Title assurance: recording statutes, constructive notice, liens, title insurance, and estoppel by deed

Black-letter propositions

1. 01

   A pure race statute protects the purchaser who records first, whatever the purchaser knew; North Carolina's statute makes a conveyance ineffective against lien creditors and purchasers for value except from the time of its registration and does not mention notice.

2. 02

   A notice statute protects a subsequent purchaser for value without notice even before recording, and Virginia's statute makes an unrecorded deed void as to purchasers for valuable consideration without notice and lien creditors until it is recorded.

3. 03

   A race-notice statute protects a subsequent purchaser in good faith for value whose conveyance is first duly recorded, as California Civil Code section 1214 provides, so the purchaser needs both lack of notice and priority in recording.

4. 04

   Recording a properly acknowledged conveyance gives constructive notice of its contents to subsequent purchasers and mortgagees, and a bona fide purchaser is someone who pays value without actual or constructive notice of defects in the seller's title.

5. 05

   A judgment lien on real property arises in California by recording an abstract of a money judgment, attaches to the debtor's interests in the county, including those acquired later, and lasts ten years from entry unless renewed.

6. 06

   A federal tax lien is not valid against a purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice of the lien is filed as the statute requires.

7. 07

   A lis pendens notice recorded in the chain of title warns that interests acquired during the suit are subject to its outcome.

8. 08

   Title insurance protects a buyer, and a lender if the loan requires it, against title issues that the search missed, such as forgery, subject to the terms of the policy; coverage disputes are common.

9. 09

   Under estoppel by deed, a grantor who purported to convey property he did not own cannot later deny the grantee's title, so if the grantor later acquires the property, he is estopped from asserting it against the grantee.

Use this attack sequence under time

Common wrong turns

• Under a pure race statute, actual notice of an earlier unrecorded deed does not defeat the first to record.
• Under a notice statute, a purchaser without notice prevails over an earlier unrecorded deed even if she has not yet recorded her own.
• A federal tax lien is not valid against a purchaser until notice of it is filed as the statute requires, so a purchase before filing takes free of it.

Worked example

Seller conveys a lot to Buyer One, who does not record, and then conveys the same lot to Buyer Two, who pays value, has no notice of the first deed, and records at once. Buyer One then records.

Practice this topic

The three recording statutes

North Carolina General Statutes section 47-18 provides that no conveyance of land, contract to convey, option, lease for more than three years, right of first refusal, or right of first offer is valid to pass any property interest as against lien creditors or purchasers for valuable consideration except from the time of its registration in the county where the land lies. The section says nothing about notice, which is the mark of a race statute. Virginia Code section 55.1-407 provides that a deed conveying any estate is void as to all purchasers for valuable consideration without notice, not parties to it, and lien creditors, until and except from the time it is recorded, which is a notice statute. It adds that the mere possession of real estate is not, of itself, notice to purchasers of the interest of the person in possession.

California Civil Code section 1214 provides that every conveyance of real property, other than a lease for a term not exceeding one year, is void as against any subsequent purchaser or mortgagee of the same property in good faith and for a valuable consideration whose conveyance is first duly recorded, which is a race-notice statute. Section 1213 makes a properly recorded conveyance constructive notice of its contents to subsequent purchasers and mortgagees. Cornell's Wex entry on bona fide purchasers says such a purchaser exchanges value for property without reason to suspect irregularities, cannot have actual or constructive notice of defects in the seller's title, and is charged with constructive notice if a third party registered a claim under the recording statute.

Liens against land

California Code of Civil Procedure section 697.310 creates a judgment lien on real property by recording an abstract of a money judgment with the county recorder, and it lasts until ten years from entry of the judgment unless the judgment is satisfied, the lien released or the judgment renewed. Section 697.340 says the lien attaches to all interests in real property in the county, present or future, vested or contingent, legal or equitable, that are subject to enforcement, and if an interest is acquired later, the lien attaches to it at that time.

The federal tax lien statute, 26 U.S.C. section 6323(a), says the lien imposed by section 6321 is not valid against any purchaser, holder of a security interest, mechanic's lienor or judgment lien creditor until notice of it has been filed as the statute requires. Wex's entry on lis pendens describes a notice recorded in the chain of title designed to let interested third parties discover pending litigation affecting the title, and it warns that interests acquired during the suit are subject to its outcome.

Title insurance and estoppel by deed

Cornell's Wex entry on title insurance says it is coverage purchased by buyers to protect against title issues. A title company searches for problems and, if none are found, insures against issues it may have missed, such as a forged title. The buyer generally pays at closing, a lender usually requires a policy in its name, and litigation over whether a particular defect is covered or over the amount of coverage is common.

Wex's entry on estoppel by deed describes a doctrine that precludes a person from arguing in court a position counter to what the person stated in an earlier deed. It arises most often where someone deeded property he did not own. In the entry's example, John sells Parker fifty acres of which he owns only thirty, and estoppel by deed prevents John from arguing in later disputes that Parker did not own the other twenty acres, although the true owner of those acres is not bound.

Frequently asked questions