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Real Estate Transactions: Avoid Litigation with Recordation

By April 20, 2020
Avoid Real Estate Litigation with Recordation

You just purchased your dream home from a seller whom you believed to be reputable. Following the purchase and closing, you have in your possession the deed to your new property. However, unbeknownst to you, a few days after selling the property to you the seller also sold your home to another buyer who purchased the property for fair value. The seller also gave a similar deed to your property to the second buyer. Surely, you might think, the property would still legally be yours. After all, you purchased the property first, days before the second buyer.

Although that is a logical thing to believe, that is not Texas law. Each state has their own version of what is called a “recording act,” which legally establishes priorities among conflicting claims to real property interests and provides certainty of title within the state. There are primarily three distinct types or categories of “recording acts” that states employ. These categories are referred to simply as “race” statutes, “notice” statutes, and third hybrid-category of “race-notice” statutes.

Texas recording act is categorized as a “notice” statute. In a state with a notice statute, a subsequent purchaser needs only to purchase the real property in good faith and for value without notice of any prior interest to prevail as the superior interest (i.e., has priority) in the real property. The key term under a notice statute is “without notice.” Notice can be obtained in three ways: having actual notice or knowledge of the prior interest, having inquiry notice if reasonable investigation would have disclosed the existence of the prior interest (such as buying property which you know has an occupant other than the person granting you the deed), or, most commonly, having constructive notice when the prior interest is properly recorded.

Nearly all instruments affecting real property interests in Texas may be recorded in a given Texas county. These instruments include:

– Deeds
– Easements
– Covenants
– Mortgages
– And even contracts or leases concerning certain real property.

In the example situation above where you purchased your dream home, if you did not record the deed to your home and real property, you would not have given constructive notice to the subsequent purchaser. And where the subsequent purchaser also does not have either actual or inquiry notice, as is often the case, the subsequent purchaser would, in fact, have the superior interest in your dream home!

Therefore, under a notice-statute state such as Texas, it is paramount that once you purchase real property within the state of Texas, you must ensure that the deed is recorded as soon as possible. This provides the necessary constructive notice to all potential subsequent purchasers and establishes your priority and interest in your purchased real property. Properly and promptly recording your deed protects your interest and prevents unwanted litigation to resolve priority disputes in real property.

If you need any assistance in recording a real property deed, or currently find yourself in a priority dispute over real property for your business or home, contact the attorneys at Lovelace Law, P.C. We would be happy to assist you in preventing (or resolving) these issues to protect your real estate purchase.