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Wednesday, January 4, 2012

Real Property: Recording Acts

The following question was asked on the Asked & Answered facebook page @ http://www.facebook.com/pages/Asked-Answered-The-Multi-State-Bar-Exam/122156504533565

Can you please explain how to tackle race, notice & race notice questions? Is there a trick to deducing the answer from the wording of the recording statute?

Response:

The best way to approach this question is to run through the three statutes while discussing how they are tested on the MBE. But first, understanding the policy behind these statutes is essential. The recording acts protect grantees by providing that, if an interest in land is recorded, subsequent grantees are on notice of a prior grant of the land. In addition, the statutes protect the subsequent grantees if the initial grantee fails to record.

Notice statutes:

Under a notice statute, a subsequent "BFP"(a person who pays value and has no notice (actual or constructive) of a prior grant) prevails over a prior grantee who fails to record. So, for example, A grants land to B. B fails to record. A grants the same land to C. Assuming that C is a BFP, C will prevail over B, because B failed to record his interest in the land. You should also note that in this situation if B rushes to the recording office and records his interest before C, but after C has been granted the land, B will still lose because all that is required is that C is granted the land prior to B recording. Once that occurs, C is protected.

On the MBE, a notice statute will look as follows: "No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof, unless it is recorded." It's important to realize that the words "first recorded" are nowhere mentioned in this statute. When the statute includes the term "first recorded" it's either a race statute, or a race-notice statute.

Race-Notice Statute


Under a race-notice statute a subsequent BFP is protected only if he takes without notice and records before the prior grantee. Same facts as above: A grants land to B. B fails to record. A grants the same land to C. Assuming that C is a BFP, C will prevail over B assuming that two requirements are satisfied. Unlike in the above, it's not enough that C takes his interest prior to B recording. In addition, C has to record prior to B. So, if C takes his interest prior to B recording, but B rushes to the recording office, and records prior to C, then C is out of luck. On the other hand, if C takes his interest prior to B recording, and then records prior to B, C wins.

On the MBE, a race-notice statute looks as follows: "No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded.

Race Statutes:

Under a race statute, whoever records first wins. Notice is irrelevant. Let's assume, now, that A grants to B. A then grants to C. Even if C is aware of the grant to B, C can prevail over B provided that C records his interest before B records his interest. In such a situation, C is not a BFP (a lack of notice is required to be a BFP), but such a determination is irrelevant, as the determining factor is simply who recorded first.

On the MBE, a race statute will look as follows: "No conveyance or mortgage of an interest in land is valid against any subsequent purchaser whose conveyance is first recorded. You should note that the word "notice" never appears in this statute, and that is an excellent way to distinguish between this type of statute, and the two statutes mentioned above.


4 comments:

  1. Thanks! That makes things clearer!

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  2. Great, as this area of the law is quite tricky.

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  3. The bar examiners usually expand upon your scenarios by including facts that prior grantees possessed the land or are donee grantees.

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  4. This is great! Thanks so much, Sean.

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