Recording (real Estate) - How The System Works

How The System Works

The record title holder is not necessarily the actual owner of the land if there are previous unrecorded deeds to it to others. The principal legal theory is that once a person has conveyed the title to his or her property (or some aspect of it) to someone, he or she has nothing left to transfer to any subsequent person. However, as a result of the various state recording acts, the courts will protect a bona fide purchaser who pays valuable consideration and doesn't have knowledge of the prior unrecorded deed from the claims of a prior grantee under that deed. The same is true respecting most types of unrecorded liens or encumbrances. For example, purchasers of the land from the record title holder who pay valuable consideration and have no knowledge of unrecorded mortgages will be protected against those mortgages by the courts. All of this flows from the statement in most recording statutes that the unrecorded instruments are void against such purchasers. Also, U.S. law permits the bankruptcy trustee of a debtor to set aside property interests the debtor has conveyed if a bona fide purchaser of the real estate, who properly perfected its interest, would be protected against the conveyance. Therefore, it behooves purchasers and mortgage lenders to record their deeds or mortgages, respectively, to prevent this outcome.

Once an instrument affecting the title to real estate has been recorded, the law holds that everyone is deemed to know of its existence, even if they haven't searched the records in the recorder's office. This is the doctrine of "constructive notice" and it is nearly universal in the various states of the U.S. So, for example, after a deed or mortgage has been recorded by someone in the chain of title, no subsequent purchaser will be protected against it. The reason is that the recording laws deem everyone to know of its existence once it is recorded.