FIN 331 Chapter 3

Chapter 3
Conveying Real Property Interests
Real Estate
FIN 331
Fall 2015
SOURCES OF COMPLEXITY IN
CONVEYING REAL PROPERTY
A. Real property is a complex bundle of rights
B. Rights to land are enduring: Rights available
today depend on transactions long ago
C. Land is a continuous surface
a. Boundaries not obvious or natural
b. Boundary errors always hurt someone
DEEDS – CONVEYING REAL PROPERTY
A. Deed: A special, written contract for conveying a permanent

interest in real property
B. Requirements for a Deed
1. Grantor (with signature) and grantee
grantor must be of legal age and competent
2. Recital of consideration: “for [ten] dollars and other good and
valuable consideration…”
3. Words of conveyance: “does hereby grant, bargain, sell, and convey
unto…”
4. Covenants
a. Covenant of seizin: promise that grantor truly has good title and right convey
it
b. Covenant against encumbrances: no liens, easements, or other limitations
except as noted in the date
c. Covenant of quiet enjoyment: the premise that property cannot be claimed by
someone else with a better title
DEEDS – CONVEYING REAL PROPERTY
5. Habendum clause: defines or limits the type of

interest being conveyed
6. Exceptions and reservations class (if any)
7. Description of land: legal descriptions are metes
and bounds, subdivision plat and block number,
in government rectangular survey
8. Acknowledgment
9. Delivery: a deed must be “delivered” in order to
be valid
TYPES OF DEEDS
A. General warranty deed: All three covenants;
seizin, no encumbrances, and quiet enjoyment
B. Special warranty deed: identical to general
warranty deed except as limited to the time of the
grantor’s ownership
C. Deed of bargain and sale: No covenants, but still
is regarded as implying ownership
D. Quitclaim deed: No covenants and makes no
assertions about grantor’s interest
TYPES OF DEEDS
E. Judicial Deeds and Trustee’s Deeds
1. Judicial deeds are the result of a court ordered
proceeding
2. Trustee’s deeds are issued by the trustee in a court
supervised disposition of property
Modes of Conveyance of Real Property
A. Voluntary conveyance by deed

1. Ordinary sale and transfer of title
B. Voluntary conveyance without a deed
1. Implied easement: utility easements
2. Easement by estoppel: permission to use by
adjacent landholder
3. Dedication: When a developer dedicates street
rights-of-way and open spaces
C. Involuntary conveyance by deed
1. Probate (distribution of estate)
2. Bankruptcy
3. Divorce settlement
4. Condemnation
5. Foreclosure
D. Involuntary conveyance without a Deed
1. Landowner involuntarily and unknowingly gives up
rights to land
2. Easement by prescription
3. Title by adverse possession
E. Gain rights to land through the action of water

(accretion, reliction)
1. Accretion: enlargement by natural action
2. Reliction: gradual change of water line on real
property which gives the owner more dry land.
Importance of Public Records
A. Doctrine of constructive notice: Cannot be bound by
claims or rules he or she has no means of knowing
B. Statute of Frauds (1677): Contracts conveying a real
property interest must be written to be enforceable
C. Recording statutes: A contract recorded in public
records is considered known
D. Actual notice: Open, continuous, actual possession of
property
E. Public records provide information for a “Title” search
Defining “Title”
A. Title: Collection of evidence indicating a particular
person(s) as holder of the “fee”
B. Title search: Examining public records to construct
“chain of title”
C. Chain of title: the sequence of conveyances passing
ownership down through time
D. Evidence of Title
1. Title abstract together with an attorney’s opinion of title
2. Title insurance commitment
3. Title insurance protects the grantee against the legal costs
of defending the title and against loss of the property in
case of an unsuccessful defense
Defining “Title”
E. Potential Problems with Titles: (Motives for
Title Insurance)
1. Conveyance of partial interest or adverse
possession
2. Inconsistent property descriptions
3. Missing signatures
4. Faulty separation of mineral or water rights
Property [Land] Description
A. Metes and Bounds: specifying the location of its
boundaries
1. Monuments: natural objects such as boulders, trees, rivers
or man-made objects such as roads or survey markers.
2. Courses: directions in the form of compass headings.
a. Compass bearings as deviations from north or south
3. Distances: measured in any convenient unit of length
(feet, meters, etc.)
4. Property description must specify a point of beginning
and is followed by a series of courses and distances.
Dr. D.P. Echevarria All Rights Reserved 13

A. Government Survey Descriptions (rectangular or
public land survey system)
1. Land description by reference to a grid of lines.
2. Used primarily west of the Mississippi following the Land
Ordinance Act of 1785.
3. Grid composed of two sets of lines
a. One set running north and south, the second set running east and
west.
b. Each grid identified by a Principal Meridian (north-south) and a
Base Line (east-west)
c. 35 principal meridians and 32 baselines comprise the GS system
d. The east-west lines are called township lines and north-south lines
are called range lines and run at intervals of 6 miles.

