Title Terminology 101
The following is a basic dictionary
of the terms commonly used in the title insurance industry.
Acknowledgment: A formal declaration,
before a notary public, by a person signing a document that his or
her signature on a document is their own and was voluntarily given.
Notarized documents may be introduced as evidence in court without
further proof to the genuineness of the signature.
Administrator: Person appointed by
the Judge of Probate to take possession of the property who died
without a will, to pay debts and distribute the property to those
entitled to it according to the law. Must have a court order to sell
the property.
Adverse Possession: The actual,
visible, hostile, notorious, exclusive and continuous possession of
another’s real estate.
American Land Title Association (ALTA):
A national association of title insurance companies,
abstractors, and attorneys specializing in real property law. The
association speaks for the title insurance and abstracting industry
and establishes standard procedures and title policy forms.
Beneficiary: The person designated to
receive the income from a trust or estate.
Clear Title: Title which is not
encumbered or burdened with defects.
Cloud on Title: Any claim or
condition (valid or invalid), which adversely affects the title to a
property. Generally these cannot be removed except by a quit claim
deed, release or court action.
Commitment (Title): The initial
product delivered by a title company which reports the status of
title as a specific date. It is called a commitment because the
company is committing to issue a title insurance policy that
conforms with its provisions.
Common Areas: Those portions of a
building, land, and amenities owned or managed by a PUD or
Condominium Project’s Owner’s Association that are used by all of
the unit owners. Common areas include swimming pools, tennis courts,
other recreational facilities, corridors of buildings, parking
areas, means of ingress and egress, etc.
Contiguous: Adjoining or touching
Covenants, Conditions and Restrictions
(CC&R): Constraints in a deed or other recorded document
which delineate the uses to which the land may be put and the
penalties for failure to comply. CC&R’s will often be used by
land developers when the property is subdivided and platted. It may
restrict the size, price range, location, character and other
features of buildings which may be constructed there. The covenants
are said to “run with the land”, meaning that they will be binding
on future owners of the property.
Deed: A written instrument by which
some degree of ownership interest in real estate is transferred from
the grantor to a grantee. Deeds must meet certain legal requirements
in order to be effective.
Deed of Trust: Used in place of a
mortgage. Property is transferred to a trustee by the borrower in
favor of the lender. (not to be confused with a Trustee’s Deed)
Deed-In-Lieu of Foreclosure: A deed
given by a mortgagor to the mortgagee to satisfy a debt and avoid
foreclosure; also called a voluntary conveyance.
Devise: Transferring title to real
property by means of a will.
Easement: Right of interest in land
owned by another entitling the holder to a specific limited use,
privilege, or benefit such as laying a sewer, putting in electric
power lines or crossing the property.
Encumbrance: A claim, lien, charge or
liability attached to and binding real property, such as a mortgage,
lease, easement or restriction.
Executor: A person named in a will to
administer an estate. The court will appoint an administrator if no
executor is named.
Fee Simple: An unconditional,
unlimited estate of inheritance that represents the greatest estate
and most extensive interest in land that can be enjoyed without
limitation on the owner’s right to sell, mortgage or devise. It is
of perpetual duration.
Fiduciary: A person who essentially
holds the character of trustee regarding financial transactions and
must carry out his or her duties in a manner which best serves the
interest of the party for whom the fiduciary relationship is
established.
Financing Statement (UCC): Under the
Uniform Commercial Code, this is a prescribed form filed by a lender
with the recorder of deeds and/or secretary of state to perfect a
security interest in personal property.
FIRPTA: Foreign Investment in Real
Property Tax Act designed to protect the interest of the U.S.
government and property buyers when foreign nationals sell property
in the United States. This act compels the purchaser to make sure
that all Federal taxes are paid by the appropriate party.
Forbearance: The act of refraining
from taking legal action despite the fact that a mortgage is in
arrears. It is usually granted only when a mortgagor makes a
satisfactory arrangement by which the arrearage will be paid at a
future date.
Foreclosure: The legal process by
which a borrower in default under a mortgage is deprived of his or
her interest in the mortgaged property. This usually involves a
forced sale of the property at a public auction with the proceeds of
the sale being applied to the mortgage debt.
General Partnership: A business owned
by two or more persons who share equally in the right and
responsibility to manage the business, with each partner responsible
for all the debts and obligations of the business.
Grantee: The person to whom an
interest in real property is conveyed. Generally, the buyer.
Grantor: The person conveying an
interest in real property. Generally, the seller.
Heir: A person who succeeds to the
ownership of real estate upon the death of the current owner. The
identity of who constitutes a person’s heirs is established by state
law.
Homestead Property: Land that is
owned and occupied as a primary residence.
Indemnify: Reimburse. In an indemnity
agreement, one party agrees to repay another for any loss or damage
suffered by that party.
Ingress and Egress: A right to enter
upon and pass through land.
Intestate: To die without leaving a
valid will so that the property of the estate passes by the laws of
succession rather than by direction of the deceased.
Joint Tenancy: An equal undivided
ownership of property b y two or more persons. The interest must be
equal, occurring under the same conveyance and beginning at the same
time. Upon the death of a joint tenant, their interest passes to the
surviving joint tenant(s) rather than to the heirs of the
deceased.
Judgment Lien: A lien upon the
property of a debtor resulting from the decree of a court.
Judicial Sale: A sale made under
court order, by one appointed by the court, rather than a voluntary
sale by the owner.
Leasehold Estate: A way of holding
title to a property wherein the mortgagor does not actually own the
property but rather has a recorded long-term lease on it.
Life Estate: An interest in real
property which lasts only for the term of the life or lives of one
or more persons. The estate then reverts back to the grantor or on
to a third party.
Loan Policy: A title insurance policy
insuring a mortgagee (and their assignees) against loss caused by
invalid title in the borrower, or loss of priority of the
mortgage.
Marketable Title: A marketable title
is one that may be completely clear or have only minor objections
that would not jeopardize the validity o f the lien, and a that
well-informed and prudent buyer of real estate would accept.
Mortgagee: The institution which
lends the money
Mortgagor: An individual,
corporation, or partnership that borrows money from the lending
institution.
Owner’s Title Policy: A policy
insuring the owner of real estate rather than a lienholder.
Plat: A map showing a parcel of land
subdivided into lots and blocks, streets and easements.
Priority: That which comes first in
time or importance and so has precedence over other claims. Priority
is usually established with regard to real property by the date of
filing or recording a document rather than by the date of on which
the document was executed.
Probate: A court proceeding in which
the property of a deceased person is administered for the purpose of
paying the decedent’s creditors and distributing the remaining
estate either in accordance with the deceased’s will or, if the
decedent left no will, to his heirs in accordance with state
law.
Real Estate Owned (REO):
Most commonly refers to property acquired by a lender through
foreclosure or deed-in-lieu of foreclosure.
Real Estate Settlement Procedure Act
(RESPA): The Real Estate Settlement Procedures Act is a
federal law covering most mortgage loans made on one-to-four family
residential property which requires lenders to provide loan
applicants with pertinent information regarding loan terms and fees
so that the applicants may make an informed decision when choosing
financing.
Redemption Period: In the context of
a foreclosure proceeding or tax sale, the time period established by
state law within with an owner must fully pay a judgment so that he
may retain title to the real estate.
Riparian Rights: A legal right of a
landowner who owns the land next to a natural watercourse to
reasonable use of whatever water flows past the property.
Sheriff’s Deed: A deed given when
property is sold by a court order to satisfy a judgment for money or
for foreclosure of a mortgage. The giving of said deed begins a
statutory redemption period.
Special Warranty Deed: A deed in
which the grantor warrants, or guarantees the title only against
defects arising during the period of his ownership of the property.
A special warranty deed does not warrant against defects existing
before that time.
Tenancy by Entirety: A method of
co-ownership which is available only between a husband and wife and
only for their homestead property. Property owned in tenancy by the
entirety is protected from the claims of certain creditors.
Tenancy in Common: A form of
concurrent ownership where two or more persons hold separate titles
in the same estate which need not be equal. There is no right of
survivorship with tenancy in common. If one tenant dies, his or her
undivided interest in the estate passes to his or her heirs rather
than to the remaining tenants in common.
Testate: To die having left a written
will.
Title: Evidence of the right to or
ownership in property.
Trust Deed: Document that borrower
grants a security interest to a “trustee” for the purpose of
securing the repayment of a loan. A trust deed differs from a
mortgage in that the trustee is neither the actual lender nor the
noteholder. Rather, the trustee merely accepts the original trust
deed and note for identification and then later, after repayment of
the loan and when presented with the original canceled trust deed
and note, issues and records the release deed.
Trustee’s Deed: An instrument in
which a titleholder trustee conveys title to real estate.
Trustee: The entity holding legal
title to property that is held in a trust.
Warranty Deed: A deed which conveys
title and in which the grantor warrants (guarantees) that the title
conveyed is valid, that there are no liens, mortgages, etc. other
than those disclosed and that the grantee will have the right to an
undisturbed possession of the property.
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