What Is a Conveyance?
The term conveyance refers to the act of transferring property from one party to another. The term is commonly used in real estate transactions when buyers and sellers transfer ownership of land, building, or home.
This is done using an instrument of conveyance—a legal document such as a contract, lease, title, or deed. The document stipulates the agreed-upon purchase price and date of actual transfer, as well as the obligations and responsibilities of both parties.
- Conveyance is the act of transferring property from one party to another.
- The term is commonly used in real estate transactions when buyers and sellers transfer ownership of land, building, or home.
- A conveyance is done using an instrument of conveyance—a legal document such as a contract, lease, title, or deed.
- Such transfers may be subject to a conveyance tax.
- Fraudulent conveyance is an unfair or illegal transfer of assets done in order to avoid creditors during bankruptcy or to avoid taxes.
In finance, the term conveyance represents the act of legally transferring property from one entity to another. So when two parties engage in the sale of a piece of property, they transfer ownership through a conveyance. For instance, when a car owner legally signs the title over to a buyer, they are engaged in a conveyance.
The term conveyance is commonly associated with real estate transactions. Conveyance of ownership of real estate is also referred to as conveyancing, and the legal representative overseeing the process can be referred to as a conveyancer. Real estate transactions often incur a tax called a conveyance tax or a real estate transfer tax. This levy is imposed on the transfer of property at the county, state, or municipal level.
A conveyance is normally executed using a conveyance instrument. This is a written instrument or contract that outlines the obligations and responsibilities of both the buyer and the seller including the purchase price, date of transfer, and any other terms and conditions associated with the sale. The instrument may be a deed or a lease—a document that transfers the legal title of a property from the seller to the buyer.
There are cases where one party doesn't live up to its obligations as outlined in the conveyance instrument or contract. When this happens, the other party can take the defaulting party to court to enforce the contract or to claim damages. Conveyancing ensures that the buyer is informed in advance of any restrictions on the property, such as mortgages and liens, and assures the buyer of a clean title to the property.
Many buyers purchase title insurance to protect against the possibility of fraud in the title transfer process.
There are also legal distinctions of conveyances, mainly stemming from British law, that hold certain rights of conveyance within family estates or bloodlines:
- Fee tail conveyances stipulate that property must remain within a family, and in particular be passed down to one's children. A fee tail only can remain in place as long as children remain alive.
- Fee simple absolute conveyances provide a claim to one's heirs, who can then assume full rights of ownership and sell to whomever they wish, even outside of the family.
- Fee simple defeasible conveyances are similar to the above but come with certain restrictions or conditions. If a condition is violated, the ownership claim reverts back to the grantor.
- Life estate conveyances exist only as long as the owner remains alive, without respect to any heirs.
If the other party doesn't fulfill their obligations, you can take them to court to enforce the contract or to claim damages.
Types of Conveyances
Real Estate Conveyances
Conveyance is a general term that applies in a legal sense beyond residential real estate. The conveyance in most real estate transactions is also known as the sale deed. Conveyance is the category, and sales deed is a type of conveyance within that category.
The process behind a typical conveyance includes a review of liens and other encumbrances. it ensures all conditions have been met, settling all taxes and charges with the appropriate party prior to transfer, confirming financing, and preparing all the documents for final settlement. The documents provided for conveyancing typically include the deed, mortgage documents, certificate of liens, the title insurance binder, and any side agreements related to the sale.
Mineral Rights Conveyances
Conveyance also applies to the oil and gas industry. As land is a form of real estate with attached rights, exploration companies use the term conveyance to refer to contracts that transfer rights to or ownership of certain parcels of land to the company. The most common conveyance is a contract granting mineral rights without turning over the title of the land, but conveyances are also used to establish the right of way for a company’s operations on a landowner’s property. The landowner is, of course, compensated for transferring these rights to the exploration company.
Examples of Conveyances
Let's look at the transfer of a piece of land owned by an individual's grandfather. In the first example, the grandfather decides to sell the property to their grandson via an arms-length transaction and at fair market value. In this case, the deed is transferred at closing to the grandson, who becomes the new legal owner.
In a second case, the grandfather decides to gift the property to the grandson. Here, no money is exchanged for the value of the property, but a gift tax must be paid on any value greater than $16,000.
In a third case, the grandfather dies and wills the property to the grandson. Again, the deed is conveyed but no money changes hands, and there is no gift tax. Instead, there may be an estate tax on any value exceeding $12.06 million.
What Is a Conveyance Tax?
A conveyance tax is levied by a government authority (such as a municipality or state) on the transfer of real property. This tax is usually paid by the seller, although this may be negotiated prior to closing.
What Is a Voluntary Conveyance?
In a voluntary conveyance, the owner agrees to transfer property to a new owner, but does not receive full compensation (known as "consideration" in legal terms). For instance, when willed to an heir, voluntarily forfeited to a lienholder, or donated to charity.
What Is a Deed of Reconveyance?
A deed of reconveyance is a legal document issued by a lender or lienholder when a mortgage or other debt secured by real property is paid off. This deed releases the property owner from any further claims by the lender.
What Is a Fraudulent Conveyance?
Fraudulent conveyance occurs when a property is transferred for reasons meant to avoid taxes, creditors, or which otherwise constitutes illegal activity such as money laundering.