Home, first-time buyers, mortgages

The Deed as Evidence of Ownership

A deed represents evidence of ownership of real estate. Thus, it is the instrument by which a real estate owner acknowledges transfer of the property to a new owner. There are two kinds of deeds that are customarily used in conveying land: warranty deeds and quitclaim deeds.
•     Warranty    Deeds. A warranty deed usually contains the phrase, “and warrants the title thereto.” Such a deed contains covenants (assurances or guarantees) of title that impose contractual liability upon the grantor (person transferring title). Typical covenants are: 1) that the seller had an estate free of adverse claims in fee simple with the right and power to convey, 2) that the property was free from encumbrances of liens except those listed on the deed, and 3) that the buyer will have quiet and peaceable possession and the seller will defend title against all persons lawfully claiming it. A warranty deed actually conveys no more title than does a quitclaim deed. However, if a warranty deed is used, the grantor may be held liable if the title is limited, defective, or encumbered. For example, if the property being conveyed by warranty deed is mortgaged and the deed is not made subject to the mortgage, then the grantor may be personally liable for any damages suffered by the grantee (person receiving the title). Such liability of the grantor may even extend beyond the grantee to subsequent grantees. The warranty deed also assures the grantee that if the grantor did not have title at the time of delivering the deed, but should later acquire title, then the grantee will thereby receive all of such title.
• Quitclaim    Deed. A quitclaim deed indicates that the seller is conveying whatever rights he possesses in the property to the buyer but does not promise that the seller owns anything. Such a deed does not obligate the grantor beyond his present ownership. If the grantor has no interest in the property, none will be conveyed. A quitclaim deed contains the words “and quitclaim” as a usual term in the granting clause of the deed. It is possible to insert in the quitclaim deed an additional clause by which the grantor obligates himself to convey all interest, if any, which he may thereafter acquire in the land. This would accomplish one of the additional protections of a warranty deed but would not help the buyer if the seller never acquired title.
• Purpose    of    Recording    a    Deed. Deeds should be recorded, not for the purpose of giving them validity, but to give notice of their contents and effects to all the world. To be recorded, the deed should be acknowledged with a declaration that the grantor personally appeared before a public officer, such as a notary public, and certified that the deed was voluntarily signed by the grantor. Deeds are recorded in the County Clerk’s office of the county in which the land is located.
• Importance    of    Delivery. Sometimes a grantor will sign a deed covering land which he or she wants to keep until death expecting the deed to be the method by which title to the land is transferred. Instead of delivering the deed directly to the grantee, the owner places the deed in a safety deposit box or among private papers. Undelivered deeds like these are commonly called “dresser drawer deeds.” Such deeds are invalid because they were not delivered to the grantee or his or her agent during the lifetime of the grantor. Delivery    is    necessary    to    accomplish    a    conveyance    by    deed.
Unless the deed is drawn and executed in the form of a will (which would be extraordinary and unusual), it could not become legally effective without delivery of the deed to the grantee or his agent. One alternative for handling this problem is for the grantor to retain a life estate for himself and transfer a remainder interest to the person he wants to own the property after death. At death, the property would automatically pass to the remainder-man. This may, however, present problems in terms of potential conflicts between the life tenant and remainderman regarding management of the property.
The deed could also be delivered to an escrow holder, who acts independently of both the grantor and grantee, with instructions that the escrow holder is to deliver the deed to the grantee upon the completion of certain acts or the happening of a certain event. In such a case, the law regards the date when the deed was delivered to the escrow holder as the effective date of the delivery, which makes the deed valid. The law would not pay any attention to the date when the deed was physically delivered to the grantee and, therefore, it would not make any difference if the grantor were dead at the time when the grantee received the deed. Escrow transactions are frequently used to overcome the risk of a grantor’s death pending the closing of a prolonged real estate transaction or one involving installment payments extending over many years.
The key to effective delivery of a deed is that the grantor must presently transfer legal control over the deed to the grantee or an independent third party. If the grantor retains a right to change his mind, then control has not been presently transferred. Because of the potential legal problems that may arise in using this type of device in estate planning, it is especially important to obtain legal advice. An alternative planning tool may better meet your needs with less risk of legal challenge.
If a mortgage covers the property to be transferred, the grantor (transferor) should keep in mind that liability for the debt remains unless a release from the lender is obtained.

Posted in Co-ownership | Comments Off

New floor

This time I would like to share something more personal with you. Finally, after too much time I left my family nest, bought a decent flat and started living on my own. Things are going just great. Nobody bothers me and I can do whatever i want. The flat is cosy and that’s enough for now. However, I have a small problem with the floor in my living room and so I think that the best idea would be to buy a new one. I’m considering Carpet One’s Laminate flooring as it seems to be the best value for the money. Moreover, it is very aesthetic and seems quite durable. So what say you? would that be a good idea?

