Conveyance as an Act of Transferring the Ownership of a Property - Essay Example

Conveyance: Introduction: Conveyance is the act of transferring the ownership of a property from one person to another. This translates into a system where buyers' prerogative is to get a survey done before making a bid through their solicitor to the seller's solicitor. In the case of massive competing interest for a property, sellers are required to set a closing date for the initial offers. Friedman M.R (2004). The contract is normally formed by letters between the solicitors on behalf of each of the seller and purchaser, called missives. Once all the terms of the contract are agreed, the missives are said to be concluded, and there is then a binding contract for the sale of the property. Normally the contract is conditional upon matters such as the sellers being able, before completion of the transaction, to prove that they have good title to the property and to exhibit clear searches from the property registers and the local authority. The system of conveyancing is designed to ensure that the buyer gets the land together with all the rights that go with it, i.e. title deed to the land and also by knowing about any restrictions in advance. A typical conveyancing transaction, whether a sale or purchase, contains two major 'landmarks', which are exchange of contracts and completion, plus the three stages: before contract, before completion and after completion. United Kingdom. Under English law agreements are not legally binding until contracts are exchanged. This mainly involves a normal practice where the buyer negotiate an agreed price with the seller then organize a survey and have the solicitor (or conveyancer) carry out their searches and prepare the contract, which are signed by the parties. Similarly, deeds are done in writing and the signature of the party or parties making the deed must be witnessed. All conveyances, transfers, leases, mortgages and legal charges must be deeds. Thus, notwithstanding the growing use of electronic communication at all the other stages of a conveyancing transaction; the two key stages of making the contract and completion must be achieved by using paper documents. The process takes an average 10-12 weeks to get the deeds to the property, and during this period either party can pull out at any time. This gives rise to a risk of gazumping. The position in Scotland under Scots law is that the contract is generally concluded at a much earlier stage, and the initial offer, once accepted by the seller, is legally binding. Bebchuk, Lucian A., and Mark J. Roe, (1999) In United States The conveyancing process in the U.S. varies from state to state depending on local legal requirements and historical practice. Edwin.T, Freedley (1858). In most situations, three attorneys will be involved in the process each representing the buyer, seller, and mortgage holder; frequently all three will sit around a table with the buyer and seller and literally "pass papers" to effect the transaction. (Some states do not require all parties to be present simultaneously.) In order to protect themselves from defects in the title, buyers will frequently purchase title insurance at this time, either for themselves or for their lender. In most states, a prospective buyer's offer to purchase is made in the form of a written contract and bound with a deposit on the purchase price. The offer will set out conditions (such as appraisal, title clearance, inspection, occupancy, and financing) under which the buyer may withdraw the offer without forfeiting the deposit. Once the conditions have been met (or waived), the buyer has "equitable title" and conveyancing proceeds or may be compelled by court order. There may be other last-minute conditions to closing, such as "broom clean" premises, evictions, and repairs. Typical papers at conveyancing include: deed(s), certified checks, promissory note, mortgage, certificate of liens, pro rata property taxes, title insurance binder, and fire insurance binder. There may also be side agreements (e.g., holdover tenants, delivery contracts, payment holdback for unacceptable repairs), seller's right of first refusal for resale, declaration of trust, or other entity formation or consolidation (incorporation, limited partnership investors, etc). Where "time is of the essence," there have been cases where the entire deposit is forfeited (as liquidated damages) if the conveyancing is delayed beyond the time limits of the buyer's contingencies, even if the purchase is completed. Ireland Irish law effectively requires that any instrument creating or dealing with any existing interest in land be signed (by an individual), sealed (both by individuals and corporate bodies) and delivered in order to become effective. Signatures of individuals and sealing by corporate bodies are required to be attested by the witness. It is true that conveyances of fee simple interests in land can still be affected by livery of season but this method has fallen into total disuse. Covered under the umbrella of the Irish law, the provisions of section 2 brought about this situation of Property Act, 1845, which provided that from 1845 "all corporeal tenements and hereditaments shall as regards the conveyance of the immediate freehold thereof, be deemed to lie in grant as well as in livery". Kenneth R. K, Zimmermann. R., (2001) Conveyance in the event of the deceased. An assent by a personal representative is not the equivalent of a "conveyance" by the deceased in so far as the deceased's spouse is concerned. The 1965 Act in the U.S provides protection for the spouse in the event that one dies. By virtue of the provisions of section 56, the surviving spouse has a right to have the dwelling in which that spouse resided at the date of the other spouse's death appropriated to the surviving spouse. The protection of the spouse of the deceased owner is exclusively contained in the 1965 Act. This then makes it true that the definition of "family home" in the 1976 Act is wider than that of "dwelling" under the 1965 Act but section 56 clearly implements a similar policy to that in the 1976 Act. Kermit Hall (1987) The only spouse whose consent might be in issue on the occasion of a personal representative assenting to the vesting of an interest in a family home would be the spouse of that personal representative and then only in the situation where that spouse had actually lived with the personal representative in the house which formed part of the deceased's estate. As the personal representative has no interest in that house other than as a personal representative, not only is it logical that his spouse's consent should not be required to any assent but it would certainly be in conflict with the duties of the personal representative in relation to the distribution of the estate. If a third party is entitled to have the house vested in that third party under the terms of the will or intestacy it would clearly be wrong for that person's entitlement to be restricted by the supposed right of the personal representative's spouse to give or withhold her consent under the 1976 Act. Lessees: Lessees in United States holding under certain long leases were originally given rights to reversionary leases under the Landlord and Tenant Act, 1931 that was amended by the Landlord and Tenant (Amendment) Act, 1943. Significant changes were made in the Landlord and Tenant (Reversionary Leases) Act, 1958 that conferred the right to reversionary leases on persons holding under "building leases" or "proprietary leases". A person holding under a building lease could only acquire a reversionary lease with the consent of any persons holding under a proprietary lease, which was defined as a sub-lease under a building lease. The holder of a proprietary lease was entitled to obtain a reversionary lease without the consent of any other The Landlord and Tenant (Ground Rents) Act, 1967 for the first time conferred on lessees a right to acquire the fee simple. This legislation was largely based on the Reversionary Leases Act, 1958. For instance if a supermarket operator holds under a one hundred and fifty year lease from 1985, which would not be a qualifying lease, that lessee can, without being obliged to seek the landlord's consent, grant a lease which would be a qualifying lease. Gibson F, Klayman. I. E., Karp .J, Salter - Mthembu.F.M, (2003) The existence of the supermarket building would ensure that the lease complied with section 9 of the 1978 Act and the lease could clearly be drafted so that it complied with alternative condition 7 of section 10, being a lease for not less than fifty years made partly in consideration of payment of a sum of money by the lessee to the lessor, which sum is not less than fifteen times the greatest rent reserved by the lease. Title Insurance Whereas most insurance is a contract where the insurer indemnifies or guarantees another party against a possible specific type of loss (such as an accident or death) at a future date, title insurance generally insures against losses caused by title problems that have their source in past events or unenforceability of mortgage liens. This often results in the curing of title defects or the elimination of adverse interests from the title before a transaction takes place. It is meant to protect an owner's or lenders financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of Insurance provided by the policy. Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all-institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate. Some mortgage lenders, especially non-institutional lenders, may not require title insurance. Owner's policy: The owner's policy insures a purchaser that the title to the property is free from defects (liens and encumbrances), except those, which are listed as exceptions in the policy. It covers losses and damages suffered if the title is unmarketable (i.e., if the title can not be legally sold and conveyed to another party or if the property is "unmarketable"), for example if an interest in the property is found to belong to someone else, if there is no access to the land (if this coverage is provided), or if there is some other defect on the title. An owner's policy specifically lists what interest in the property is insured as of what effective date. The policy also contains various standard exclusions to coverage and also specific exceptions to coverage, based on documents that have been recorded against the property at some point in the past, which the title company is unwilling to insure. The policy limits of the owner's policy are typically the purchase price paid for the property. As with other types of insurance, coverage's can also be added or deleted with an endorsement. There are many forms of standard endorsements to cover a variety of common issues. The seller or buyer may pay the premium for the policy as the parties agree; usually there is a custom in a particular state or county, which is reflected in most local real estate contracts. Consumers should inquire about the cost of title insurance before signing a real estate contract, which provide that they pay for title charges. Coffee, John C., (2001) Lender's policy; This is sometimes called a loan policy and it is issued only to mortgage lenders. Generally speaking, it follows the assignment of the mortgage loan, meaning that the policy benefits the purchaser of the loan if the loan is sold. For this reason, these policies greatly facilitate the sale of mortgages into the secondary market. That market is made up of high volume purchasers such as Fannie Mae and the Federal Home Loan Mortgage Corporation as well as private institutions. Construction loan policy In many countries, separate policies exist for construction loans. A Land title association In the United States, the American Land Title Association (ALTA) is a national trade association of title insurers. ALTA has created standard forms of title insurance policy "jackets" (standard terms and conditions) for Owner's, Lender's and Construction Loan policies. ALTA forms are used in most, but not all, U.S. States. ALTA also offers special endorsement forms for the various policies; endorsements amend and typically broaden the coverage given under a basic title insurance policy. ALTA does not issue title