THE CONCEPT OF TITLE
Ownership in a bundle of rights
Legal and equitable title
Ownership in a
bundle of rights The bundle of rights is the set of legal privileges comprising the legal concept of ownership. These rights are conferred upon the buyer of a real property when the title of the property is transferred. The bundle includes everything the new owner can do with the property within the boundaries of applicable laws:
possession – the fundamental right of property, allowing the owner to be on the property physically and to choose who else may or may not be on the property; this right may be lost if the mortgage loan, property taxes, or homeowners association dues are not paid
quiet enjoyment – the owner’s right to use the property for any legal activity without interference
control – the owner’s right to do what he or she wants with the property within local zoning codes and other laws or covenants; this right includes what is beneath and above the property
exclusion – the owner’s right to limit who may enter the property with some exceptions, such as easements and warrants.
disposition – the right to transfer ownership (sell, lease, or gift) of all or a section of the property to someone else, temporarily or permanently; this right is fully realized only when the property is owned outright with no mortgage or liens
equitable title Owning title to real property commonly connotes owning the complete bundle of rights that attach to the property, including the right to possession. More accurately, someone who possesses all ownership interests owns legal title to the property. Legal title is distinct from equitable title, which is the interest or right to obtain legal title to a property in accordance with a sale or mortgage contract between the legal owner and a buyer or creditor. During the contractual period of time when ownership of legal title is contingent upon the contract, the buyer or lender owns equitable title to the property.
For example, a buyer enters into a contract for deed to purchase a house. The seller lends the bulk of the purchase price to the buyer for a term of three years. The buyer takes possession of the property, and makes payments on the loan. During this period, the seller retains legal title, and the buyer owns equitable title. If the buyer fulfills the terms of the agreement over the three year period, the buyer has an enforceable contract to obtain legal title.
Another common example is a mortgage loan transaction that gives the lender the right to execute a strict foreclosure, which transfers legal title to the lender Section 9: Title, Deeds, and Ownership Restrictions 195
in the event of a default. With this contractual right, the lender has equitable title to the property.
In practice, the terms “title” and “legal title” are often used interchangeably.
Transferring title Transfer of title to real estate, also called alienation, occurs both voluntarily and involuntarily. When the transfer uses a written instrument, the transfer is called a conveyance.
Voluntary alienation. Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party. If the transferor is a government entity and the recipient is a private party, the conveyance is a public grant. If the transferor is a private party, the conveyance is a private grant.
A living owner makes a private grant by means of a deed of conveyance, or deed. A private grant that occurs when the owner dies is a transfer by will.
Involuntary alienation. Involuntary alienation is a transfer of title to real property without the owner’s consent. Involuntary alienation occurs primarily by the processes of descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel.