Legal Definitions - right-to-convey covenant

A right-to-convey covenant is a fundamental promise made by a seller of real estate to a buyer, assuring the buyer that the seller possesses the legal authority and ownership necessary to transfer the property. It guarantees that the seller not only holds the property but also has the full legal right to pass valid title to the buyer. If the seller lacks this authority at the time the property is transferred, this covenant is considered breached, potentially allowing the buyer to seek legal remedies.

Here are some examples illustrating the right-to-convey covenant:

• Example 1: Residential Property with Undisclosed Co-owner

  Imagine David sells his family home to Emily. In the deed, David implicitly provides a right-to-convey covenant. Later, Emily discovers that David's estranged brother, who was a co-owner on an old, unrecorded deed, still holds a partial legal interest in the property. Because David did not have the full legal right to convey the entire property to Emily, he has breached the right-to-convey covenant. Emily could then pursue legal action against David for failing to deliver full, unencumbered title.

  This example demonstrates the covenant because David, the seller, promised he had the full legal right to transfer the property, but he did not due to his brother's undisclosed co-ownership, which prevented him from conveying complete title.

• Example 2: Sale by a Trustee with Limited Authority

  A bank, acting as a trustee for a deceased individual's estate, decides to sell a valuable piece of undeveloped land that was part of the estate's assets. The bank, as the seller, provides a right-to-convey covenant to the buyer. However, it is later discovered that the trust document only permitted the sale of developed properties, not raw land. Therefore, the bank, in its capacity as trustee, did not have the legal authority to sell this specific parcel of land.

  Here, the bank, acting as the seller, breached the covenant because its authority to convey the property was limited by the trust document, meaning it lacked the true legal right to transfer ownership of that particular asset.

• Example 3: Corporate Property Sale Without Proper Authorization

  "Global Innovations Inc." sells one of its regional warehouses to "Logistics Solutions LLC." The CEO of Global Innovations Inc. signs the deed, implicitly making a right-to-convey covenant. However, the company's internal bylaws require that any sale of corporate real estate must be approved by a supermajority vote of the board of directors, and this specific vote never occurred. Consequently, the CEO did not have the full corporate authority to convey the property on behalf of Global Innovations Inc.

  This example illustrates the covenant because the CEO, acting for the seller (Global Innovations Inc.), implicitly promised the legal right to convey the property. However, due to internal corporate governance rules not being followed, the CEO lacked the necessary authority to legally transfer the property, thus breaching the covenant.