Real Estate ownership can sometimes involve complex issues, especially if a dispute arises. Perhaps there is a misunderstanding or disagreement about a boundary line. Other times, a party’s ownership of the land may be in doubt, or there can be a “cloud on title” – meaning there are doubts about clear and absolute ownership, due to questions or concerns regarding the legitimacy or sufficiency of certain deeds or other real estate instruments. Needless to say, there are many situations that can create complication, or give rise to real estate disputes. Sometimes, even cooperative or uncontested real estate matters can get complicated or confusing.
Understanding the Basics
A basic understanding of fundamental real estate concepts and documents is a good place to start. Three of these are the Real Estate Sales Contract, the Deed, and what we refer to as “Title”.
- Real Estate Sales Contract: This legal document memorializes the agreement in writing between the seller and buyer. Real Estate Contracts must be in writing. A Real Estate Sales Contract will generally contain crucial details such as the property’s description, the agreed price, and the transaction date. This document primarily serves as evidence of the sale and transfer of ownership from the seller to the buyer.
- Real Estate Deed: A deed is a legal instrument that conveys the rights, obligations, and interests in the property from the seller (grantor) to the buyer (grantee). In simpler terms, it’s the document officially transferring the property’s ownership from one party to another. In Missouri, the grantor signs a deed, and the grantor’s signature must be notarized. In certain parts of Missouri, the Grantee must also sign in front of a notary.
- Title: First of all, unlike a “title” to a car or piece of equipment, real estate has no physical, actual title. The Real Estate deed (see above) is the document that proves ownership. “Title”, when referring to real estate, is a more conceptual term encompassing the legal rights that a person or entity has to a property. These rights include possession, control, exclusion, enjoyment, and right to transfer. The title, therefore, does not refer to a document but to a legal concept. When you purchase a property, assuming it is all done correctly, you then have ‘title’ or rights to the property.
Understanding the above is very important for buyers and sellers as it allows them to navigate through property transactions knowledgeably, thus reducing the potential for disagreement or other problems. In most “arms length” real estate transactions, a title company is utilized to prepare deeds and other real estate instruments, verify “title” and ownership, and safeguard the transaction against all kinds of problems. Title Companies are also often called “Closing Companies”, and they are often responsible for the completion of the “closing”, i.e., the finalization and completion of the real estate transaction.
Deeds as Proof of Ownership
When it comes to property ownership, deeds play a fundamental role. There are many types of real estate deeds in Missouri. Generally, most real estate transactions involve one of two types of deed: a Warranty Deed or a Quitclaim Deed. Either one may serve as evidence of property ownership. Despite this shared purpose, these two types of deeds do have some differences.
A Warranty Deed provides the highest level of protection for the buyer. Upon selling the property, this deed ensures the new owner (buyer) that the seller holds a free and clear (unencumbered) title. When the seller signs a Warranty Deed, they are essentially guaranteeing that the property is free from any debts or legal claims, and that the seller is indeed the owner free and clear of any major problems, and if any such problems do arise later, the seller may be legally obligated to compensate the buyer or fix any such issues.
On the other hand, a Quitclaim Deed offers less protection to the buyer. In a quit claim deed, the grantor (seller) is generally stating that whatever interest they have in the real estate, if any, they hereby relinquish to the grantee (buyer). This type of deed merely transfers any ownership interest the seller has in the property, if any, without any warranties or guarantees regarding the title’s clearness. For these reasons, a quit claim deed It is often used in more straightforward, lower-risk transactions, such as transferring property within a family.
However, what happens if a deed is misplaced?
Property deeds are public records, generally recorded in the County Recorder’s office in Missouri. There are several ways to obtain such records from a County, including an in person visit to the county Recorder’s office, or in many counties, you may be able to retrieve records online, which may sometimes be free, or may cost money or be part of subscription service you would need to sign up for. Therefore, because real estate deeds are recorded, it’s usually a relatively straightforward process to get a copy of a misplaced original deed.
What if a Property has a Mortgage?
If you own a property with a standard mortgage, this means YOU OWN the property, but you own the property SUBJECT TO THE LIEN (the mortgage lien). When you borrow money to purchase property, you will generally sign a “Deed of Trust” (the main mortgage document) which places a lien on the property you own, and this document is recorded publicly so that the lending bank’s rights are formally made known to the public. Someday, when you pay off that mortgage, the mortgage holding bank will then record a “Deed of Release”, stating that the mortgage has been paid in full, thus making your ownership now free and clear of the previous mortgage.
It is difficult, but not impossible, to convey real estate that has a mortgage currently upon it, unless you pay off the mortgage first. A seller (grantor) could convey away their legal ownership to a grantee, but any such conveyance would transfer the property while still being subject to the mortgage loan. As you can imagine, most buyers (grantees) do not want to take the property subject to the seller’s mortgage loan, and if they did, the mortgage bank would generally have the right to foreclose on the property if the bank desired. When selling real estate with a mortgage upon it, a title company at closing can make sure that the old mortgage is paid off, and any new mortgages (for the buyer’s bank) are properly placed upon the property and the transaction runs smoothly.
Death of a Co-Owner, and Different Types of Ownership
The death of a co-owner can often involve interesting legal issues, and depending on how the real estate was previously owned, different results can occur when an owner dies.