Posted in Home renovation | Comments Off

Co-ownership

One piece of property can also have two or more present owners, rather than being owned by just one individual. Co-ownership can be for real property as well as personal property. In legal language, it is owned “in undivided interests.” There are three types of such co-ownership: tenancy-in-common, joint tenancy with the rights of survivorship, and tenancy by the entirety. The type of co-ownership affects:
1. Who will inherit property
2. How it will be taxed for estate tax purposes
•     Tenancy-in-Common. Tenants-in-common have undivided interests in the same land. Two or more persons may be owners in undivided interests as tenants-in-common. Tenancies-in-common are frequently created by the laws of inheritance. For example, if a widow with two children owns a farm and dies without a will, the two children will each own an undivided one-half interest as tenants-in-common.
There is no right of survivorship between tenants-in-common. Each tenant-in-common can sell or devise (will) his share. For example, if two married brothers own 320 acres as tenants-in-common and one brother dies, his one-half interest would pass to his heirs and be included in his estate for estate tax purposes. It would only pass to the surviving brother if he were an heir designated to receive the property.
If two or more persons own property jointly, it is normally presumed that they own as tenants-in-common unless the deed or title documents clearly indicate that a right of survivorship was intended.
•     Joint    Tenancy. The owners are called “joint tenants.” The joint tenants do not have to be husband and wife. When one joint tenant dies, his or her undivided interest is distributed equally among the surviving joint tenants. This is the characteristic peculiar to joint tenancy, and is referred to as “right of survivorship.”
Under Oklahoma law3 a joint tenancy can be created by the present owner deeding property to himself or herself and another as joint tenants or by a third party transferring property to two or more persons in a deed that specifies they will own as joint tenants. Use of words “and/or” alone is insufficient to create joint tenancy. Since some institutions or firms do not rigidly follow the law in this respect, it is best to review and decide with your legal counsel how titles should be held for bank accounts, savings and loans, bonds, stocks, insurance policies, and automobiles. Inadequate or improper wording may result in unnecessary litigation or additional estate taxes. A common abbreviation designating joint tenancy, as used here, is “J.T.W.R.O.S.,” meaning joint tenancy with rights of survivorship.
A joint tenant can sell or mortgage their interest, but cannot dispose of it by will. If a husband and wife own real property as joint tenants and the husband dies, the wife takes full ownership to the exclusion of the children. It is possible for the joint tenancy to be broken by one joint tenant conveying his or her interest outside the existing joint ownership.
For estate tax purposes, generally the entire value of joint tenancy property is included in the estate of the first joint tenant to die, but it may be reduced by the proportionate value contributed by the survivors.4 There is an exception for gifts of joint tenancy property to a spouse which occurred after December 31, 1976. See post “Taxing Joint Tenancy Property.”
•     Tenancy    by    the    Entirety. Tenancy by the entirety is a type of joint tenancy between husband and wife that is characterized by the fact that neither party can sever it without the consent of the other. Upon the death of one, the survivor acquires title to the property. This type of ownership is similar in nature to joint tenancy. Therefore, it is recommended that the deed or contract specifically refer to tenancy by the entirety if this type of co-ownership is desired.

Posted in Co-ownership | Comments Off

PREVAILING RISK ATTITUDES

An efficient mental risk-return calculus is a critical component for business success under uncertainty.
. . . the overall risk perception held by the public is often worse than reality. Risk management can assist you in making more profits in areas where over-conservative investors stay out. The upside is that, if risk is really low, your rivals will be over-valuing the risk. The downside is that, if risk is really higher than you think, you will stand to pay the price of the risk hazard or damage.
The efficient portfolio theory and mainstream mathematical models only set a basic foundation for analysis; they do not represent the risk management goal itself. Thus, they can become inclined to set a level of return that is not proportionate to an acceptable level of risk. We have seen that investors and managers often inadvertently end up being risk-seeking.
Sophisticated financial modelling can lead companies into a false sense of security where theory has not been adequately back-tested to check if it conforms to reality. Thus:

• they have lower assessment of the risk probability and impact;
• the impact of worst-case scenario is less dramatic than imagined;
• the maximum return is potentially higher than thought;
• such phenomena of risk misperceptions are often observed in practice, but not always admitted.

Weak banks and companies that are more prone to failure have inherent shortcomings such as a CEO and board that are likely to embark on unsuitable strategic missions. Reputation and prestige of the guilty party, as we have seen in the Credit Lyonnais case, may be enough to stop adequate risk management exercises taking off in the first place.
Furthermore, the internal checks and balances offered by the oversight board may have been overidden, so defects in the company’s structure are prevalent.
At the lower organisational level, there will be risk management weaknesses that allow major errors to occur. The Leeson or Rusnak cases are examples of a failure to incorporate suitable control elements. Financial modelling errors are examples of less glaring unintentional mistakes in risk management.
Setting up a departmental risk management function will monitor a risk hazard, and train staff. Under the trend of short-termisim in career and instant gratification, there are limits to how much passive personnel watching can achieve.
It is traditionally incumbent upon the industry watchers and regulators to monitor the operations and losses on a “watch list”, then to sound alarm bells. Yet, this corporate warning is too late for many shareholders. The auditors are meant to perform a regular financial health-check, as is done before a merger or acquisition.

Posted in Rights | Comments Off