IX. Recording

Question 1

Purpose of Recording

Answer 1

• Generally speaking, the purpose of the recording statute is to let the subsequent purchaser keep the property—provided that the subsequent purchaser can meet the requirements of the applicable recording statute. If the subsequent purchaser does not satisfy the requirements of the applicable recording statute, then just apply the common law rule—First in Time, First in Right. Under the common law rule, subsequent purchasers will always lose.
• An unrecorded deed is just as valid as between the original parties as a recorded deed. Recording only serves to give notice of the terms of the deed.

Question 2

Mechanics of Recording

Answer 2

• STEP 1: The court clerk files a copy of the deed in a book (or on microfilm)
• STEP 2: The clerk will then index this information in two indices:
  
  • GRANTOR INDEX: The clerk lists the transaction alphabetically by Grantor, noting the name of the Grantee, a brief description of the property, and citing to the volume and page number of the book (microfilm) where a full copy of the deed can be found.
  • GRANTEE INDEX: The clerk lists all the same information—alphabetically by Grantee.

Question 3

Different Types of Recording Acts

Answer 3

• Notice
• Race
• Race-notice

Question 4

Notice Recording

Answer 4

• A Notice Statute protects subsequent Grantees who are bona fide purchasers (BFP’s), i.e., a purchaser for value who takes without notice of the earlier transaction.
• The sole inquiry is notice.
• As such, recording is important only to the extent it imparts constructive notice.

Question 5

Race Recording

Answer 5

• Notice is irrelevant in a Race jurisdiction. The rule is whoever records first keeps the property.
• The subsequent purchaser does not have to be a BFP.

Question 6

Race-Notice Recording (GA)

Answer 6

two-part test. A Race-Notice statute protects all subsequent Grantees who are bona fide purchasers for value who:

• (i) take without notice; and
• (ii) are the first to record.

Question 7

Identifying the type of Recording Statute

Answer 7

• Look for the words—without notice—or—the words—in good faith—which means the statute is either a Notice or a Race-Notice statute.
• Look for the words recorded first—OR— first recorded, which indicate a Race-Notice statute. If these words are not present, then the statute is a Notice statute.
• If the quoted language does not include the word notice—or—the words—in good
  faith—then it is a pure Race statute.

Question 8

Bona Fide Purchaser

Answer 8

• A BFP is a bona fide purchaser for value who takes without notice.

Question 9

BFP: Purchase for Value

Answer 9

• Unless there is an explicit claim of fraud, any consideration that is out of pocket ( i.e., more than a “mere peppercorn”) is enough to be considered value.
  
  • Bargain Basement Sale: Even if the purchaser pays way below FMV, the
    purchaser has still come “out of pocket” and thus has paid sufficient value to
    qualify as a purchaser “for value.”
  • Transferee is an Heir, Donee or Devisee: One who purports to take property as an heir, devisee or donee cannot be a BFP (as they are not out-of-pocket anything), and therefore, cannot prevail over the claim of an earlier Grantee.
  • Shelter Rule Exception: Anyone (even heirs, donees or devisees) can take shelter under the rights of a true BFP.

Question 10

BFP: Three Kinds of NOtice

Answer 10

• ACTUAL Notice: If the subsequent purchaser had actual notice of the prior
  unrecorded conveyance, then the subsequent purchaser is not a BFP.
  
  • Shelter Rule Exception: Anyone (even those who actually know of an earlier conveyance) can take shelter under the rights of a true BFP. Thus, in order to protect the right of the true BFP to sell the property and convey good title, the Shelter Rule protects anyone who takes from a true BFP—regardless whether they are purchasers for value and no matter what they know.
• RECORD Notice: Record notice is a constructive notice arising from the record. In order to impart record notice, a deed must be recorded in the buyer’s direct chain of title—so that a subsequent purchaser can find it and inspect it.
• INQUIRY Notice: In order to be a BFP who takes without notice, the subsequent purchaser must examine the land and must make inquiry as to any unexplained uses or possessions. The subsequent purchaser will be charged with notice of whatever such a physical inspection of the property would reveal.

Question 11

Subsequent Interests Prtoected by Recording Statutes

Answer 11

• SUBSEQUENT MORTGAGES: Recording statutes generally protect subsequent
  mortgagees.
• JUDGMENT CREDITORS: judgment creditors generally are not protected by the recording statutes.

Question 12

Title Searching

Answer 12

• CONSTRUCT A CHAIN OF TITLE–USING GRANTEE INDEX: Look up seller’s name and find name of seller’s Grantor;; then look up name of that person’s Grantor, and so on, going backwards in time for whatever period of time is required by the marketable title statute.
• ADVERSE EACH LINK–USING GRANTOR INDEX: Look up the name of the last Grantor found in the chain of title just constructed and see if that person recorded any interest on the property, starting from the time they got the property until the time they passed title onto the next link in the chain of title.
  
  • Specifically, look to see if Grantor placed any encumbrances (e.g., easements, mortgages, etc.) on the property.
  • Repeat this search for each Grantor in the chain of title leading down to your client’s prospective seller.

Question 13

Concept of Legal Blinders

Answer 13

• “Legal Blinders” means that the title searcher examines only the actions taken by the Grantor during the window of time known as the period of record ownership by that Grantor.
• Therefore, the title searcher does not look for anything that a Grantor may have done before obtaining title to the property, nor does the title searcher look for anything that a Grantor may have done after passing title on to the next Grantor—that is, on to the next link in the chain of ownership.
• So there are two possible ways that a deed may be filed at the courthouse but not be recorded in the chain of title: where the deed was recorded too early or where the deed was recorded too late.
• Deeds recorded too late are recorded outside the chain of title and do not impart constructive notice to the subsequent purchasers.

Question 14

Role of INquiry Notice in Title Search

Answer 14

• First Rule: Where a reading of the deeds on record discloses an unrecorded transaction, then the subsequent purchaser has to make inquiry in order to take without notice and qualify as a BFP. Subsequent purchasers, therefore, are on notice of anything that is mentioned in a deed recorded in the direct chain of title.
• Second Rule: To qualify as a BFP without inquiry notice, the subsequent purchaser must make a physical inspection of the property, and must investigate any unexplained possessions or any unexplained uses of the property.