Legal Definitions - Recording statute

A Recording statute (also known as a Recording act) is a state law that governs the public recording of documents related to real estate, such as deeds, mortgages, and liens. The primary purpose of these statutes is to create a public record of property ownership and interests, providing transparency and helping to prevent fraud. By requiring or encouraging the recording of these documents, recording statutes establish a clear system for determining who has a valid claim to a property, especially when multiple parties might assert conflicting interests.

These laws typically dictate the legal effect of recording (or failing to record) a document, often determining priority among competing claims based on factors like who recorded first or who had knowledge of prior unrecorded claims. There are generally three types of recording statutes:

• Race statutes: The first party to record their interest wins, regardless of whether they knew about an earlier, unrecorded claim.
• Notice statutes: A later buyer who pays value for the property and has no knowledge (notice) of an earlier, unrecorded claim wins, even if they don't record first.
• Race-notice statutes: A later buyer who pays value, has no knowledge (notice) of an earlier, unrecorded claim, AND records their interest first wins.

Here are a few examples to illustrate how recording statutes work:

• Example 1 (Race-Notice Statute): Imagine Sarah sells her vacation cabin to Mark. Mark receives the deed but, due to a busy schedule, forgets to record it at the county clerk's office. A month later, Sarah, facing financial difficulties, fraudulently sells the same cabin to Lisa. Lisa, being diligent, checks the public records before buying and sees no record of Mark's purchase. Lisa pays Sarah, receives a deed, and immediately records it.

  How it illustrates the term: Under a race-notice recording statute, Lisa would likely be recognized as the legal owner. She paid value for the property, had no notice (knowledge) of Mark's prior unrecorded purchase because it wasn't in the public records, and she recorded her deed first. Mark's failure to record left his interest vulnerable to a subsequent bona fide purchaser who recorded first.

• Example 2 (Notice Statute): A farmer, Mr. Henderson, grants his neighbor, Ms. Chen, a written agreement allowing her to cross a corner of his land to access a public road (an easement). Ms. Chen never records this easement. Years later, Mr. Henderson sells his farm to a new buyer, Mr. Davies. Mr. Davies walks the property, reviews the public records, and finds no mention of Ms. Chen's easement. He has no reason to know about it.

  How it illustrates the term: In a state with a notice recording statute, Mr. Davies would likely take ownership of the farm free of Ms. Chen's unrecorded easement. Because he was a "bona fide purchaser" (paid value and had no actual or constructive notice of the unrecorded easement), the statute protects his interest even though Ms. Chen's easement was created earlier. Ms. Chen's failure to record meant her interest was not publicly known, and thus not binding on a subsequent purchaser without notice.

• Example 3 (Race Statute): A real estate developer sells a commercial lot to ABC Corp. ABC Corp receives the deed but delays recording it for a few weeks due to an internal administrative oversight. Unbeknownst to ABC Corp, the developer, due to a clerical error in their own office, mistakenly sells the same commercial lot to XYZ Inc. a few days later. XYZ Inc. immediately records their deed with the county. A week after that, ABC Corp finally records its deed.

  How it illustrates the term: In a state with a pure race recording statute, XYZ Inc. would be deemed the rightful owner of the commercial lot. Even though ABC Corp purchased the property first, the "race" to the recorder's office determines priority. Since XYZ Inc. was the first to record their deed, their claim takes precedence, regardless of whether they knew about ABC Corp's earlier, unrecorded purchase. The act of recording itself is the decisive factor.