A. Government Survey
Descriptions (cont.)
1. Townships: the area
encompassed by two
adjacent range and
township lines = 36
square miles
2. Tract = 16 townships

1. Townships (cont.):
Comprised of 36
sections (each = 1 sq.
mile)
2. Each section = 640
acres
3. 1 Acre = 43,560 sq ft
4. Each section is
numbered
consecutively from 1 to
36

1. Sections may be sub-
divided into smaller
parcels
a. Quarter section = 160
acres
b. Quarter-Quarter section =
40 acres
c. Q-Q-Q section = 10 acres
2. Metric Land Measure

a. Hectare = 2.471 acres
b. Hectare = 100m x 100m
c. Hectare = 10,000 sq
meters

Principal Meridians and Base Lines

Chapter 3 Recap
A. In real property law, The word estate refers to an
interest in land that is or may become possessory.
B. Estate's fall into two categories:
1. Freehold estates: do not have a fixed duration
2. Leasehold estates: have limited duration
C. Freehold estates
1. Fee simple absolute (infinite duration plus full bundle of
rights)
a. Exception: Life estate freehold limited to life of person or persons
2. Fee simple defeasible (grantee’s estate has conditions)

Chapter 3 Recap
A. Leasehold Estate: a tenant who does not own the
property
1. Estate for years: tenancy for fixed term of time.
2. Periodic Tenancy: period to period with no fixed
termination date
a. Serial renewal of an apartment lease
3. Tenancy at Will: tenant has possession for an
indefinite period of time with the landlords consent.
4. Tenancy at Sufferance: when tenant stays on after the
lease has expired

Chapter 3 Recap
A. Deeds
1. General Warranty Deed: Grants the greatest
protection to the grantee
2. Special Warranty Deed: scope is limited to defects
that arose during the grantor's tenure
3. Grant Deed: used in the few states instead of
warranty deeds
4. Bargain and Sale Deed: offers the grantee no
guarantees or covenants.
5. Quitclaim Deed: contains no warranties of any kind.
Does not imply that the grantor owns the property.

Chapter 3 Recap
A. Requirements for a valid deed
1. It must be in writing
2. Must identify the parties
3. The grantor must be legally competent
4. Have a living grantee
5. Be signed by the grantor
6. Include an adequate description of the property
7. Recite consideration exchanged
8. Contain the words of conveyance
9. Define the interest conveyed [the independent clause]
10. State any exclusions or reservations

Foreclosure or Other Notice
Article 11. Lis Pendens
§ 1-116. Filing of notice of suit.
(a) Any person desiring the benefit of constructive notice
of pending litigation must file a separate, independent
notice thereof, which notice shall be cross-indexed in
accordance with G.S. 1-117, in all of the following cases:
(1) Actions affecting title to real property.
(2) Actions to foreclose any mortgage or deed of trust or to
enforce any lien on
real property.
(3) Actions in which any order of attachment is issued and real
property is
attached.

Lis Pendens
(b) Notice of pending litigation shall contain:
(1) The name of the court in which the action has been commenced or is
pending;
(2) The names of the parties to the action;
(3) The nature and purpose of the action; and
(4) A description of the property to be affected thereby.
(c) Notice of pending litigation may be filed:
(1) At or any time after the commencement of an action pursuant to Rule 3 of
the Rules of Civil Procedure; or
(2) At or any time after real property has been attached; or
(3) At or any time after the filing of an answer or other pleading in which the
pleading party states an affirmative claim for relief falling within the
provisions of subsection (a) of this section.

Lis Pendens
(d) Notice of pending litigation must be filed
with the clerk of the superior court of each
county in which any part of the real estate is
located, not excepting the county in which the
action is ending, in order to be effective against
bona fide purchasers or lien creditors with
respect to the real property located in such
county.

