HISTORY OF LAND TITLE IN CALIFORNIA
Original inhabitants in California were the native Americans, then came the Spanish explorers, who in 1593 claimed the land for the King of Spain. The King then granted land for farming and cities. Each city was given 4 leagues, 4,440 acres (2/3 of a township). The city would decide who was granted land rights in the name of the King. There were strict rules accompanying the grants.
1822, Mexico won independence from Spain. Mexico had been controlling California while a territory of Spain. Mexican Governors took over the dishing out of land and recording it… known as Expedients. Very rough form of recording and caused problems when California became a state.
After the Treaty of Guadalupe Hidalago 1848. Individuals who could prove they owned the land were given ‘land patents’ by the US Government. Previously land was under civil law. US changed it to common law. Allowing squatters to claim land under them. Some rules remained from Spanish and Mexican laws e.g. community property. Property acquired by a married couple became dual ownership and both signatures required to do anything. (civil law)
Disagreements occurred between title holders and squatters so a Land Commission Board was established. Fights went through the court system, even up to the Supreme Court.
ACKNOWLEDGMENT AND RECORDING
Recording is the interest of a party written down for all to see. Avoids secrecy and eases the conveyance. Must be recorded in same county as property. Filed alphabetically under name of interested party. Originals returned to requester. Not required by law.
Acknowledgment is the notarizing of any documents affecting the title. Must be done with proper official (Judge, court clerk or notary) in California. Official can’t be related to any party or part of the transfer process. A seal must be placed on the document as well as grantor’s thumbprint. After which, recorded at the County Recorders Office.
Documents that can be recorded:
• Deeds
• Loan Documents
• Agreements for Sale
• Option Agreements
• Deposit Receipts
• Commission Receipts
• Affidavits for above documents
Recording serves as notice to the public of your interest in a property. Buyers should always inspect a property they are buying as it may be occupied. You can’t just go by what’s on the deed. By recording the title/deed you protect yourself.
It can happen that 2 parties claim they own the land. In this case the law is guided by First in Time, First in Right. The first person to record a deed is the rightful owner. In the case where the property is sold to more than 1 person the first to record is the new owner.
Records are regarded in order of their seals. Those with older time stamps are given priority except in cases of tax or mechanics (someone who improved the property) liens.
The Real Estate Fraud Prosecution Trust Fund to investigate and prosecute such crimes is funded by recording fees. ($2)
OWNERSHIP OF REAL PROPERTY
Title to property is proof there is an owner. Can be individual, corporation, government. One or many can own real estate.
When one entity owns RE, it is ownership in severalty. Both corporations and individuals are single entities. Also known as sole ownership or separate ownership. Corporations use this method to protect board members. Owners are responsible for costs, but benefit from profits.
When more than 1 person owns property, called co-ownership or concurrent. There are different types:
• Tenancy in Common
• Joint Tenancy
• Community property
• Tenancy in Partnership
Tenancy In Common
Created when owners take possession as tenants, unmarried or no other method specified. Equal right of possession or undivided interest. Each party has equal say, equal right to inhabit even though there may be unequal financial interest.
When it comes to fees and expenses the percentage owned dictates how much responsibility each partner carries. If the parties disagree , they can file a ‘partition action’ which enlists the help of the court to settle or decide the fate of the investment.
Each partner may will or sell their share of the property on. The new owner of the portion of the property will become a co-owner with the others.
Joint Tenancy
Distinct due to right of survivorship and 4 unities. Each partners portion will revert to the other partners at time of death. Heirs are entitled to profits, but not ownership. Partners debts will not carry on to the property.
The four unities must maintain, if one of them is broken, the joint is dissolved onto tenancy in common. The 4 unities are:
• Unity of time - All must enter at same time
• Unity of title - All must enter the same deed, when title is taken on
• Unity of interest - All must have the same interest
• Unity of possession - All must have equal right of possession
Co-owners may borrow against their interest in the property. Debt will not be attached to the property, but will remain with the deceased estate.
Co-owners may sell their interest in their portion, however the new relationship will not be able to remain joint as one of the 4 unities is broken.
Community Property
Only 9 states have community property laws:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
Community property is joint ownership by husband and wife. All property obtained after marriage is owned jointly. Except, ’separate property. This is property obtained before the marriage or is willed or bought with pre-owned funds. THe confusing part becomes, what is his/her funds.
Community
- All property acquired during a marriage
- Wages
- Money earned from community property/investment
Separate
- Property before marriage
- Property inherited/gifted
- RE Finance
- Property acquired from separate money
- Money earned from separate money
In community property the property goes to the surviving spouse. If separate property is owned within the marriage and no will states otherwise, half the estate goes to the child and half to spouse.
