Voluntary Conveyance
The intentional transfer of a title to a property from one individual to another through a deed
Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.
What is Voluntary Conveyance?
Voluntary conveyance is the intentional transfer of a title to a property from one individual to another through a deed.
When such a transfer occurs without adequate consideration of the conveyor, the original owner who shall be making the transfer must be prepared to explain the transfer. The explanation must be recognized by the legal system with jurisdiction over the location of the property.
A deed is an official record of the ownership of property rights for the asset in question. Consideration refers to a legally recognized compensation that must be given to the owner in exchange for the rights of the property in question.
Summary
- Voluntary conveyance is said to be the intentional transfer of a title to a property from one individual to another through a deed.
- It comes in three types – public grants, private grants, and public dedication.
- Voluntary conveyance can be used to avoid default, for charitable purposes, fraudulent purposes, and conveyance to descendants.
What is Conveyance?
The term conveyance refers to the legal process of the transfer of property or other fixed assets from one owner to another. This type of conveyance of ownership can be classified under five categories:
1. Voluntary conveyance
2. Involuntary conveyances
3. Transfer by will
4. Transfer by laws of succession
5. Transfer by accession
Types of Voluntary Conveyance
There are three types of voluntary conveyance:
1. Public grant: Publicly-owned land is transferred to a private individual.
2. Private grant: Privately-held land is transferred to an individual.
3. Public dedication: Privately-held land is transferred to the government or an organization operated by the government.
When is Voluntary Conveyance Used?
Voluntary conveyance can be used in the following situations:
1. Avoiding default
Consider a situation where a borrower is about to default on their debt. To prevent the negative impact that it will have on their credit history, the borrower may convey their interest in real property to the lender.
The lender can accept the title conveyance and sell the property to recover their money. Before a mortgage company considers this option, the borrower must try to sell the property at its fair market value for at least three months.
2. Charitable purposes
Donors often convey real property to charitable organizations. In such a case, they must carefully manage the consideration issue. With proper protections in place, consideration is in the form of a tax deduction.
3. Conveyance to descendants
Many people convey their properties to their descendants as a gift or through their last will, which is done through a gift deed. Consideration consists of a small monetary amount or simply love and affection. However, in cases where the creditors seek possession of the property to fulfill their claims, such a gift can be considered suspicious.
4. Fraudulent purposes
Voluntary conveyances can sometimes be made with the intention of hindering, delaying, or defrauding a creditor.
The sale of a property to a third party, when done with the intention of avoiding the creditor’s claim to that property, is considered illegal in most cases. Such a type of conveyance is referred to as fraudulent conveyance.
Several avenues, such as civil legal proceedings, are available to creditors that can enable them to defend their claim to a particular property.
Under civil cases, the court may order the defendant to pay penalties in situations where the transaction is ruled to be a de factor fraudulent transaction. It happens in a case where the court rules that the fraud is real, malicious, or constructive.
What is Involuntary Conveyance?
The term involuntary conveyance refers to an instance where the transfer of real property occurs without the explicit consent of the owner. It usually happens in cases of divorce decrees, condemnation due to neglect or natural disaster, failure to pay taxes, asset seizure in case of debt default, etc. In case of the death of a property owner with no direct heirs, the state takes custody of the property.
Related Readings
CFI is a global provider of the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To learn more and expand your career, explore the additional CFI resources below:
