The Recording System

Question 1

Common Law Rules (Prior to Recording Acts)

Answer 1

• first in time, first in right
• basically, at common law, whoever bought the property first won, but that incentivized double dealing (bad actors could place loss on subsequent purchasers)
  -> led to modern recording act system - goal was to protect bona fide purchasers from prior interests they had no way of knowing about

Question 2

Recording - General Purpose

Answer 2

• gives notice to the world that title has been transferred
• good for subsequent purchasers b/c gives notice
• good for present owner because helps prevent the subsequent purchaser from becoming a BFP (BFPs always lack notice -> you can protect your title by putting everyone on notice)

Question 3

Recording Acts - Interests That Arise Through Operation of Law

Answer 3

• subsequent BFPs AREN’T protected by recording acts against interests that arise by operation of law
  -> includes adverse possession, prescriptive easements, and implied easements
• reason: there’s no instrument to record in those cases (you usually don’t have a valid deed to record)
• result: BFPs take subject to these interests

Question 4

Race Jurisdiction - Basic Rule

Answer 4

• subsequent purchaser wins if he records properly before the prior purchaser
• BFP OR NOT DOESN’T MATTER

Question 5

Notice Jurisdiction - Basic Rule

Answer 5

• subsequent purchaser wins if they were a BFP when they took, REGARDLESS of whether they record before prior purchaser does so
• last BFP to take wins

Question 6

Race-Notice Jurisdiction - Basic Rule

Answer 6

• subsequent purchaser wins if BFP AND records properly before prior purchaser

Question 7

Bona Fide Purchasers - Requirements

Answer 7

Must:
- be a purchaser for value or a mortgage lender (NOT somebody who received the property by gift, will, or inheritance)
- pay valuable consideration
- take without notice (actual, constructive, or inquiry) of prior conveyance
-> notice is judged at time of conveyance, not time of recording

Question 8

Notice and Race Notice Jurisdictions - What happens if neither is a BFP?

Answer 8

• not protected by recording act -> common law rule applies -> first in time, first in right

Question 9

BFPs - Purchasers for Value

Answer 9

• doesn’t need to be equivalent to proper market value, just need to have given some consideration
• heirs, donees, + devisees NOT protected unless shelter rule applies

Question 10

BFPs - Forms of Notice

Answer 10

• actual notice -> literal knowledge, buyer learns of prior purchaser prior to closing
• inquiry notice -> buyer is considered on notice for anything an inspection would reveal (even if they don’t actually inspect)
• record notice -> buyer is considered on notice for any deeds properly recorded in the chain of title

*inquiry notice and record notice are both forms of constructive notice

Question 11

Inquiry Notice

Answer 11

• buyer is on notice of anything an inspection would’ve revealed (regardless of actual inspection)
• buyer has duty to inspect premises before transfer of title
• if prior purchaser is in actual possession, you’d be on notice of their existence
• also means if recorded instrument makes reference to an unrecorded transaction, buyer is on inquiry notice of whatever a reasonable follow-up would’ve revealed

Question 12

Record Notice - Chain of Title

Answer 12

• if prior purchaser has properly recorded their deed within the chain of title, the buyer is on notice
• note that there is no LEGAL duty to do a title search, BUT it’s sort of forego it at your own risk -> if you don’t search, you’re still going to be charged with notice of whatever the search would’ve revealed

Question 13

If second buyer is a BFP, when do they win?

Answer 13

Depends on kind of recording statute:
- Race - buyer 2 wins if they win the race to record
- Notice - Buyer 2 wins as long as they’re the last BFP to take
- Race Notice - Buyer 2 wins if BFP AND they win the race to record

Question 14

Race Statute - Key Features

Answer 14

• notice doesn’t matter
• whoever records first wins (if you want to win, just record)
• only exists in a few states

Question 15

Race Statute - Typical Language

Answer 15

A conveyance of an estate in land shall not be valid against a subsequent purchaser for value [LACK OF REFERENCE TO NOTICE] unless the conveyance is FIRST recorded

Question 16

Notice Statute - Key Features

Answer 16

• subsequent purchaser w/o notice of prior conveyance wins out over prior grantee who failed to record
• last BFP wins REGARDLESS of whether they record

Question 17

Notice Statute - Language

Answer 17

A 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, unless the conveyance is [NO MENTION OF FIRST] recorded.

Question 18

Race-Notice Statute - Key Features

Answer 18

• subsequent purchaser needs TWO things to win: no notice of prior grant AND first to record

Question 19

Race-Notice Statute - Language

Answer 19

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 conveyance is FIRST recorded

Question 20

Comparing Language of the Kinds of Statutes

Answer 20

• only “first” -> race statute
• only “notice” -> notice statute
• “first” and “notice -> race-notice statute

Question 21

Chain of Title - Basic Concept

Answer 21

• chain of title = the sequence of recorded documents capable of giving record notice to subsequent takers
  -> proper recording helps you safeguard your title, because it means subsequent purchasers will have notice

Question 22

Key Chain of Title Problems

Answer 22

• shelter rule
• wild deed
• estoppel by deed

Question 23

Shelter Rule

Answer 23

• anyone who takes from a BFP will prevail against any interest that BFP would’ve prevailed against
  -> even if that transferee would’ve failed to meet BFP requirements, takes shelter in status of original BFP + steps into their shoes
• doesn’t matter if the transferee had actual notice of the unrecorded conveyance

Question 24

Wild Deed

Answer 24

• wild deed = a recorded deed that isn’t connected to the chain of title
• DOESN’T give subsequent purchasers any constructive notice because a subsequent purchaser couldn’t feasibly find it
• as a buyer, you should make sure the prior person recorded their title

Question 25

Estoppel by Deed

Answer 25

• if one party conveys realty to another that they don’t actually have an interest in, that party is estopped from denying the validity of the prior conveyance if they subsequently acquire the title they previously purported to transfer
• in other words, if X doesn’t own Blackacre but conveys it to A anyway, then finally acquires Blackacre ten years down the road, A would win out over X
  -> note though that if A recorded at the time of the original conveyance, that recording would essentially be a wild deed, and A could lose out to BFPs

Question 26

Deed Recorded Late

Answer 26

• a deed recorded after the grantor parts with title through a subsequent deed is not constructive noice in most states
  -> ex: O conveys to A March 1 and B April 1, then B records April 10 + A on April 15 -> if B conveys to C May 1 + C has no actual or inquiry notice of O-A deed, C wins
  -> most states would hold A’s deed was recorded late + not in C’s chain of title

Question 27

Deed in Chain Referring to Instrument Outside Chain

Answer 27

• reference to another instrument in a recorded doc that’s in the chain of title may impart constructive notice of the instrument referred to
  -> true EVEN IF that instrument is unrecorded or not itself in the chain of title

Question 28

Restrictive Covenants - Deeds from Common Grantor

Answer 28

• courts divided on whether deeds to adjacent lots or lots in a subdivision, executed by the same grantor + containing restrictions + easements involving subject lot, are within chain of title of the subject lot
• book says the better view is that they aren’t

Question 29

Judgment Creditors

Answer 29

• pl who obtains a money judgment can place judgment lien on def’s property by filing in appropriate county office
• most states don’t grant judgment creditors protection by recording statutes against prior unrecorded conveyances-> their notice or lack of notice of prior claims is irrelevant
  -> note that this is different from mortgage lenders, who are treated like BFPs