After successfully completing this topic, you will be able to
• list the two methods of giving notice to title, and
• describe the reason for acknowledgement.
The statute of frauds, enacted in 1677 with the title “An Act for Prevention of Frauds and Perjuries” requires that transfer of real estate be written and signed. After that date, most jurisdictions established a system of public records to keep track of the deeds, mortgages, liens, and other documents that reflected title to real property. As property is transferred, the most efficient way to verify ownership is by searching the public records.
It is very important to protect ownership rights by having evidence of title. When faced with a legal challenge over ownership, notice to title becomes very significant.
There are two methods of giving notice of ownership rights. Both have the same legal validity and effect:
Actual notice is direct knowledge of ownership, usually by statements given by an owner or other witnesses, or by physical possession of the property. Actual notice is also direct knowledge acquired in a transaction, such as a potential buyer being told there is an income tax lien on the property.
|Example: The Joneses are buying the Smiths’ home. Before the closing, Jones visits the house and meets Williamson, who is occupying the house. Jones has actual notice that the Williamsons have some interest in the property, either ownership or a leasehold.|
Constructive notice is given by recording (filing the deed with the clerk of the court in the county where the property is located.) Constructive notice notifies the world about the property’s ownership.
A person who fails to give notice (either by recording or by occupancy) may lose title to the property to a subsequent buyer who does record and/or takes occupancy.
|Example: Gomez has purchased a home, but has not moved in or recorded the deed. The unscrupulous seller resells the home to McManus, who records the deed. Gomez later finds McManus living in the house and files suit. What will the court decide? |
Answer: The courts will say that Gomez should have recorded his deed to give notice to his ownership. Because Gomez “slept on his rights,” the court will decide in McManus’s favor. Gomez will have to sue the seller.
Before a document can be recorded, it must be acknowledged. Acknowledgment is the statement by the signer, before a notary public that he has signed voluntarily. The notary will witness and attach the notary seal. A deed must be signed by two witnesses to be recordable.
A lis pendens is recorded notice that there is legal action pending against the real property. The notice will give the names of the parties, the type of action requested, and the property description. If a buyer is purchasing property the title insurance company will halt the transaction until the buyer (and the new lender) have made a decision on how to continue.