The Recording Acts- Introduction
Video-Course: Mortgage Execution: Recording Requirements, Documentation, and Closing Procedures-Module 2 of 5
Video-Course: Part 2, Module 2: Mortgage Execution: Recording Requirements, Documentation, and Closing Procedures
Land Records Index:
All jurisdictions in the United States maintain a system that allows all real property transfers to be recorded in a land records office. This is done on the county level. Each county has its own land records office. In this office, all deeds or records that transfer title to any parcel or any interest in any parcel (such as an easement) of land in the county are recorded and noted in the land records section.
To facilitate the usefulness of these records and indexes, every transfer of property must be recorded in the county property records office. What will generally happen is that as soon as the deed is transferred by the seller of property to the buyer, the buyer (or his attorney or agent) will go down to the property records office and file the deed in the county records office (the buyer will keep the original and leave a photocopy with the records office). The clerk in the records office will then file the record of the deed in the appropriate index (described below).
The main purpose of this is to allow potential buyers of real property to make sure that the purported seller really owns the property that is the subject of the potential transaction. Keep in mind that, in transactions for the sale of personal property, this is not really an issue because possession is usually tantamount to ownership. A good faith purchaser of personal property is usually protected even if it turns out that the property did not belong to the seller. However, that is not the case when you are dealing with real property. If real property is sold by a party to whom the property does not belong, that sale is generally considered to be irrelevant. The true owner could then retrieve the property from the buyer.The buyer would then have to recover the purchase price by suing the seller. For example:
Slick sells the Brooklyn Bridge to Tourist for $100,000. It turns out (surprise!) that New York City, and not Slick owned the Brooklyn Bridge at the time that Slick sold the Bridge to Tourist. If Tourist has taken possession of the Brooklyn Bridge, New York City can recover the Brooklyn Bridge from Tourist. Tourist’s only remedy would be to sue Slick to recover his purchase price, and perhaps some punitive damages based on the tort of misrepresentation.
Therefore, in order to protect themselves, buyers are well advised to do a title search on any property before they buy that property. Today, buyers generally do not do this title search themselves. Rather, they hire a legal professional or a title search company to perform the title search for them.
In addition, most buyers purchase title insurance on property before they buy it. The way title insurance works is that, for a fee, the title insurance company will guarantee that the title obtained by the buyer is good title. If the title is challenged, the insurance company guarantees that it will defend the buyer against the lawsuit. If title is successfully wrested from the buyer by such a lawsuit, the title insurance company guarantees that it will compensate the buyer for his or her loss. Of course, before issuing such a policy, the title insurance company will make sure to perform a thorough title search to make sure that there will never be a successful action to take the property from the buyer. For example:
Shady sells Fakeacre to Gully. Gully buys title insurance on Fakeacre from the “Titles ‘r’ us” insurance company (“Titles”). Titles does a title search on Fakeacre and determines that Shady’s title to Fakeacre is legitimate. Therefore, they issue the insurance policy to Gully. It turns out, that Shady tampered with the land records and he really never owned Fakeacre to begin with. The real owner of Fakeacre, Truly, sues to recover Fakeacre from Gully. Titles would be obligated to defend Gully against this suit to whatever extent they can. If Truly is successful in recovering Fakeacre from Gully, Titles would have to reimburse Gully for the purchase price that he paid for Fakeacre.
The Recording System
A public official in each county is responsible for actually maintaining the county’s land record office. This official simply receives all recorded deeds of transfer, collects any applicable recording fees and files the deeds in the records office. He or she also maintains an index that facilitates title searches by allowing title searchers to more easily access the documents that they are searching for. There are two types of indexes that are maintained by county records offices (an individual county may maintain one or both of these):
1) Grantor-Grantee Index: This type of index maintains a list of property transactions by the names of the parties to the transactions in alphabetical order. The index will be divided into the grantor section and the grantee section. The grantor section will list all grantors in alphabetical order. Under each grantor’s name, all deeds that contain the name of that person, as grantor, will be listed. The same is then done for the grantees in the grantee index. For example:
I want to do a title search before I buy a house from John Smith. So, I take a trip to the county records department and go to the grantor-grantee index. I first want to make sure that the seller actually received the property from someone. So, I look up “Smith” in the grantee index. Sure enough, I find that on April 17, 1973, John Smith was the grantee of the property that Smith is purporting to sell in a deed given to him by Mary White. So far, so good! But, I should not stop there. How do I know that the property really belonged to Mary White in the first place? So, I look under “White” in the grantee index. I find that on December 17, 1957, Rob Johnson conveyed this property to Mary White. I continue doing this until I reach the beginning point that the records are maintained for (obviously, this will vary by county, depending on which part of the country you are in).
Okay, so, let’s assume that I’ve traced title to this property all the way back to 1800, when land records in this county were first recorded. So, I go and buy the property. Right? Wrong! How do I know that Smith or White or Johnson or any of the other owners did not transfer the property to a different party? How do I know that Smith didn’t transfer the property to Fred Flintstone in 1980 or that White didn’t transfer the property in 1960 to Black? For that, I use the grantor index. I look up “Smith” in that index. If I don’t find any deeds from John Smith conveying that property to anyone after April 17, 1973, then I know that Smith did not transfer the property to anyone during that time. Then, I’d go and do the same search for all of the pervious owners. (Note that when I’m looking in the grantee index, I hope to find the name of my seller and the previous owners. In the grantor index, I hope not to find the name of my seller or any of the previous owners.)
As you can see, title searches can get to be quite complicated. One mistake can really burn a purchaser, causing him or her to pay full price for bad title. This is why it is usually safest to hire a title search company or a title insurer to do your title searches for you.
Tract Index: Some counties have another index called the tract index. This index keeps track of all deeds pertaining to each and every lot in the county. The property in each town is often divided into sections. The sections are divided into blocks and the blocks into lots. So, for example, a house might be designated as “Town of Orangeville, Section 7, Block 23, Lot 4” or some such designation. Thus, the property record index might be divided so that you can look up any lot in the county and see a list of all deeds that pertain to that lot. For example:
I want to do a title search before I buy a house from John Smith that is located at 52 Oak Street. So, I take a trip to the county records department and I either look at a county map or I ask a county official to determine what the lot designation for 52 Oak Street is. I learn that 52 Oak Street corresponds to the Town of Cedarwood, Section 4, Block 121, Lot 11. I look under that section of the tract index. I can now see all deeds that purported to convey any interest in that property for as long as the property records have been in existence. In this way, I can make sure that there are no holes in the chain of title from the beginning of time to the current seller.
It should also be noted that conveyances are not the only things that will show up in the property records indexes. Mortgages, easements, liens and other encumbrances generally must also be recorded. The consequences of failing to record a conveyance of a deed or of failing to record a mortgage or other encumbrance will be discussed in the next subchapter.
A problem arises when title to a property (or an encumbrance) is conveyed without a deed. The simplest example would be when property is acquired via adverse possession. In such a case, there is no deed to be recorded. So, how does a title search detect transfers via adverse possession?
If there is a court ruling that a property transfer has occurred via adverse possession, that will be noted in the indexes. So, that information will be obtainable by the searcher. However, if there was never a court ruling to this effect, there will, in fact, be no record of the transfer in the property records office. If you recall from a previous chapter, title that is acquired via adverse possession is not considered marketable for exactly this reason. For example: