In California, an unrecorded interest is valid between the parties thereto and those who have notice thereof. (Civ. Code § 1217.)
Just because a deed is unrecorded doesn’t mean it isn’t valid. If executed correctly, it is a valid transfer of real estate. But that doesn’t mean an unrecorded deed is a good idea. In fact, failing to record can wind up being a massive mistake, especially if the grantor tries to sell the property a second time, or give it to another family member.
In these situations, the right attorney can make all the difference. At Underwood Law Firm, our attorneys are well-versed in real estate recording laws and have the experience and knowledge to assist you in these types of title disputes.
What is a deed?
A deed is a written legal instrument that conveys an ownership interest in real property from one person to another. Put simply, it’s the document that both grants property rights from one to another, while also being evidence that title has officially been transferred.
For example, suppose Buyer purchases land from Seller. Even though they enter a sales contract, title has not officially transferred from Seller to Buyer. Instead, after the sale closes, Buyer receives a deed. That deed “executes” the conveyance and operates as a present transfer of the real property. (Estate of Stephens (2002) 28 Cal.App.4th 665, 672.)
Put differently, a deed is executed because it transfers property from one to another. It leaves nothing else to be done. (Greeninger v. Ruelle (1954) 124 Cal.App.2d 8, 9.)
What is recording?
Usually, when someone purchases or acquires an interest in a property, they will “record” that interest. When a document is recorded, it is filed with the county and becomes a public record free for anyone to see. Anytime a title search is conducted, for instance by a bank before executing a mortgage loan, then that recorded instrument will appear during the search.
Virtually any document related to property can be recorded. Government Code section 27280 specifically states that “any instrument affecting title to or possession of the real property may be recorded.”
Deeds fall squarely within this definition, and so most individuals, upon receiving a deed, promptly record it with the county. This doesn’t mean an unrecorded deed is ineffective.
But just because it’s okay to not record doesn’t mean that practice should be encouraged. In fact, failing to record a deed can cause serious problems down the line if one’s title to a certain piece of property is challenged.
Why are deeds recorded?
Suppose both “Shawn” and “Julie” claim to have received the same piece of property from Seller. Both show up to court, deed in hand, saying that they own 100% of the property. This is where recording laws come into play. Sometimes, there are two simultaneous claims to a single piece of property, and the courts need to decide who the “true” owner is.
California starts with the “first in time, first in right” system of priorities, under which “a conveyance recorded first generally has priority over any later-recorded conveyance.” (Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1099.)
So in the example above, the dispute between Shawn and Julie can be decided based on the winner of the race to record. If Shawn recorded his deed before Julie, then Shawn’s deed wins out.
The reason this rule exists is that a recorded interest constitutes “notice” to all other persons who may claim to have an interest in the same property. As stated in the Civil Code, “every conveyance of real property… recorded as prescribed by law from the time it is filed… is constructive notice of the contents thereof to subsequent purchasers and mortgagees.” (Civ. Code § 1213.)
As such, a subsequent purchaser of property cannot claim to be ignorant of a prior recorded interest because the recording is a public record and would show up during a title search.
What happens if an unrecorded deed was executed first?
Occasionally, a situation arises where the first grantee does not record, but the second grantee does record. In that situation, the “winner” of title to the property depends on whether the second the grantee was a “bona fide purchaser.”
A bona fide purchaser (BFP) is someone who obtains property by (1) paying valuable consideration, (2) with no notice of the previously created interest, and (3) who first duly records. (First Bank v. East West Bank (2011) 199 Cal.App.4th 1309, 1313.) If someone satisfies all three of these requirements, then the prior deed doesn’t matter. The BFP takes the real property free of the unknown rights.
This goes back to why it’s important to record. As soon as the deed is recorded, it provides notice to the world. So a subsequent purchaser can never be a BFP. The recording of the deed gives him “constructive” notice of a prior interest in the property.
Does recording ever not impart notice to a subsequent purchaser?
There is one situation where a recorded deed will not work for imparting notice, and that is where the deed is “wild” or not properly recorded. For constructive notice to be imparted on the world, the deed must be “recorded as prescribed by law.” (Civ. Code § 1213.) That phrase means the deed must be properly indexed. (Hochstein v. Romero (1990) 219 Cal.App.3d 447, 451.) If it is not indexed, the deed is considered to have never been recorded at all.
So, for example, suppose Julie receives the deed to a property from her father. Julie records the deed, but does so incorrectly, failing to index the deed as is required under the law. Years later, Julie’s dad sells the property to Shawn.
Shawn is considered a BFP, because Julie’s improperly recorded deed is deemed, under the law, to have never been recorded in the first place.
How the Lawyers at Underwood Law Firm Can Help
Title disputes can be a harrowing experience, especially when dealing with the unrecorded deed that suddenly pops up in a quiet title or partition suit. For the inexperienced litigant, the next steps might seem impossible to determine. Fortunately, the lawyers at the Underwood Law Firm specialize in partition actions and solving the difficult problems that can accompany them. If you have found yourself in one of these situations, then please do not hesitate to contact us today.