Last week, we discussed when there is more than one owner on a deed and what can happen if you do not use the correct specific words to legally describe the owners’ interests. In prior weeks, we talked about the different types of deeds that are typically used and the variety of ownership and/or use interests that can be conveyed with a deed. Today, we will review the different parts of a deed.
A deed is very often a single page, so many people think that it is simple and are tempted to draft it on their own. I regularly see do-it-yourself deeds blow up because the real estate owner did not want to spend a few hundred dollars to hire a real estate attorney to properly transfer the real estate. They do not know what they do not know. When the do-itself-deed back fires, it can cost them thousands or tens of thousands of dollars as a result.
A deed is actually one of the most complex legal documents that is extremely easy to mess up. I fix do-it-yourself deeds all the time. And when you do get a deed 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. It is just like the old Fram oil filter commercial, “Pay me now, or pay me a lot more later.”
Today’s column is NOT about how you can properly draft your own deed. It is about the information that is typically included in a deed and how this information is presented in a deed can affect the interest that is conveyed by the 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.
Usually after the date, the amount for which the property sold is listed. This is called the consideration for the property. 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.
You may attempt to hide the price you paid for your property by putting “for no consideration” on the deed. Some people do this in an attempt to keep the price private. Others do it in an attempt to avoid county and state transfer taxes, which are $8.60 per $1,000 of sales price.
If you do not indicate the purchase price on the deed because you are trying to keep the purchase price private, there are usually ways to find out the sales price in the public record. For example, transfer taxes are required to be listed on the deed. If someone wants to know what you paid for the property, all he or she has to do is look at the transfer taxes paid listed on the deed and divide them by $8.60. This results in the amount for which the property sold, in thousands.
If you do not indicate the purchase price on the deed because you are trying to avoid paying transfer taxes, don’t. If you do not properly disclose the purchase price and pay the transfer taxes, that is tax fraud. You may be liable for civil and/or criminal penalties.
After the date and consideration, typically the seller(s) or transferor(s) of the property is(are) listed along with their current address. The seller or transferor of the property is called the “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 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 “Jonathan A. Smith”, you don’t want the grantor on the new deed to read “Jon Smith”. If it did, there would be no clear chain of title that showed that the original owner, Jonathan A. Smith, ever deeded the property away.
If a grantor has changed his or her name as a result of marriage, divorce or otherwise, you should list all the names that were used in prior recorded deeds with appropriate qualifications such as “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 a grantor is male, you may also need to name the grantor’s wife on the deed, even if her name is not on the prior deed, in order to extinguish her dower interest.
After the grantor’s information, comes the conveyance language for the type of interest being transferred, such as convey, convey & warrant, quit claim or otherwise. The words that you use here are critical and affect the interest that you receive as we have previously discussed.
Following the conveyance language, are the name(s) and address(es) of the recipient(s) or transferee(s) 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 or otherwise. A description of the rights and effects of these ownership interests were the subject of last week’s 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. I regularly see deeds that even use tax descriptions from the county website, under the mistaken belief that tax descriptions are complete legal descriptions.
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 along with the general and limited common elements set forth in the master deed of the condominium association. Every recorded amendment of the master deed should be listed in the deed legal description with its recording information.
To verify the legal description and location of the property, I recommend that whenever you are buying property, you have a stake survey BEFORE you buy it. A stake survey is one in which every corner of the property is located and staked with an iron rod by a licensed surveyor who measures the property and provides you with a drawing of that the property. Because I have seen so many errors in legal descriptions and lot locations over the years, before I buy a parcel of real estate, I always have a stake survey completed before I give my money to the seller. In one case, I picked up nine feet on a 39 foot lot because the survey disclosed that a fence was not placed on the property line.
Property that is not a condominium or a lot in a subdivision or plat, is usually called “unplatted land.” Unplatted land transferred by deed must have special notices in the deed with regard to the Michigan land division statute 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. The notary information should include the date that the deed was signed. Also, if the deed is signed outside 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, along with the name and address of the drafter of the deed.
In addition to all this information, 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 minimum 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 many other deed requirements, such as for deceased joint owners or trustees. Do you and your loved ones a favor. Hire a competent legal professional to draft your deed properly in the first place.
By Matthew M. Wallace, CPA, JD
Published edited January 15, 2017 in The Times Herald newspaper Port Huron, Michigan as: What must be included in a deed?