insurance; they provide the policy forms that title insurers issue. Some states, including Texas and New York, may mandate the use of forms of title insurance policy jackets and endorsements approved by the state insurance. Commissioner for properties located in those jurisdictions, but these forms are usually similar or identical to ALTA forms. While title insurance generally insures owners and lenders against things that have occurred in the past, in some limited circumstances, in some states, coverage is available for certain events that can occur after a title insurance policy is issued. Susan A. B -(2001) Problems facing Conveyancing: Protection Money Theory: The conveyancing process touches upon the wealth and happiness of a great number of individuals and businesses every year. The worst evil threatening this contract is the "Conveyancing Fraud", English solicitor Michael Joseph pointed out the obvious - you can't see faults in a property if you don't look and conveyancers don't look. Paid conveyancing is a fraud, he said, because it leads people to believe they are "protected" in ways they are not. In practice he said, the most important things are "left to chance". The indifference between ignorance and nativity widens the fear of the unexpected, which is like an epidemic in our contemporary society these days. When Professionals in the world of Law / conveyance's can't come up with a rational argument then scare talk is their weapon of choice. They treat intelligent adults as children who will tremble at the thought of something "going wrong" - and shell out a fortune in "protection money". Yet solicitors/conveyancers can actually increase the chance that something will go wrong. Why' Because conveyancing clerks with 100 files on their desk just don't have time to keep track of them all. Important things can get forgotten, and when they do it is usually the client who loses. All the talk of "conveyancing protection" can turn to dust before client's eyes. This then calls for personal initiative in carrying out conveyance. Professional Indemnity Professional Indemnity is a common deceptive theory peddled around ignorant clients. The most unfortunate thing is that Clients cannot claim against "professional indemnity" policies. The name says it all - the policies "indemnify the professional". It is the lawyer/ conveyancer who is protected - not the client. Then someone ignorantly calls it protection. The only potential benefit for a client is that if the client successfully sues the lawyer for negligence and wins, the lawyer can't say he/she does not have the money to pay up. But what are the client's chances of suing the lawyer successfully' The client must be able to prove lawyers negligence. In the real world, that is so hard to do that most clients accept losses of hundreds or even thousands rather than risk financial meltdown by taking the lawyer to court. Then there is the imbalance of power when suing lawyers. Clients can find themselves confronted by the financial muscle of the whole professional indemnity insurance system (which in the case of solicitors is run by the solicitors' trade association). So clients should avoid being sucked into a false sense of comfort by the "professional indemnity" myth. Future of Conveyancing: Contrary to traditional paid conveyancers that entail working behind desks, by doing only the paperwork, leaving the most important parts (investigation and negotiation) to their clients is headed for the rocks. The scientific evolution in Information technology poses a threat upon the Precambrian conveyance that involves strictly paper. Electronic or Digital Conveyancing in this case is a system of exchanging sales & mortgage documentation and property data electronically between vendor & buyer, agent & lawyer, brokers & banks, government & land registry from point of sale to contract to settlement with or without printed documentation. Hansmann, Henry & Reinier K., (2001) In the U.S. the Electronic Communications Act 2000 gives Ministers in the power subject to parliamentary approval, to change the law to authorize or facilitate the use of electronic communication and electronic storage. Ministers have since proposed to use this power to improve the conveyancing process by permitting the creation of new electronic system of formalities for the creation and disposal of interests in land and establish a new legal framework in which electronic conveyancing documents will have the same effect as their paper equivalents. When made, the order will The order will do so by amending the Land Registration Act 1925 and the Law of Property (Miscellaneous Provisions) Act 1989. Solomon. D.L Saret L., (2006) It will however need to be supplemented by new land registration rules and stamp duty legislation before it can be brought fully into force. The terms of the draft order specify that electronic conveyancing documents will have to meet certain conditions. References: Bebchuk, Lucian A., and Mark J. Roe, (1999) A Theory of Path Dependence in Corporate Governance and Ownership, Between Great Britain. Butler. C, Preston. R. (1829) Practical Conveyance Manuscripts. Cheffins, Brian, (2001) The Separation of Ownership and Control in the United Kingdom, 30 J. LEGAL STUD. Coffee, John C., (2001). The Rise of Dispersed Ownership: The Role of Law in the Separation of Ownership and Control. Edwin T., Freedley (1858) Philadelphia and its Manufacturers. Forbes. D.W (2001) Conveyance of Real Estate; Hawaiian National Bibliography. Friedman M.R (2004) contracts and Conveyance Law Gibson F, Klayman. I. E., Karp .J, Salter - Mthembu.F.M, (2003) Real Estate Law Hansmann, Henry & Reinier K, (2001).The End of History for Corporate Law. Hertslet's Commercial Treaties: (1925) A Collection of Treaties and Conventions. Kempees. P (1999).A Systematic Guide to the Case-Law of the European Court of Human Rights. Kenneth R. K, Zimmermann. R., (2001). A History of Private Law in Scotland. Kermit Hall (1987) Women, the Law, and the Constitution: Major Historical Interpretations. Solomon. D.L Saret L., (2006) Asset Protection Strategies. Susan A. B.(2001). Federal Tax Litigation Read More