Some Legal Definitions
Real Estate
FIN-331
Appurtenance
A. Anything attached to a piece of land or
building such that it becomes a part of that
property, and is passed on to a new owner
when the property is sold. It may be
something tangible like a garage, septic
system, water tank, or something abstract
such as an easement or right of way.
Estoppel
A. A legal principle that bars a party from denying
or alleging a certain fact owing to that party's
previous conduct, allegation, or denial.
1. Promissory estoppel is a contract law doctrine. It
occurs when a party reasonably relies on the promise
of another party, and because of the reliance is
injured or damaged.
2. Estoppel by laches precludes a party from bringing
an action when the party knowingly failed to claim or
enforce a legal right at the proper time.
Legal Estoppel
A. Estoppel by deed, a party to a property deed is precluded from asserting,
as against another party to the deed, any right or title in derogation of the
deed, or from denying the truth of any material fact asserted in the deed.
1. 1. If O conveys property she doesn't own to A by warranty deed, but O later
acquires title to that land, then title immediately passes to A.
2. 2. However, if, as above, O conveys property she doesn't own to A by
warranty deed, but O later acquires title to that land, A may elect to treat O's
lack of title at the time of the conveyance as a breach of the covenants of
seizin and right to convey (two of the six traditional forms of Covenants for
Title that are contained in a general warranty deed), and sue O for damages.
A cannot be forced to accept O's after-acquired title if she wishes instead to
receive damages.[4][5]
3. 3. If O conveys property she doesn't own to A by quitclaim deed, but O later
acquires title to that land, then A owns nothing. This is because O passed her
interest to A with a quitclaim deed; at the time of the conveyance, O's
interest was nothing, so she passed nothing.
HOMEWORK ASSIGNMENT
A. Key terms: Accretion – Reliction, Adverse Possession,
Covenant of Seizin, Types of Deeds (7), Doctrine of
Constructive Notice, Easement by Estoppel,
Encroachment, Habendum Clause, Metes and Bounds,
Title Abstract / Insurance
B. Study Questions: 1, 2, 4, 5
C. Issues to Ponder: Smith bought a repossessed property
from the bank. A year later, Smith decides to have the
property surveyed. Smith discovers that the adjoining
neighbor’s fence is actually on Smith’s property. What
are the issues involved?
North Carolina Power of Sale
Foreclosure Procedure
© Rogers Townsend
Attorneys at Law
[Fair Use Doctrine Applies]
© Rogers Townsend Attorneys at Law 31

