COVENANTS OF TITLE AND INSURANCE

TYPES OF DEEDS: When should you discuss covenants of title on an essay?

Whenever a deed has been delivered and there is a dispute about title defects, encumbrances, or ownership.

The first question is:

What type of deed was conveyed?

TYPES OF DEEDS: Q: What is a General Warranty Deed?

Warrants against all title defects arising before and during the time grantor had title.

TYPES OF DEEDS: Q: What is a Special Warranty Deed?

A Special Warranty Deed contains all six covenants, but the grantor only warrants against defects that arose during the grantor's ownership.

The grantor promises he has done nothing to impair title.

TYPES OF DEEDS: Q: What is a Quitclaim Deed?

A Quitclaim Deed conveys whatever interest the grantor has, if any.

It contains no covenants of title and makes no promise that title is good.

TYPES OF DEEDS: Which deed contains no covenants of title?

A Quitclaim Deed.

PRESENT VS FUTURE COVENANTS: Before identifying a specific covenant, what should you ask?

Determine whether the covenant is:

• Present (breached, if at all, at delivery), or

• Future (breached only upon disturbance of possession).

This distinction determines when the claim accrues, whether eviction is required, and whether the covenant runs with the land.

PRESENT VS FUTURE COVENANTS: Which 3 covenants are present covenants?

The three present covenants are:

• Covenant of Seisin

• Covenant of Right to Convey

• Covenant Against Encumbrances

They are breached, if at all, at the moment the deed is delivered.

PRESENT VS FUTURE COVENANTS: Which 3 covenants are future covenants?

The three future covenants are:

• Quiet Enjoyment

• Further Assurances

• General Warranty

They are breached only when the grantee's possession or title is disturbed.

COVENANT OF SEISIN: Q: What is the Covenant of Seisin?

The grantor promises that he owns the estate he purports to convey and has both title and possession.

It is a present covenant.

COVENANT OF SEISIN: When is the Covenant of Seisin breached?

Immediately upon delivery of the deed if the grantor does not actually own the estate conveyed.

No eviction is required.

Covenant Against Encumbrances: What is the Covenant Against Encumbrances?

The grantor promises there are no outstanding interests that diminish the property's value or restrict its use, such as:

• Easements

• Mortgages

• Liens

• Restrictive covenants

It is a present covenant.

Covenant Against Encumbrances: Is the Covenant Against Encumbrances breached if the grantee knew about the encumbrance even before seller hands over title promising there are no encumbrances?

Majority Rule: Yes.

The grantee's knowledge does not prevent a breach by the grantor (seller to buyer)

Covenant Against Encumbrances: What are the damages for breach of the Covenant Against Encumbrances?

Generally:

• The diminution in value caused by the encumbrance, or

• The reasonable cost of removing the encumbrance (when removable).

COVENANT OF RIGHT TO CONVEY: What is the Covenant of Right to Convey?

The grantor promises that he has the legal authority to transfer the property.

It is a present covenant.

QUIET ENJOYMENT: What is the Covenant of Quiet Enjoyment?

The grantor promises that the grantee's possession will not be disturbed by someone with superior title.

It is a future covenant

QUIET ENJOYMENT: When is the Covenant of Quiet Enjoyment breached?

Only when the grantee is actually or constructively evicted by someone holding paramount title.

COVENANT FOR FURTHER ASSURANCES: What is the Covenant for Further Assurance?

The grantor promises to perform any future acts necessary to perfect the grantee's title and not to take actions that would defeat it.

It is a future covenant.

GENERAL WARRANTY: What is the General Warranty Covenant?

The grantor promises to defend the grantee against all lawful claims of superior title.

It is a future covenant.

Present vs. Future Covenant Comparison: What are the key differences between present and future covenants? (Breach, Eviction, Statute of Limitations, Runs with land, how damages measured.

Present Covenants	Future Covenants
Breached at delivery	Breached upon eviction or disturbance
No eviction required	Eviction (actual or constructive) required
Statute of limitations begins at delivery	Statute begins upon breach
Generally do not run with the land (majority)	Run with the land if privity exists
Damages usually measured at time of conveyance	Damages generally measured when breach occurs

TITLE INSURANCE: How does title insurance differ from covenants of title?

Title insurance is a contract that protects the insured purchaser against covered title defects. Unlike deed covenants:

• It does not run with the land—later purchasers need their own policy.

• Standard policies generally do not cover off-record defects such as implied easements, rights of persons in possession, matters discoverable by inspection or survey, zoning violations, or unpaid taxes/assessments unless specifically insured.

• Damages are limited to the insured's actual market loss, up to the policy limit, rather than automatically using the purchase price measure applied in warranty deed actions.