BAR FLASHCARDS - P13
Bright-line rules for recording statutes (3)
RACE: B wins if records properly before A.
NOTICE: B wins if BFP when took (last BFP to take wins)
RACE-NOTICE: B wins if BFP and records properly before A.
• In a race jurisdiction, B wins, if he records properly before A does.
• In a notice jurisdiction, B wins if he was a BFP when he took, regardless of whether he records before A does. In a notice state, the last BFP to take wins.
• In a race-notice jurisdiction, B wins if B is a BFP and he records properly before A does.
In both a notice and race-notice state, to prevail in a recording system question B must demonstrate that when he took he was a BFP. A
BFP is one who purchases Blackacre for value without notice that someone else (in our model, A) got there first.
What happens if a grantor is a double-dealer and conveys the very same parcel to more than one grantee? Who gets the property?
At common law?
Under the recording acts?
A subsequent BFP is not protected by the recording acts against WHICH interests?
What happens if a grantor is a double-dealer and conveys the very same parcel to more than one grantee? Who gets the property?
At common law, the rule was simple: first in time, first in right. In other words, whoever received the interest first was entitled to the property. The second grantee was out luck regardless of the circumstances.
Because this rule encouraged nefarious grantors to commit fraud by placing the losses on unsuspecting subsequent purchasers, the recording acts were enacted to protect bona fide purchasers from prior interests that they could not know about. Practically any kind of instrument affecting an interest in land can be recorded, including deeds, mortgages, contracts to convey, or judgments affecting title to property.
Recording gives notice to the world that title to property has been transferred. So, any subsequent purchaser will have constructive
(or record) notice of the conveyance. Because, as you’ll soon see, a bona fide purchaser by definition lacks notice of a prior conveyance, proper recording prevents a later taker from becoming a subsequent bona fide purchaser (“BFP”).
Note, however, that a subsequent BFP is not protected by the recording acts against interests that arise by operation of law (for example, prescriptive and implied easements, or title by adverse possession). Why? Because in such instances there is no instru- ment to record, so the recording acts do not apply and subsequent purchasers take subject to these interests.
BONA FIDE PURCHASERS
To be a bona fide purchaser, a grantee must:
• Be a purchaser (or a mortgage lender), not one who received the property by gift, will, or inheritance
• Pay valuable consideration
• Take without notice (actual, constructive, or inquiry) of the prior conveyance
Bona fide purchasers prevail over prior transferees in notice jurisdic- tions. They also prevail in race-notice jurisdictions if they win the race to record. If the subsequent grantee does not qualify as a BFP, they are not protected by the recording act and the common law rule of first in time applies.
“good faith” purchasers
Recording acts sometimes refer to “good faith” purchasers in place of bona fide purchasers.
You can treat these terms as synonymous (a good faith purchaser is one who acquires property for valuable consideration, in good faith, and without notice of another’s prior claim to the property).
Purchaser for Value.
Who is NOT protected?
The recording statutes protect purchasers. Donees, heirs, and devisees are not protected because they don’t give value.
a. Two Routine Value Questions
- The bargain basement sale:: yes, for value.
- The case of the doomed donee: recording statutes do not protect donees, heirs, or devisees unless the shelter rule applies.
Notice
Types?
When?
“Without notice” means the purchaser had no actual, constructive (record), or inquiry notice of a prior conveyance at the time they paid consideration and received the interest. The three forms of notice that a buyer potentially may be charged with are:
A I R:
A: ACTUAL - B learns of A (literal knowledge)
I: INQUIRY: B charged with what inspection would’ve revealed (constructive notice)
R: RECORD: B on notice of deeds properly recorded in chain of title (constructive notice)
a. Actual Notice
What does actual notice mean?
b. Inquiry Notice: Whether he examines Blackacre prior to closing or not, B is on inquiry notice of whatever an examination of Blackacre would have revealed. He has a DUTY to inspect.
• The buyer of real estate has a duty to inspect the premises before transfer of title, to see, for example, whether anyone else is in possession.
• If another is in possession, B is charged with inquiry notice of that fact, regardless of whether B actually bothered to inspect or not.
• Thus, in our model of the double dealer, if A had taken pos- session, B would be on inquiry notice of that fact, thereby defeating B’s status as a BFP.
Inquiry notice also means that if a recorded instrument makes ref- erence to an unrecorded transaction, grantee is on inquiry notice of whatever a reasonable follow-up would have revealed.
•
c. Record Notice—Chain of Title
B is on record notice of A’s deed if, at the time B takes, A’s deed was properly recorded within the chain of title.
subsequent purchaser will be..
Although no one has a legal duty to perform a title search, a subsequent purchaser will be charged with the notice that such a search would provide, whether or not she actually searches.
In our model, what if A has not recorded, or has not recorded properly at the time B takes? Assume that B is a BFP. Does B win?
It depends on the type of recording statute the jurisdiction has enacted.
In a RACE state, B wins if he wins a race to record.
in a NOTICE state, B wins if he is the last BFP to take.
In a RACE-NOTICE state, B wins if he is a BFP and he records BEFORE A does.
TYPES OF RECORDING ACTS
The examiners will not tell you which type of statute to apply; they will give you the language of the statute.
Race Statute
Race Statute
Under a pure race statute, notice of a prior conveyance by the grantor doesn’t matter. The first party to record wins. Only a few states have a pure race statute.
The language of a typical race statute looks like this: A conveyance of an estate in land shall not be valid against a subsequent purchaser for value unless the conveyance is first recorded.
- No requiremnt of BFP. Just first to record.
Notice Statute
Notice Statute
Under a notice statute, a subsequent purchaser who had no notice of a prior conveyance by the grantor will prevail over a prior grantee who failed to record. Typical notice statute language looks like this:
A conveyance of an interest in land, other than a lease for less than one year, shall not be valid against any subse- quent purchaser for value, without notice thereof, unless the conveyance is recorded.
- the last BFP to enter the fact wins, regardless of who wins the race to record.
The subsequent purchaser under a notice statute prevails WHEN?
The subsequent purchaser under a notice statute prevails even if they don’t record. As long as they had no notice of the prior conveyance, they win. But if they don’t want the same thing to happen to them, they will have to record to put other subsequent purchasers on notice of their interest.
Race-Notice Statute
Race-Notice Statute
To be protected under a race-notice statute, the subsequent purchaser must not have any notice of the prior grant and must record first. Typical race-notice language looks like this:
Any conveyance of an interest in land, other than a lease for less than one year, shall not be valid against any subsequent purchaser for value, without notice thereof, whose convey- ance is first recorded.
- to win: B must be a BFP AND win race to record!!!
To be a BFP for purposes of protection of the recording statutes, the purchaser must….
at what time?
In determining who is a BFP for purposes of protection of the recording statutes, remember that the purchaser must be without notice at the time of conveyance.
It does not matter if she learns of an adverse claim after the conveyance but before recording.
How to spot the different statutes
An easy way to spot the different statutes is to look for the words “notice” and “first.”
• “First” only = race statute
• “Notice” only = notice statute
• “Notice” & “first” = race-notice statute
