The last few weeks, we have discussed the different types of deeds, the different types of ownership interests of a deed and the rights of deed co-owners. Today we will discuss the elements of a deed.
Most deeds start with the date. Many people just date the deed the day that it is signed. However, the date on the deed should be the date of transfer of ownership, which is not necessarily the day it is signed. In Michigan, the date of transfer of ownership is the date the deed is delivered to the recipient of the deed, or the date the deed is recorded at the county Register of Deeds office, whichever is earlier.
After the date, the deed consideration is listed. In your home deed, the consideration is the purchase price that you paid for your home. If you are gifting real estate to you children, you should have “for no consideration” or “for less than $100.00” to document that your children did not pay for the property. Some people think that they can hide the price they paid for their property by putting “for no consideration” on the deed. However, there are always ways to find out in the public record.
For example, transfer taxes are required to be listed on the deed. Currently the transfer taxes on the sale of real estate are $8.60 per $1,000.00 of sales price. If you want to know what someone paid for a parcel of real estate, all you have to do is look at the deed and divide the transfer taxes paid by $8.60 and you will have the sales price in thousands.
After the date and consideration, the seller or transferor of the property is listed along with their current address. The seller or transferor of the property is called a grantor. In your home deed, the grantor is the person who owned the property before you and sold it to you. When people attempt to do their own deeds, they often get the grantor name wrong. In order to properly convey the interest in the real estate, the grantor of the deed must be exactly the same as it was on the prior deed, when the grantor purchased the property.
For example, if the property was originally purchased by “Jonathon A. Smith”, you don’t want the grantor on the new deed to read “John Smith”. If it did, there would be no clear chain of title that showed that John Smith was the same person as Jonathon A. Smith. If the grantor has since changed their name as a result of marriage, divorce or otherwise, you should list all the names that they used in prior recorded deeds with the qualification “aka” for “also known as” or “fka” for “formerly known as”. This will insure that you have a clear chain of title. In addition, if you are a male grantor and are married, in most cases your wife would also need to named as grantor, even if her name is not on the prior deed.
After the grantor’s information comes the conveyance language for the type of deed it is, such as convey, warrant, quit claim or otherwise. The words that you use here are critical and affect the interest that you receive and was the topic of a separate column.
Following the conveyance language, you have the names and addresses of the recipients or transferees of the property who are called the grantees. The grantees’ names should be exactly how you want the property to be titled.
If there is more than one grantee, you must also include how these co-owners are going to hold the property, such as by tenants in common, joint tenants with or without survivorship or as tenants by the entireties. A description of the rights and effects of these ownership interests were also the subject of a separate column.
Next included on the deed is typically the legal description of the property conveyed. The legal description is critical and should be proofread and verified to make sure it is correct. I have seen legal descriptions that omit zeros or have a decimal point in the wrong spot or a lengthy description that doesn’t end up at the place it started, which results in a parcel with an open side.
I recommend that whenever you are buying property that you have a stake survey. A stake survey is one in which every corner of the property is located and staked with an iron rod by a surveyor who measures the property and then draws that the property out on a piece of paper. Because I have seen so many errors in legal descriptions and lot locations over the years, I always have a stake survey completed before I purchase a parcel of real estate for myself. In one case, I picked up nine feet on a 39 foot lot because a fence was not placed on the property line.
If the property is a lot or lots in a subdivision or recorded plat, it is called “platted property.” In such cases, you must also include the name of the plat in which the property is located along with the liber or book number and page number where the plat can be found at the county Register of Deeds office.
If the property is a condominium, the legal description should include the condominium unit number including the general and limited common elements set forth in the master deed of the condominium association. Every recorded amendment to the master deed should be listed with its recording information.
Property that is not a lot in a subdivision or plat or is a condominium, is usually called “unplatted land.” With unplatted land, you have to include special notices in the deed with regard to the Michigan land division statutes and the Michigan Right to Farm Act.
The deed must be signed by all grantors and must be signed exactly how the names are on the deed. The signatures must be notarized. Generally if the deed is signed out of the state of Michigan, then the notary should place his or her seal on the deed.
The property’s address and tax identification number should also be included on the deed. The name and address of the drafter of the deed should also be listed.
In addition, the deed must conform to all of the requirements of the Michigan recording statutes or else it can’t be recorded at the county Register of Deeds office. There are numerous requirements such as margins, font size and the minimum information that must be included on the deed, some of which we have only touched upon today.
There are other requirements such as for deceased joint owners or trustees. You may be tempted to draft your own deed because it is usually just a single page document that looks simple. However, if you get it wrong, it is generally going to cost more to fix it, than it would have cost to hire a competent legal professional to do it right in the first place.
By Matthew M. Wallace, CPA, JD
Published edited August 22, 2010 in The Times Herald newspaper, Port Huron, Michigan as: Dotting ‘I’s’ and crossing ‘T’s’ critical when drafting deed