. . . Real Estate Law Lecture Notes: Title Examinations. . . . ..
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Lecture
Notes: Title Exams
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WHY DO TITLE EXAMINATIONS?
(You
don't have to record your property transaction documents. But it sure is dumb
not to do so.)
BONAFIDE PURCHASER FOR VALUE RULE:
One
who purchases real estate in good faith for value and without notice of
any claim is a bona fide purchaser and takes the property free and clear
of any encumbrances or claims by other parties.
(Must
be a purchaser. Must pay value. BFP and all who claim through BFP get this
protection so a BFP can sell the property. And must not have notice.)
There
are two kinds of notice for the application of this rule.
-
Actual Notice: That is, direct knowledge or information about the title
matters, and including anything that could be seen by an eyeball inspection
of the real estate, plus the actual facts and information learned or known
that would put one on notice that there may be an encumbrance, or raise a
question about encumbrances which would create a duty to investigate the matter.
-
Constructive Notice: That is, a legal presumption that the buyer has looked
at the land and therefore knows of any matters indicating adverse claims that
would be evident from inspection of the land, and the buyer has looked at
the public title records and therefore knows of any adverse claims or encumbrances
that appear in the records.
Constructive
notice is charged to the buyer to the extent that information is in the
chain of title.
Massachusetts rule: To review the chain of title, examine all conveyances
from the point where owner receives property to the point where owner sells
property.
New York rule: To review the chain of title, examine all conveyances made
by individuals in the chain of title.
Constructive notice is also charged to the buyer as to documents not actually
recorded in the public documents, but mentioned by recorded documents.
Recording a document that acts as an encumbrance will put buyers on constructive
notice of the encumbrance, which means that they have notice of that encumbrance
and will not take the land free from the encumbrance under the bona fide
purchaser rule.
RECORDING
STATUTES:
The purpose
is to give notice of changes of ownership, to protect subsequent purchasers
from the same common grantor, and to determine priority of claims. There are
three kinds:
Race statute: First to record wins, even if one has notice of a prior
unrecorded encumbrance. It's a race to see who can get to the courthouse to
record, first. In other words, just record it right away.
Notice statute: An unrecorded encumbrance is still valid as to a later
conveyance if the person taking a later conveyance takes it with actual knowledge
of the unrecorded encumbrance. But if a person taking a later conveyance doesn't
have actual notice of the earlier unrecorded document, then the earlier claim
will not be valid as to that person. In other words, just record it right
away.
Race-notice statute: An unrecorded encumbrance is valid as to a later
recorded conveyance if the later knew of the previous unrecorded claim, just
like the notice statute rule. But as between two recorded interests, the first
in time is first in right. In other words, just record it right away. (Sound
familiar by now?)