Last type of community property… quasi-community is when a married person (outside of CA) obtains RE in California, either by sale or swap.
Tenancy in Partnership
The partnering of individuals to conduct profit. Each partner can own property as individual all members of partnership have right of possession. Death dissolves partnership and property is sold and profit shard amongst partners.
Missing graph (page 54)
ENCUMBRANCES
Encumbrance is a limitation placed on property by non-owner. Affects the ability to sell property until encumbrance is cleared. Not all are bad e.g. A property in zone required to maintain level of improvement.
When a title has encumbrances it’s called ‘cloud on the title’. Some sellers will have to sell property at below market value. Some might not even be able to be sold.
2 types:
Money - Lien/Debts secured against the property. (Tax, mortgage, mechanics, judgments)
Non-money - Limits on use. (Easement, building restrictions, zoning requirements or encroachments.)
Liens can be levied against all or specific property. Mechanic (improvement) and trust deeds (finance) are specific. Court judgement is general. These are examples of involuntary liens.
Some liens are voluntary as when an owners uses the home as collateral.
Mechanics Liens
Used to secure payment on work executed to improve property.
Those eligible:
• Contractors
• Subcontractors
• Architects
• Engineers
• Surveyors
• Material Suppliers
• Machinists
• Equipment Lessors
• Truckers
• Laborers/Workers
Subcontractors can file mechanics liens against the homeowner who doesn’t pay. Even in the event the homeowner pays the contractor in full. The homeowner is liable. It’s a good idea for the homeowner to require the contractor to obtain an payment bond. This insures all parties will be paid and releases homeowner from responsibility.
Enforcement of this type of lien results in foreclosure of the property. Enforcement must occur within 90 days. Can be granted extension for up to a year. Home is sold in judicial sale and proceeds go towards lien holders. Liens must be verified and recorded.
Following are steps to create a mechanics lien:
Preliminary Notice
After 20 days of work commencement a letter stating a lien may be served if payment not forthcoming, must be hand-delivered or first-class registered mail or certified, to homeowner, contractor or lender.
Starting Time
When construction begins.
Completion Time
When the owner begins to use the improvement, when work is accepted or work has ceased for 60 days, then the work is deemed completed.
Notice of Completion
Owner may file a notice of completion 10 days after completion time. After this contractors have 60 days and all others have 30-days. If owner does not file… all have 90 days.
Foreclosure Action
The filer of the mechanics lien has 90 days to foreclose on the lien after the filing. If they fail to do so they can loose their option to foreclosure or get compensation for their work.
Timeline
1) Materials are delivered or work begins on the project.
2) Preliminary 20 day notice given.
3) Work has been completed.
4) Notice of completion is recorded.
5) Lien recorded
6) Foreclosure action recorded
7) Service of process.
Court decision.
Upon foreclosure, the liens will be paid in the order they were filed (date). Mechanics liens take priority over all others, even trust deeds.
Sometimes work the owner has not authorized begins on his/her property. The property owner needs to file a ‘notice of non-responsibility’ with the county recorder, within 10 days and a copy posted on the property.
Notice must include property description, name, address, and property interest(owner) and a statement on non-responsibility. This will relieve the owner of responsibility.
Tax liens and Special Assessments
When property taxes utility project or local improvement or are not paid, they become a lien. These are called specific liens. Government taxes are general liens attached to any property.
Attachments and Judgments
Attachment is a freeze of assets to pay off a judgment. The loosing party in judgment has right of appeal to higher court. Once judgment becomes final, it becomes a general lien. A writ of execution can be requested by lien holder to satisfy debt. Property is sold off, can include exempt or non-exempt (judge discretion).
Lis Pendens
This is a cloud on the title on a property pending litigation. Property can’t be sold until resolved.
Easements
The right to use another’s land for a specific purpose. Called a non-posessory interest as the user does not own the property. Granting the ‘right of way’ is called ’servient tenement’. Receiving is the ‘dominant tenement’.
Useful as they allow those cut off from access the ability to reach their land. Easement is an appurtenant and when the dominant sells the property the easement is sold with the property. Seller cannot maintain rights.
Easements also benefit the public to access public recreation areas. If easements weren’t allowed, access to rivers, beaches and lakes would be the sole right of the property owner.
Easements in Gross these are used by utility companies to cross land or access utility hardware. Not appurtenant to 1 property and similar to a license but cannot be terminated.
