THE ULTIMATE “RECORDING ACT”
(They Hardly Ever Toured)
A DECADE OF STEELY DAN
RECORDINGS 1972-80
Duty to Disclose DQ84: Ordinary Sellers
v. Comm’l Sellers v. Agents/Brokers
• Strawn distinguishes on-site & off-site defects
– All sellers responsible for on-site (e.g., polluted water supply)
– Only comm’l sellers responsible for off-site
– Rev Prob 5B (Fri): Is noise an on-site OR off-site defect?
• Sellers v. Agents/Brokers: I won’t test
Duty to Disclose Defects
DQ85-88 (Wheat)
Duty to Disclose Policy Q:
What Should Count as a Defect?
• Some states: Statutory disclosure list
– Usually makes it easy to identify “defects”
– But see P409: Calif. Statute requires disclosure of
“neighborhood noise problems or other nuisances.”
Duty to Disclose Policy Q:
What Should Count as a Defect?
• Some states: Statutory disclosure list
• Materiality also provides limit (no need to disclose if
insufficient effect on value). Exact test varies:
– Most states require that the fact be simply
“material” to value (= “relevant”)
– WVa stricter: “substantially affect” value/habitability
DQ 85: Why might a state choose a more strict
requirement like this? Is it a good idea?
Duty to Disclose Policy Q:
What Should Count as a Defect?
• Some states: Statutory disclosure list
• Materiality also provides limit
• Can argue some things shouldn’t count as matter
of public policy even if tests all met. (Like
preclusion issues for nuisance)
Duty to Disclose Policy Q:
What Should Count as a Defect?
What shouldn’t count as “defect” as matter of public
policy even if tests all met? Two related policy
concerns:
1. Are there issues where we don’t think the seller
should bear the burden of disclosure?
2. Are there issues for which disclosure itself is a
bad idea?
Duty to Disclose Policy Q:
What Should Count as a Defect?
1. Issues where we don’t think the seller
should bear the burden of disclosure .
• Could draw line at on-site v. off-site
• Could draw line at subjective v. objective: (E.g., quality of
local school district)
• Could draw line where seller has no information
advantage over buyer (e.g., Zoning: Compare info on laws
to info on particular decisions)
Duty to Disclose Policy Q:
What Should Count as a Defect?
2. Issues where disclosure is a bad idea.
• Maybe effect on market value is irrational
• Maybe possible harm/stigma/privacy issues
• Examples: Early AIDS cases; Group homes for persons
with disabilities
• “Stigma statutes” provide lists of issues that need not be
disclosed to avoid undue harm to value
Duty to Disclose Policy Q:
What Should Count as a Defect?
2.
Issues where disclosure is a bad idea.
• “Stigma statutes” provide lists of issues that need not be disclosed
to avoid undue harm to value: E.g., Fl. Stat. 689.25(1)
(a) The fact that an occupant of real property is infected or has been
infected with human immunodeficiency virus or diagnosed with
acquired immune deficiency syndrome is not a material fact that
must be disclosed in a real estate transaction.
(b) The fact that a property was, or was at any time suspected to have
been, the site of a homicide, suicide, or death is not a material fact
that must be disclosed in a real estate transaction.
DQ87: Strawn P411: No duty to
disclose “transient social conditions”
MEANS?
DQ87: Strawn P411: No duty to
disclose “transient social conditions”
What does it mean two sentences
later when it says “we root in
the land the duty to disclose offsite conditions”?
DQ87: Strawn P411: No duty to
disclose “transient social conditions”
EXAMPLES
• Changing nature of
neighborhood
• School in decline
• Group home nearby
MUST DISCLOSE
• Landfill
• Planned superhighway;
• Office complex approved
nearby
CAN YOU ARTICULATE
DIFFERENCE?
What Should Count as a Defect:
DQ86: Hypotheticals
Arguments from Policy & Strawn Language
a) Violent crime in the house itself.
– Why relevant?
– Should seller have to disclose?
What Should Count as a Defect:
DQ86: Hypotheticals
Arguments from Policy & Strawn Language
a) Violent crime in the house itself.
b) Violent crime in a neighboring house.
– Reasons to treat differently from (a)?
What Should Count as a Defect:
DQ86: Hypotheticals
Arguments from Policy & Strawn Language
(f) Physical contact with some of the plants in the
yard gives many people rashes or blisters.
