Deeds and Recording Acts

Deeds

Ownership of real property may only be transferred by written deed, or by will or intestate succession when an owner dies. A deed must be in writing, must identify the grantor and grantee, must be signed by the grantor, must uniquely identify the property, and must be delivered to the grantee, in order to convey the property. So if owner O prepares and signs a deed to grantee A, but puts the deed in a drawer, and later dies or sells the property to someone else, A does not own the property. However, when owner O prepares and signs a proper deed and delivers it to a county recording office, the law presumes that O intends a subsequent delivery to grantee A. This presumption may however be rebutted.

Void deeds

A forged deed is void. In other words, if the signature of the grantor is not the grantor's signature and not authorized or ratified by the grantor, the forged deed conveys no property interest. The grantee of a forged deed may attempt to then convey a deed or a mortgage on the property, but those transfers will have no effect. One cannot sell or mortgage property one does not own.

On the other hand, some deeds may be voidable, but not void. This means that the grantor has grounds for invalidating the deed, but if the grantor does not obtain a court order invalidating the deed, the grantee of the deed will be treated as the owner. The grantee may convey the property by subsequent deed, or mortgage the property, to a third party bona fide purchaser. Grounds to invalidate a deed may include fraud, duress, undue influence, or other personal defenses. If the later grantee or mortgagee has no knowledge of the prior owner's defenses, the prior owner loses the right to invalidate later transfers.

In summary, a bona fide purchaser or mortgagee never obtains title based on a void deed, but may take title when a prior deed in the chain of title was voidable but not void.

Warranty Deed and Quitclaim Deed

The deed to real property may contain warranties of title from the grantor to the grantee. The grantor of a "general warranty" deed is promising the grantee and later owners that the grantor has the right to convey the property, and that there are no encumbrances on the property except those listed in the deed. On the other hand, a quitclaim deed contains no title warranties. The grantor of a quitclaim deed is making no promises or representations about the grantor's title, but is only conveying whatever interest the grantor may have to the grantee.

Recording

Every county in the United States has a land records office where deeds, mortgages, and other documents affecting land property rights may be filed for public record. Recording a deed, mortgage, or other property interest gives notice to all interested parties that someone has a prior interest in the identified property. A deed does not have to be recorded to be a valid transfer of title ownership. However, the owner under an unrecorded deed may lose ownership because of state recording acts.

If it were not for state recording acts, the common law rule would always give priority according to the "first in time, first in right" principle. If owner O conveys Lot X by deed to grantee A, and a month later attempts to convey Lot X to grantee B, A owns the property and the deed to B has no effect. However, state recording acts may change this result. If A does not record the O to A deed, and B does not know about A's deed, then if B records the O to B deed first, B will displace A as the owner of Lot X. B is said to be a "bona fide purchaser."

There are three types of state recording acts. A "pure race" recording act gives priority to A or B solely based on who records first. This means that even if later purchaser B did have actual notice, B will still prevail over A and be the owner, so long as B records before A. A "pure notice" recording act gives priority to later purchaser B whenever B did not have notice of A's unrecorded deed. Under a pure notice recording act, it does not matter if after B receives a deed, A records before B. A "race-notice" recording act protects later purchaser B only if B does not have actual or record notice of A's deed, AND B records before A. Race-notice recording acts are the most common. New York is a race-notice recording act state.

All recording acts protect later grantees only if they are a "bona fide purchaser," or "BFP." This generally means the grantee paid money or exchanged something of value for the property, so that a grantee who receives a deed as a gift would not be protected. In addition a BFP must take the property in good faith, meaning that they are acting honestly and not as part of a scheme to defraud the earlier grantee. However, remember that in a pure race recording act state, the later purchaser may have actual notice but still prevail over an earlier grantee so long as the later purchaser records first.

Mortgages and Recording

A mortgage is a transfer of an interest in property, to secure repayment of a debt. Like a deed, a mortgage must be in writing, identify the mortgagor (borrower) and mortgagee (lender), must be signed by the mortgagor and delivered to the mortgagee, to be valid. If a property owner conveys a mortgage to more than one lender, the "first in time, first in right" principle applies, but may be altered by recording acts. So if owner O grants a mortgage to lender 1, and then a month later to lender 2, lender 1's mortgage would ordinarily have priority. Priority means that if there is a foreclosure sale, lender 1's debt must be paid in full first from the sale proceeds, before any proceeds go to lender 2.

Recording acts affect the priority of multiple mortgages on a single property. An unrecorded mortgage will lose priority to a later recorded mortgage, if the later mortgage qualifies as a BFP. In other words, if the second (in time) lender does not have notice of a prior, unrecorded mortgage, and the second lender records before the prior mortgagee, the second lender's mortgage will have priority. The same rules that govern deeds under the three types of recording acts also govern mortgages. The difference is that where a later deed may completely defeat a prior unrecorded deed under a recording act, a later mortgage will not invalidate a prior unrecorded mortgage, but rather will win priority.

Recording acts will also come into play in conflicts between deeds and mortgages. A BFP without notice who records will take property ownership free and clear of unrecorded mortgages granted by prior owners. On the other hand, the owner of a property who does not record their deed runs the risk that their grantor (prior owner) could obtain a loan a grant a mortgage on the property to a lender, and that lender could record a mortgage that would become a lien on the new owner's property.

For all these reasons there are strong incentives for purchasers and mortgage lenders to record their deeds or their mortgages, to protect against losing property interests to later purchasers or mortgage lenders.