor to take affirmative steps to cure any defects in title.

The “General” in a General Warranty Deed means the grantor provides all six covenants FOR ALL TIME, at least in theory. In reality, a grantor also relies upon the warranties from the persons who conveyed title to them, and so on back through the chain of conveyances.

Special Warranty Deeds

Special Warranty Deeds contain all six covenants described above, but the grantor only warrants title for the time during which they held title. No warranty is made about the state of title prior to their ownership.

Deeds without Warranty

Once you understand the six covenants in a Warranty Deed, a Deed without Warranty becomes fairly self-evident. These convey ownership, but makes no guaranty about the condition of the title the grantee receives. The advantage of this instrument comes from the doctrine of after-acquired title. Should the grantor later acquire title to the property by operation of law, this deed acts to convey that grantor’s title to the grantee.

Quitclaims

Unlike Deeds without Warranty, Quitclaims act merely to denounce title in favor of another. Under Texas law, these instruments do not convey title to property. A grantor makes no warranties or covenants. And should the grantor come into title by operation of law at some later time, nothing conveys to the grantee.

Bills of Sale and Other Transfers

Bill of Sale: Certain personal property statutorily requires a bill of sale, including livestock, trees/timber, used pipelines and oil/gas equipment, just to name a few. In other instances, a bill of sale may not be required, but useful. Titled vehicles cannot be sold without designating the transfer on the title to be recorded with the proper county. Sales involving appliances under warranty may be subject to the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, 15 U.S.C. §§ 2301–2312.

Gift Deed: These avoid the requirement to recite “consideration” for a valid conveyance, other than the traditional “love and affection.” A Gift Deed requires a gift made during a grantor’s life are donative intent, delivery, and acceptance. Gannon v. Baker, 830 S.W.2d 706, 710 (Tex. App.—Houston [1st Dist.] 1992, writ denied).

Transfer on Death Deed: These allow owners the conveyance of real property to take effect upon death and mostly used to avoid having the property become part of their estate to be probated. The grantor can change the named grantee until their passing.

Ladybird Deed: Similar to a ToDD (above), except the transfer takes effect immediately, with the grantor retaining and “Enhanced Life Estate.” There are other distinguishing characteristics, including that the grantor can still lease, mortgage, or sell the property.

Where to go from here.

There are numerous variations, additional clauses, and fact patterns not included in the description above. When reviewing or drafting deeds, you should consult with an attorney in your jurisdiction. This is meant merely to act as an introduction to a complex legal topic. Contact us to discuss your legal needs.

All content is for informational and educational purposes.  Jerel Ehlert is licensed to practice only in Texas.  The laws of your state may be different.  Laws change over time, and discussions are a reflection of the laws at the time of writing.  Seek competent legal advice based on your circumstances.  This is not a substitute.

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