Deed recites less than $500 and grantee has same last name as Settlor, so I assume not a BFP for value.  No safe harbor exception. In this case, the grantee in the trustee deed is our seller, so the purchaser's affidavit is not going to create a burden on seller.  But I believe the title standard does not take into consideration a non-BFP grantee.

-----Original Message-----
From: realestate-owner@iabar.org [mailto:realestate-owner@iabar.org] On Behalf Of realestate@iabar.org
Sent: Friday, December 11, 2015 9:20 AM
To: realestate@iabar.org
Subject: [ISBA RealEstate] [Spam-Stat] Purchaser's Affidavit

You certainly ought to note in your opinion the absence of affidavit by the "bona fide purchaser" (BFP) of trust property. 
Also, if your examination occurs within one year after the recording of the trustee's deed then you may strongly recommend that the purchaser (or subsequent purchaser) generate a purchaser's affidavit complying with TS 4.7A.
But I don't believe that a title chain link not directly coming within the bar association's title-standard 'safe harbor' is necessarily unmarketable, if otherwise solid. 
Note: The title standard is not a state statute. Nor does the BFP's affidavit equate in seriousness to a lien encumbering the property.
From the examiner's perspective, title simply remains in that old 'might be questionable' status that the statute aims to avoid (for BFPs)--until expiration of the year's limitation period fixed by Code section 614.14(5).
After one year, who cares about the purchaser's affidavit?  At worst, its absence amounts only to a mere cloud on title.
  
So--No.  IMHO you bear no duty to **object** to title due solely to absence of purchaser's affidavit.  
You do bear duty to note the affidavit's absence and potential consequences thereof.

Title Standard 1.1 should always influence decisions about objections. 
 
I gather from your question that the purchaser is 'close' to the trustee in relationship. 
So might purchaser have some knowledge of potential adverse claim, costing him BFP status?
Or is the property being sold for less than fair market value (under $500)?

Did the trustee produce the trustee's affidavit created by Code section 614.14(2) as a BFP condition for automatic clearance?  If he did then I think title is "good".  

Title Standard 4.7A sets out what an abstract ought to show in these circumstances.

STANDARD
A. Non-Tax Issues:
If Iowa Code Section 614.14 (5) is not applicable, the abstract should show all of the following for all conveyances after July 1, 2008:

1. a recorded affidavit in substantially the form required by Iowa Code Section 614.14(2); and 2. no adverse claim prior to the deed from the trustee; and 3. an affidavit of the immediate purchaser from the trustee, or an affidavit of a subsequent purchaser, stating that it relied on the affidavit and has no notice or knowledge of any adverse claims arising out of the execution and recording of the deed from the trustee.

"Should" (in the first sentence) is the word that I think leads you to raise your question.  
3 Webster's Third New International Dictionary (unabridged) p. 2104 declares that "should" is "used in auxiliary function to express" either "condition", or "duty, obligation, necessity, propriety, or expediency."
Those concepts cover a wide spread of possibilities--not all of which *mandate* a particular course of action.

I read TS 4.7A as setting the "best" or *most preferred* content of a "well-constituted abstract" portraying a chain of title to land granted by a trustee. 
No punishment arises for a title chain generating something less than the highest standard set--other than potential malpractice liability.

Here is the statutory safe harbor:

614.14 Real estate interest transferred by trustee.
1.  If an interest in real estate is held of record by a trustee, a *bona fide purchaser* acquires all rights in the real estate...
2.  A *bona fide purchaser* is a purchaser for value in good faith and without notice of any adverse claim who has relied on a current, recorded affidavit in substantially the following form delivered to the purchaser...
...
5.  b. An action based upon an adverse claim arising on or after January 1, 2009, by reason of a transfer of an interest in real estate by a trustee, or purported trustee, shall not be maintained either at law or in equity, in any court to recover or establish interest in or claim to such real estate, legal or equitable, more than one year after the date of recording of the instrument from which such claim may arise.

Relevant 'standards' for attorneys making title examinations and objections we find in 1 Patton & Palomar on Titles 3d (2003): 

Section 50. Elements of a Good Record title  (p.178) "A good record title is one that conforms to the standard of marketableness and which is also capable of being proven entirely from those county land records that have been designated to impart constructive notice of matters pertaining to rights in land. Regardless of the quality of the title required of the vendor by a standard form purchase contract, a purchaser usually wants to know whether the vendor has a title that is good, both in fact and of record, and to what encumbrances it is subject, if any. The following four points have been called the four elements of a good record title:
    1. The rightful ownership of the entire estate or interest contracted for, free from all fair and reasonable doubts.
    2. The rightful possession thereof.
    3. The appropriate record evidence of ownership.
    4. Freedom of the title from liens, encumbrances, or title defects (other than any provided for by the sale contract).
A record title could exist without including points 1 or 2, and a good title could exist with point 3 broadened to read "legal evidence" rather than "record evidence." But all four points are necessary for a good record title.

Section 51, Elements of a Good Record Title--Treatment in Title Opinions and Reports  (pp.178-179) "In drafting a title opinion for a client or a title report for a title insurer, the title examiner's first paragraph usually covers the 1st and 3d elements of title described in SS 50 supra....
"The title attorney writing a title opinion for a client will cover element 4...by listing [title defects]...in the order of their importance, e.g., taxes, unsatisfied mortgages, other liens, encumbrances, title defects, and clouds upon the title.
"An attorney's title opinion customarily also advises the client regarding steps recommended for removal, of record, of any of the foregoing title defects and encumbrances...."

Section 52, Methods of Making Examinations  (pp.186-87) Title Examination Standards "When examining a title, every lawyer applies, consciously or unconsciously, some standard for approving or disapproving transfers in the chain of title, determining what claims constitute encumbrance, and determining the sufficiency of discharges of encumbrance...A lawyer will make some requirements solely to protect her client from business risks and, at other times, may waive a point of technical unmarketability on the belief that no serious risk exists. ...
"In many states, statewide title examination standards have been promulgated to help title examiners know the standards that subsequent examiners and courts likely will apply to transfers in the chain of title, encumbrances, and discharges of encumbrance.  The availability of written standards that were promulgated after careful study and are generally accepted among members of the bar in the state helps protect examiners who utilize them against claims of malpractice. Availability of generally accepted standards also, consequently, helps to keep title examiner No. 2 from overly-cautiously casting a shadow on the title and the reputation of examiner No. 1."

David Hanson
Hofmeyer & Hanson PC
Fayette, Iowa


----- Original Message -----
From: "Barb Orzechowski" <realestate@iabar.org>
To: realestate@iabar.org
Sent: Thursday, December 10, 2015 10:16:56 AM
Subject: [ISBA RealEstate]  Purchaser's Affidavit

With regard to Title Standard 4.7 requiring a purchaser's affidavit upon conveyance from the trustee of a revocable trust: What if grantee of the trustee warranty deed is not a bona fide purchaser for value because either the grantee is a distributee/beneficiary of the trust or the consideration is less than $500?
Must title be objected to because the grantee has not recorded a purchaser's affidavit?

Barbara F. Orzechowski
Klass Law Firm, L.L.P.
4280 Sergeant Road
Mayfair Center, Suite 290
Sioux City, IA 51106
Phone: 712-252-1866, ext. 224
orzechowski@klasslaw.com<mailto:orzechowski@klasslaw.com>
WWW.KLASSLAW.COM<http://www.klasslaw.com/>



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