Tenancy in Common. In Missouri, real estate ownership by multiple owners will generally default to “tenancy in common”, generally meaning each party owns an undivided one-half (½) interest in the property. If the deed does not specify the type of ownership between the parties, it will generally be tenancy in Common. In this form of ownership, when one party dies, unless having made proper estate planning arrangements during their lifetime, their one-half (½) interest in the property would now be “stuck” in that deceased party’s name, and would generally have to be probated, and would go to the deceased owner’s heirs under Missouri Law, unless a Will said otherwise.
Joint Tenancy with Rights of Survivorship. If a real estate deed specifically states “Joint Tenancy with Rights of Survivorship” or similar enough wording, then this type of ownership is triggered. In Joint Tenancy, when one party dies, the surviving party is now sole owner – in the example of two owners, there used to be two owners, one dies, now the survivor is the only owner. Stated another way, the heirs or the deceased owner receive nothing, and the surviving owner continues to own the whole thing. The “last person standing” is the owner.
Tenancy by Entirety. This is a special sort of ownership reserved for married couples. When a husband and wife acquire property together, the spouses generally become tenants by the entirety. This special type of ownership functions very similarly to Joint Tenancy, as described in the above paragraph. If one spouse dies, all that happens is that there is one less owner than before; the survivor is now the sole owner.
The death of an owner can sometimes create legal issues, in particular probate concerns – but not always. An experienced Probate Attorney can advise you on such matters and let you know if there are any problems, and how they may be fixed.
Legitimate Property ownership can occasionally become in dispute. In such situations, there are several ways to resolve such disputes, whether as part of litigation, or outside of Court.
One common method of resolving disputed ownership claims involves simply using a Quitclaim Deed. This type of deed allows the third party to relinquish any claim they might have over the property in question. By signing a Quitclaim Deed, a party can effectively ‘quit’ any claim or interest they have previously had in the property, if any. In doing so, the other party’s claim of ownership is now clarified and legitimized, and any such “ cloud on title” is cleared.
There are several types of Court actions that can be filed to resolve real estate disputes. One common type of action is a “quiet title”, where generally a plaintiff will sue any and all other parties having an interest in the property, and attempting to “quiet” those parties (remove their rights to the real estate). A quiet title action can be used to fix or clarify many types of real estate disputes.
Having a clean or clear title is of paramount importance, especially when it comes to refinancing or selling a property. A clean title indicates that the property is free from liens, levies, and ownership disputes. It assures potential lenders or buyers that the property’s ownership is not disputed and that no other party can claim ownership.
Refinancing can become more complicated or impossible without a clean title, as lenders are generally wary of extending credit for properties with disputed ownership. Similarly, potential buyers would likely be hesitant to purchase a property that could involve them in legal issues. Therefore, ensuring a clean title is beneficial and vital in maintaining the property’s value and marketability.
Errors in Real Estate Deeds
Various errors or omissions in legal documents are not uncommon, and can create various complications or problems. Such issues can range from simple mistakes that are easy to fix, to more complex or nuanced issues that are more difficult to fix. Common examples of such errors or omissions are:
- Typographical errors or minor oversights: These are common, and can be corrected with either the creation of a new, Correction Deed to be signed by the original grantors, or perhaps by a Scrivener’s Affidavit, which allows a person to correct small, generally non-material mistakes like misspellings.
- Serious errors like inaccurate property descriptions: A new Correction Deed can generally correct such errors. Usually the grantor must sign the Correction Deed, it must be notarized, and then recorded.
Unrecorded Deeds or Documents
Sometimes, real estate deeds or other documents are signed, and/or notarized, but not recorded. Most deeds in Missouri must not be recorded during the Grantor’s lifetime to be effective (except for beneficiary deeds, which convey property upon death to a beneficiary). Unrecorded documents nonetheless can affect property ownership, and their discovery can lead to disputes over ownership.
It’s essential to consult a legal expert when encountering these issues to ensure proper legal resolution.
Real Estate Deed vs. Real Estate Sale Contract
Two documents often appear in property transactions: A Real Estate Sales Contract and a Real Estate Deed. While both are integral to the transfer process, their functions and implications differ significantly.
A Real Estate Sales Contract is a legal document in which the parties agree to transfer the property, usually from Seller to Buyer. It details the terms of the sale, such as price, timeframes, and what is included; identifies the buyer and seller, and describes the property. It provides protection to both parties in the event of future disputes related to the transaction.
A Deed is a legal instrument that conveys the property’s rights, obligations, and interests from the seller to the buyer. It is signed by the grantor (seller) and often requires notarization to be valid. Unlike a sales contract, a deed directly conveys the ownership of the property.
When comparing the two, a deed is the document that proves ownership of real estate. Generally, two parties sign a real estate sales contract at the beginning of the transaction, to evidence the sale and what they are exactly agreeing to; and then a deed is conveyed to the buyer at the very end of the transaction.
Securing Your Property Ownership
As you can see, there are many issues that can affect ownership of real estate, and the above concerns are just a small portion of the issues that can come up. If you have any concerns with property ownership in Missouri, our attorneys at Affordable Legal Services, a Division of Piatchek Law Firm, are available to assist you. We provide deed creation and deed reviewing services, in addition to expert legal advice to ensure peace of mind in all property matters.