What Should Count as a Defect:
DQ86: Hypotheticals
Arguments from Policy & Strawn Language
(f) Physical contact with some of the plants in the
yard gives many people rashes or blisters.
NOTE TIE TO NUISANCE ISSUE
Duty to Disclose Defects
DQ88: Waivable? (Check State)
• Casebook: Most jurisdictions don’t allow waiver re fraud
• Johnson (FL) suggests can’t waive duty to disclose
• Stambovsky (S115): Disclaimer in this contract irrelevant
– Only covers physical defects (not reputation)
• Note cute contract interpretation point:
• IF this is a physical defect, then premises not “vacant”
– Ct. says can’t disclaim if peculiarly within knowledge
of seller.
Duty to Disclose Defects
DQ88: Waivable?
Suppose a court allowed residential buyers to
waive the duty to disclose in some
circumstances.
• What facts should be relevant to this determination?
• What circumstances would provide the best case for
allowing waiver?
Duty to Disclose Defects
DQ88: Final Qs (For You!)
• What is best approach to problem?
– Caveat emptor v. Disclosure form v. Lawsuit
– What is best legal test?
• Relevant policy debate
– Protecting homebuyers v. requiring homebuyers to act
diligently (inspect/ask Qs).
– Are policy arguments in the cases convincing?
• Applicability of Duty to Disclose Rules to Landlord/
Tenant (Interesting Q; Outside Scope of Course)
POP CULTURE QUIZ:
NAME THAT BAND
• First Billboard #1 Hit in 1958
• Won 5 Grammy Awards; Nominated for 8 Others
• Won American Music Award for Best Soundtrack
Album
• Featured in a Major Studio Motion Picture
Released in 2009
ANSWER ON FRIDAY
LOGISTICS
• Friday’s Class
– Start with Duty to Disclose Review Problems
– Finish Recording Acts
– Start Easements
• Housing Discrimination
• Practice Midterms
• Grading: 12 + 12 + 60 = 84
– Line ‘em up & draw lines
NOTICE & THE
RECORDING
SYSTEM
NOTICE (of Conflicting Property
Rights)
• Actual Notice: Fact Question
• Constructive Notice: Generally Legal Q
– Record Notice (from public records)
– Inquiry Notice (facts suggesting conflicting
interest)
Operation of the Recording System
• Every jurisd. in US has recording office
• If a real property interest is transferred, normally
grantee records document
– Deeds, Mortgages, Easements
– Court judgments; lis pendens (Nightmare) etc.
• Clerks of court: “blind” recipients w date stamps
• County keeps documents & notes them in indexes
Purposes of Recording System
• Provides public record of land titles: gov’t
knows who is responsible
• Secures copies of important documents
• Provides notice to subsequent buyers
– Can see chain of title of seller
– Can see non-ownership interests (e.g., easements,
other servitudes)
– Gives grantees incentive to record
Recording Acts: Problem Addressed
• Transfer of Interest in Same Property to
Two Different Grantees (OA, OB)
– Can be resale of whole parcel
– More frequently, transfer of partial interest
(e.g., easement or mineral rights) that
conflicts with later transfer of complete
interest
Recording Acts: Problem Addressed
• Transfer of Interest in Same Property to Two
Different Grantees(OA, OB)
• O liable for fraud or breach of warranty
– A v. B: who gets ppty rt & who just gets lawsuit?