Creation of an easement requires:
• Contract
Where servient tenement grants use to dominant tenement. Dominant need not own adjacent property.
• Express Grant from property owner
Express grant, by deed to person who will benefit.
• Express reservation
Then the servient sells the property, it retains the right of way in the sale.
• Implied Grant/ Reservation
When easement is granted through application of law. No need of mention in the deed as it may be obvious.
• Necessity
When there is no other way to reach a land-locked property. If another way presents itself, the easement is terminated.
• Prescription
When a dominant has been using an easement across another’s property for 5 or more years. Can be with or without the owners permission, by has to show just cause.
8 ways to terminate an easement:
• Express agreement between both parties
When the dominant surrenders the easement through a quitclaim deed (no warranty)
• Lawsuit
Quiet title action or court proceedings to reclaim title to property.
• Abandonment
If an easement created through prescription is not used for 5 continuous years, it is terminated.
• Estelle
When no longer used or the dominant suggests new purpose for the land.
• Merger of the easement between the dominant and the servant tenements.
When the dominant purchases the land from the servient.
• Destruction of the servient tenement
If the servient changes the use/type of property to the point it can no longer be used as an easement.
• Adverse possession
Servient performs all the necessary actions to take back easement.
• Excessive use
If the easement is used more that intended or for a reason other than planned/agreed.
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Restrictions
Also called CC&R’s or covenants, conditions and restrictions.
A covenant is a promise to engage/abstain from an action. Usually carries a penalty fee.
A condition is similar to a covenant with the difference being that the property reverts to original owner when conditions not met. 2 kinds of conditions:
1) Condition subsequent - Restriction on deed, reverts back to owner.
2) Condition precedent - Numerous actions or events must take place before reverting to owner.
Limitations placed on a property either privately (by the previous owner) and only affects a single property or development. The government also creates restrictions in the form of zoning laws and building restrictions. Acts more towards the public good.
Restrictions are created at time of deed or during planning of subdivision. Development restrictions lean towards conformity and unity. e.g. development knows for view… house height is limited. This is regarded as form of encumbrance for the good of all.
When more than 1 restriction… the stricter of the two takes precedence. A covenant is a promise to engage/abstain from an action. Usually carries a penalty fee.
Encroachments
An improvement that crosses property border. Encroached property owner has 3 years to remove encroachment. Examples: Trees, shrubs, fences, walls, buildings or drives.
If the encroachment fulfills the prescription adverse possession encroachment he/she now has rights to use the land if the encroachment is not contested within 5 years.
HOMESTEAD DECLARATION
Is a recorded document protecting a certain amount of the homeowners investment. Guarding against certain foreclosure and judgments. Not against trust deed, mechanics liens or other liens recorded before HD. Head of household can declare $75,000 protection. 65 and older $150,000 all others $50,000. Only 1 homestead per person. If you want to release homestead, file abandonment of homestead… or selling the home has same effect.
MARKETABILITY OF TITLE
Is a title that a new buyer will feel confident in purchasing and that no challenges will be forthcoming. Good way to check is check the chain of title which will establish actual owner of the property.
Before record keeping abstractors were hired to research the documents and conveyances and create an abstract of title. The owner would then consult to see the feasibility of a clear title.
Now titles can be researched by anyone in the public at the recorders office. One can look at the certificate of title and determine encumbrances and how titles are vested to their owners.
TITLE INSURANCE
Used to insure marketable titles. Properties maintain wealth as long as titles are marketable. Properties go through various forms within an ownership. Marriage, joint tenancy, willed, inheritance. How can one know tho the rightful owner is?
In researching the chain of title (various owners) and the abstract of title (change in ownership) and attorneys opinion of title are methods to determine a titles marketability. However all efforts could be nullified in the case of fraud.
2 Kinds of Title Insurance:
• Standard Policy
• Extended Policy
Standard protects against records on file with county recorder and items not on record, like fraud, misrepresentation, etc. Also against federal tax liens and legal expenses.
Will not protect against:
• Title defects either known or by policyholder or shown in survey
• Rights or claims of those in possession, even those that would not show in the records.
• Easements and liens not shown in public records.
• Changes in land use dictated by zoning laws
• Water rights
• Mining claims
• Reservations
California Land Title Association (CLTA) provides members with standard form of insurance. Extended will use a different form.
Extended policy covers that not covered in standard policy. American Land Title Association (ALTA) has a standard policy which also protects against physical possession claims, water rights, easements, liens, claims, etc. Lenders usually take out this insurance to protect their investment.