Documents Needed at Referral
Foreclosure Process
Copy of Recorded Deed of Trust (DOT)
• Copy of Note with Endorsements
• Copy of Title Policy
• Copy of Assignments/Allonges (an attachment to a legal document that can
be used to insert language or signatures when the original document does not
have sufficient space for the inserted material)
• Copy of Appraisal
• NCGS 45-93 Written Compliance response
• Payoff figures for NCGS 45-21.16(c)(5a) notice
* This letter also includes the Fair Debt Collection Practices
information.
• Home Loan/Non-Home Loan Certificate, if applicable
• 45 day pre-foreclosure notice and/or 30 day breach letter
• If our office sends the 45-day pre-foreclosure notice for you, we need a
reinstatement figure.
http://www.rtt-
© Rogers Townsend law.com/public/files/docs/Nort
Attorneys at Law h%20Carolina%20Foreclosure.
Foreclosure Process
A. Substitution of Trustee (SOT): executed by
holder of the note
B. Notice of Hearing (NOH): to person(s)
directed in deed of trust
C. Service: certified mail or in person by Sheriff
– 20 days on property, 10 days to mortgagor
(borrower)
D. Clerk of Court is presiding official
E. Affidavit of Indebtedness
http://www.rtt-
Hearing before the Clerk of Court
To authorize the foreclosure sale, the Clerk must find the existence of:
1. A valid debt of which the party seeking to foreclose is the holder;
2. Default;
3. Right to foreclose under the instrument;
4. Notice to those entitled to notice;
5. That the underlying mortgage debt is not a home loan as defined in G.S.
45-101(1b), or if the loan is a home loan under G.S. § 45-101(1b), that the
pre-foreclosure notice under G.S. § 45-102 was provided in all material
respects, and that the periods of time established by Article 11 of Chapter 45
of the General Statutes have elapsed;
6. That the property is occupied by the borrower as his/her principal
residence and the lender has complied with the requirements of G.S. § 45-
21.16C or that the property is not occupied by the borrower as his/her
principal residence and therefore G.S. § 45-21.16C is inapplicable; and
7. That the sale is not barred by G.S. 45-21.12A.
http://www.rtt-
Contested Issues/Appeals
2 issues that are contested most often are:
• Whether the party seeking to foreclose is the
holder of the Note; and
• Whether the borrower is in default.
• In North Carolina, the amount of the default is not
relevant for a Clerk’s foreclosure hearing. If the
borrower is $1.00 behind, the Clerk shall enter the
Order allowing the foreclosure sale to proceed.
http://www.rtt-
NC G.S. § 45-21.16C
G.S. § 45-21.16C provides the Clerks with the
authority to continue a foreclosure hearing for up
to 60 days if the residence being foreclosed is
the borrower’s principal residence and the
Clerk determines there is good cause to believe
that additional time or additional measures
have a reasonable likelihood of resolving the
delinquency without foreclosure
http://www.rtt-
Notice of Sale
A copy of the Notice of Sale is posted at the courthouse immediately after
the hearing before the Clerk of Court takes place.
• We send a copy of the Notice of Sale by First Class Mail to the following:
√Any person who has filed a Request for Notice (RFN). A person that
has filed a RFN is entitled to notice of the sale at least 20 days prior to the
sale taking place.
√Current Occupant. The current occupant of the property must be given
20 days notice of the sale of the property.
√Large Judgment. If there is a large judgment, we send a copy of the
Notice of Sale to the judgment holder.
√Junior Lienholder.
• We send a copy of the Notice of Sale by U.S. Certified Mail, return
receipt requested to the IRS. If an IRS lien was filed 30 or more days prior to
the sale date, we are required to provide the IRS with notice of the sale at least
25 days prior to the sale date.
http://www.rtt-
Sale
A. The sale takes place at the courthouse. If a third party bidder
is the high bidder, he is required to deposit 5% of his bid in
certified funds with the person holding the sale. We generally
give a third party bidder 30 days to pay the full balance of his
bid.
B. • There is a 10 day redemption and upset bid/confirmation
period in N.C. that run concurrently. A sale is not
“confirmed” until there have been 10 consecutive days with
no upset bids having been filed. Once the sale has confirmed,
the rights of the parties become fixed and the purchaser is
entitled to a Trustee’s Deed upon payment of the balance of
the bid.
http://www.rtt-
Sale
A. Redemption: During this 10 day period, the borrower
has the right to pay the loan in full and “redeem” the
property.
B. Upset Bid: During this 10 day period, any person may
file an upset bid with the Clerk of Court. The upset bid
must be at least 5% more than the last bid and the
person placing the bid must deposit 5% of his bid with
the Clerk’s office. The 10 day period starts over again
after each upset bid is placed and continues until 10
consecutive days have passed without an upset bid
having been filed
http://www.rtt-
NCCOB Rule 702
NC Commissioner of Banks
Under this rule, mortgage servicers must:

(1) Acknowledge, in writing, a borrower’s request
for loss mitigation no later than ten (10) business
days after the request.
(2) Respond to a loss mitigation request from a
borrower no later than thirty (30) business days after
the receipt of all information necessary from the
borrower to assess whether or not a borrower
qualifies for any loss mitigation programs offered by
the servicer.
http://www.rtt-
NCCOB Rule 702
(3) Include in a final response denying a loss
mitigation request the reason for the denial and
contact information for a person at the servicer with
authority to reconsider the denial.
http://www.rtt-

FIN 331 Chapter 3

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Chapter 3

Conveying Real Property Interests

A. Deed: A special, written contract for conveying a permanent

5. Habendum clause: defines or limits the type of

A. Voluntary conveyance by deed

E. Gain rights to land through the action of water

Dr. D.P. Echevarria All Rights Reserved 13

Dr. D.P. Echevarria All Rights Reserved 14

Dr. D.P. Echevarria All Rights Reserved 15

Dr. D.P. Echevarria All Rights Reserved 16

2. Metric Land Measure

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© Rogers Townsend Attorneys at Law 31

Under this rule, mortgage servicers must:

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