Recording Title

• Author: Alan R. Romero
• Profession: Professor of law and Director of the Rural Law Center at the University of Wyoming College of Law
• Pages: 295-310

Chapter 17

Recording Title

In This Chapter

▶ Understanding priority and why it matters

▶ Considering what can be recorded

▶ Indexing recorded documents

▶ Examining the kinds of recording statutes and whom they protect

▶ Eliminating certain title risks by statute

V

arious people can have different interests in the same real estate at the

same time. One person may own a life estate in the property, another

may own a remainder, a third may own an easement, a fourth may have a

lease, a fifth may own a lien, and so on. Sometimes the creation or exercise of

one interest conflicts with other interests in the property.

An owner of the property may even convey an estate to one person and then

purport to convey it again to another. In this situation, too, the interests of

the two grantees obviously conflict.

Such conflicts are generally resolved by statutes that allow parties to give

notice of their real property interests to the rest of the world and, when they

don’t give such notice, protect those who bought interests in the property

without notice of earlier interests. This chapter fills you in on the requirements

for recording documents in the public records and identifies the circumstances

in which the recording statutes protect people who didn’t know about an

unrecorded interest.

Understanding Priority Disputes

Priority problems arise when a property owner creates conflicting interests

in the property. Probably the simplest example is when the owner conveys

her property to one person by deed and later gives another deed to the same

property to a different person. But similar conflicts can happen when the

owner creates lesser interests. For example, the owner leases the property to

a tenant and later mortgages the property. If the owner subsequently defaults

296 Part IV: Acquiring and Transferring Property Rights

and the mortgagee forecloses, the foreclosure buyer and the tenant may have

a conflict about whether the lease continues in effect.

In either case, the baseline common law principle to resolve these conflicts is

simple and intuitive. The owner can’t give away any part of what she doesn’t

own. So after she has conveyed a property interest to one person, she has no

power to convey the same interest to another person. For example, after the

owner has given away a leasehold to a tenant, she has no power to take any

of that interest away from the tenant (unless the lease otherwise provides,

of course). All the landlord can mortgage is what she still owns, which is the

reversion that will take possession after the leasehold ends.

The bottom line is that if the owner creates inconsistent interests, the later

interest is subject to the prior interest, but the prior interest isn’t subject to

the later interest. This principle is often referred to as “first in time, first in

right.”

Recording Documents

The principle of first in time, first in right may seem unquestionably right and

fair. Someone shouldn’t be able to give away someone else’s property rights.

But selling an interest that conflicts with a prior interest may also be unfair to

the later grantee. If the grantor doesn’t tell the later grantee about the prior

interest and the later grantee can’t reasonably discover the prior interest,

then the later grantee may innocently and reasonably pay value for a property

interest that turns out to be impaired or useless. He might be able to sue his

grantor for damages, but a judgment against the grantor may not be collectible

and may not be a satisfactory substitute for the desired property interest.

If a prior interest isn’t reasonably discoverable, the later grantee can’t do

anything to avoid the unfair result. But the prior grantee can do something,

and it’s pretty easy. A simple way to avoid unfairness to the later grantee is

to have the prior grantee notify him of the prior interest. The prior interest

holder knows she has an interest in the property, and she knows that other

people may consider acquiring interests in the property, too. She doesn’t

know who those later grantees may be, of course, but she knows that such

people may come along. If she can give notice to the world generally, she can

avoid the unfairness to a later grantee.

That’s what the recording system does. In all 50 states, a person who

acquires an interest in real property can give notice of that interest to the

world by filing a document with the local government where the real property

is located. Thereafter, anyone who considers acquiring an interest in real

property can search those recorded documents to see whether any conflicting

prior interests exist. From those records, he can determine whether his

intended grantor actually owns the interest she’s offering to sell and whether

that interest is encumbered.