Real Estate Principles
UNL Finance 382
Chapter 6
Recordation, Abstracts, and Title Insurance

Real Estate Principles, 11th Ed., Charles J. Jacobus
	© 2010 by Cengage Learning

Title Evidence

When a party wants to acquire an interest in real estate, historically they went to the neighbors and inquired who may have witnessed a conveyance of the property.

Today, after the Statute of Frauds, written deeds and conveyances are required to show transfers of interests in real estate.  The government has set up recording services where deeds and other conveyances are stored, thus one wishing to investigate title to real estate must review the P                   R                     .  There one will investigate the deeds and other records which affect title to the particular tract of real estate.  In addition however, one must also investigate person in P                              of the real estate to make sure there are no adverse possessors, leaseholds or any other unrecorded interest.

Public Records*

*Note Mr. Jacobus explanation of the notice types differs slightly from the explanations given here and in class.  You should be familiar with both explanations but the test questions will focus on what you learn from the lecture.
There are three types of notice that a person who is acquiring an interest in real estate must be concerned.
1.	C                   Notice is the notice given by the public records.  This type of notice is sometimes referred to as Legal Notice or Documentary Notice.
2.	Inquiry notice is the type of notice one gives by their P                   on the land. Adverse possessors and Tenants give inquiry notice.
3.	A                notice occurs when you see, hear, read or observe the occurrence of a conveyance or event. 
 Recording documents does not V                  the document.
B              F                  P                  may be protected against unrecorded interests.

The Recorder’s Role

All interests in real estate maybe recorded with the public recorder’s office to give interested parties an opportunity to check title to real estate, and the recording of such interests gives C                          notice of the conveyance of the interest.

Where, What and When to Record

In Nebraska there are several locations where records are stored.  Most documents are stored in the R                  of Deeds (in some counties this office is combined with the County Assessor).  Some counties may record documents in the County C                  office.  Other records are found in the Secretary of State and the Clerks of the District and County Courts.

Documents that will be recorded include: D             , Mortgages and Deeds of Trust, L               , long term Leases, Options, E                 , Affidavits regarding names, encroachments or anything needing explanation.  Any record of an interest in the real estate.
 
Normally, you wouldn’t find P                    A                    , short term Leases, and Promissory Notes filed in the recorders office. 

Documents should be recorded I                         following closing or the acquisition of the interest.  The delaying of recording may result in:	

Why Record?

Give Notice of:
	Change in O                       
	A                       any interest in the property	
Does not affect validity of title
ie. An unfiled deed may still be valid as between the parties and others who have N                      
Establishes priority.  For example the first mortgage (loan) against the property is called a “first mortgage” a mortgage filed after the first will be a “second mortgage” and so on.

Recording Statutes

Types of Recording Statutes
Race: race to recorder 	
Notice: subsequent purchaser must not have notice	
Race Notice: priority given to one recording without notice (Nebraska)	

Requirements for Recording

Legal Description:	  
Filing Fee:                	
Special Note to Record a Deed:  
To record a deed you must include the Documentary tax ($                per $                or part thereof)
	Accompanied by Form 521
Must be A                                signed under oath before a N                 
Public Records Organization

Records photocopied or microfilmed 
Filed in chronological order
Indexed
Tract Index:	
Grantor and Grantee Indexes:	

Chain of Title

Chain of title shows the connection or L                       of property ownership from one owner to the prior owner, and then from that owner to the next prior owner and so on.
The chain of title, is used to prove the V                       of title in the current owner.
 	Abstract of Title

An abstract of title is a historical summary of all recorded documents
Recites in chronological order all C                          and R                   interests in the real estate including:                                                      	
Abstracts need to be brought “up to date” sometimes referred to as “brought down” (refers to the placing of the most recent abstract of document at the bottom of the list).
C                      of T                is attached to the abstract each time it is updated.
After the abstract is up to date, an A                     will review the abstract and give an O                          as to the quality of the ownership of the title and whether or not any defects in title exist.

Title Defects

Some typical title defects: (See page 95 in “What Ifs”)

Some title defects won’t be found by a title search including: Lack of proper delivery, occupants, survey issues, compliance with laws (zoning) and recordings after the date of the search.

Title is Described as Being

Marketable:	

Equitable:	

Curing Title Defects

Q                Deed 	is the most common method to cure defects in title when the claimant is cooperative.  A Quitclaim is a “R                       “ of an interest in the property
Q       T           Action	A law suit to give persons who are not cooperative a right to a hearing to present evidence about their claim.  A judgment “quiets” their interest.
R                        	Certain interests in real estate, in particular liens may be released by the claimant if they in fact have no interest and are cooperative.
A                        	Sworn statements given before a notary used to clarify certain defects or ambiguities.  May be given by a person in the C               of title or a disinterested third party.
M                        	Statutory law setting a deadline that cuts off certain claims to rights or interests in land that have been inactive for a period of time (22 years in Nebraska).  The title holder must prove unbroken chain of title during the period.

Proof of Ownership

To prove to a prospective buyer or lender that one owns the subject real estate, free and clear of any defects, they have to prove that they are the owner.  They do that in one of two (sometimes but rarely both) methods.
Abstract includes:	
	
If there is a defect that wasn’t revealed:	

Title Insurance includes:	
	
If there is a defect that wasn’t revealed:	

Title Insurance

Does not guarantee title. It                                    in title.
Title insurance covers claims and hazards which                                    occurred, for a claim to arise in the future.  
The insurance pays either to                                      the title or will                                            the claimant (owner or mortgagee) for their loss. Note most policies do not appreciate in value. 

The Standard Owner’s Policy: Hidden defects are excluded from coverage
Covers:  Claims to title, Forgery and Impersonation, Liens (except those excluded), Defects in Deeds or other documents
EXCLUDES:  Survey findings, Occupants,  Easements, Taxes and assessments not due, Mining claims, Governmental zoning and use restrictions, UNRECORDED LIENS

The Extended Coverage Policy: 
Covers: parties in possession, survey disclosures and unrecorded liens

Popularity of Title Insurance over Abstract and Opinion:
Lender’s Policy
	For amount of loan
	Terminates when loan paid off
	Covers “inquiry notice” defects
	Assignable to subsequent holders of the same loan
Growth in Market
	Grantor liability for warranties
	Grantee’s exposure if Grantor unable to satisfy guarantees
	Secondary loan market by law requires
	Lawyers may be more careful as to what is marketable

Key Terms

Abstract of title
Acknowledgment
Actual notice
Chain of title
Constructive notice
Marketable title
Public recorder’s office
Quite title suit
Title insurance
Torrens system