I bought 60 acres of commercial property ten years ago for $30,000.00. I did not file the deed with the Register of Deeds. The former owner again sold the property to his heirs for $50.00 last year and they recorded their deed. If they would have gone out and looked at the property, they would have seen that it was owned by someone else. Who should prevail in this situation?The legal action required when two or more persons are fighting over real property is called an action to quiet title. The person asserting ownership files a complaint requesting that the judge enter an order in their favor.
A common misconception is that deed must be recorded with the Register of Deeds in order to be legal. A deed is legal by itself and does not need to be recorded, however, recording does provide some protection. Recording statutes protect bonafide purchasers for value, known as BFPs, from secret, unrecorded interests of others. When a person records their deed, they give notice to the world that the incident property has been conveyed to them and they have title. This puts subsequent purchasers on guard in just the situation of which the question inquires.
The key to protection is that recording protects BFPs and thus, in order to qualify one must be a BFP. Protection will not be afforded against an unrecorded deed if the grantee did not pay value in a bonafide purchase. Again, the validity of a deed is not dependent upon recordation. However, grantees who do not record their deeds may lose out against subsequent BFPs.
Therefore, who is a BFP? A BFP is one who is a purchaser who takes the property/deed without any notice of the prior deed and who pays valuable consideration. Notice includes knowledge obtained from any source, from inspecting the records and the property itself. It can be actual, constructive and inquiry. Knowledge will be imputed to a subsequent purchaser who could have learned of the prior deed via an inspection or via an inquiry to the possessor. A subsequent purchaser must also pay valuable consideration to have protection. This means that they cannot be donees, heirs, or devisees and they must give substantial pecuniary value. The BFP must prove that real consideration was paid and not love and affection for example.
In this situation, the first buyer should prevail because the second buyer did not pay substantial value and they would have discovered the true owner’s possession had they inspected the property. The statute providing for recording of deeds with the Register of Deeds grants protection to purchasers for value.