– Common law answer: 1st in time = 1st in Right, so A
gets ppty right
Recording Acts: Operation
• Recording has no effect on rights of parties
to original transaction as betw. themselves:
– Unrecorded OA deed still valid
– O can’t defend suit by A by saying
“unrecorded”
Recording Acts: Operation
• Recording has no effect on rights of parties
to original transaction as betw. themselves:
• Protects buyers who record against other
transferees
– Often yields different results than 1st in time
– Most jurisdictions protect later bona fide
purchaser (BFP) for value against unrecorded
interests
BFP for VALUE: Definitions
Bona Fide Purchaser = good faith
• No notice of prior transaction
• Status is specific to one prior transaction
• Can only be true of later player
BFP for VALUE: Definitions
Bona Fide Purchaser = good faith
What is value? (jurisdiction specific)
• donees, heirs, devisees usually not prot’d
• split re amount of consideration needed
3 Kinds of Recording Acts
1. Race
2. Notice
3. Race-Notice
3 Kinds of Recording Acts
1. Race
– 1st to Record Wins
– N.C. + La. + Del. for all interests
– Some others for some specific interests
2. Notice
3. Race-Notice
3 Kinds of Recording Acts
1. Race
2. Notice
– Protects BFP for Value against prior unrecorded
interests regardless of when or if BFP records
– About half the states (e.g. TX + FL)
3. Race-Notice
3 Kinds of Recording Acts
1. Race
2. Notice
3. Race-Notice
– Protects BFP for Value against prior unrecorded
interests only if BFP records 1st
– About half the states (e.g. NY + CA)
DQ89 featuring ALL
•
•
•
•
•
•
Kurland, Matt
Velarde, Victor
Villarosa, Michael
Goldbaum, Candice
Schnedar, Jeff
Rigby, Brett
•
•
•
•
•
•
Caliendo, Courtney
Navarrete, Ana-Sofia
Liu, Tian
Ryan, Mike
Delsontro, Michael
Gastin, Jeremy
DQ89: Situation 1
OA
OB (BFP)
B records [O B deed]
A records [O A deed]
WHO WINS IN …?
• RACE:
• NOTICE:
• RACE-NOTICE:
DQ89: Situation 1
OA
OB (BFP)
B records [O B deed]
A records [O A deed]
WHO WINS IN …?
• RACE: B
• NOTICE: B
• RACE-NOTICE: B
DQ89: Situation 2
OA
A records
OB
B records
WHO WINS IN …?
• RACE:
• NOTICE:
• RACE-NOTICE:
DQ89: Situation 2
OA
A records
OB
B records
WHO WINS IN …?
• RACE: A
• NOTICE: A
• RACE-NOTICE: A
Moral of Situations 1 & 2:
If you record immediately, you
are always in the best position
possible.
DQ89: Situation 3
OA
OB (NOT BFP)
B records
A records
WHO WINS IN …?
• RACE:
• NOTICE:
• RACE-NOTICE:
DQ89: Situation 3:
RACE STATUTE: PROTECTS BAD FAITH PURCHASER
WHO RECORDS FIRST
OA
OB (NOT BFP)
B records
A records
WHO WINS IN …?
• RACE: B
• NOTICE: A
• RACE-NOTICE: A
DQ89: Situation 4
OA
OB (BFP)
A records
B records
WHO WINS IN …?
• RACE:
• NOTICE:
• RACE-NOTICE:
DQ89: Situation 4:
NOTICE STATUTE: PROTECTS BFP EVEN IF DOESN’T
RECORD FIRST
OA
OB (BFP)
A records
B records
WHO WINS IN …?
• RACE: A
• NOTICE: B
• RACE-NOTICE: A
DQ89: Title Search with
Grantor-Grantee Indexes
Purchasing from Ms. Cohen. How do you
begin?
DQ89: Title Search with
Grantor-Grantee Indexes
Purchasing from Ms. Cohen.
1. Check grantee index under Cohen going
backward from present. You find record of
deed: Bryan  Cohen (1984). What now?
DQ89: Title Search with
Grantor-Grantee Indexes
Purchasing from Ms. Cohen.
1. Deed: Bryan  Cohen (1984).
2. Check grantee index under Bryan going
backward from 1984. You find record of
deed: Anderson  Bryan (1969). What
now?
DQ89: Title Search with Grantor-Grantee Indexes
Purchasing from Ms. Cohen.
1. Deed: Bryan  Cohen (1984).
2. Deed: Anderson  Bryan (1969).
3. Check grantee index under Anderson going
backward from 1969. You find record of
deed: U.S. Govt  Anderson (1962). What
now?
DQ89: Title Search with Grantor-Grantee Indexes
From Grantee Index:
Check grantor index to see if
Anderson conveyed any
Bryan  Cohen (1984).
interests between 1962 and
Anderson  Bryan (1969).
1969. You find nothing until
Anderson  Bryan deed in 1969.
U.S.Govt  Anderson
What Next?
(1962)
DQ89: Title Search with Grantor-Grantee Indexes
From Grantee Index:
Bryan  Cohen (1984).
Anderson  Bryan (1969).
U.S.Govt  Anderson (1962)
Anderson  Bryan (1969).
Check grantor index to see if
Bryan conveyed any interests
between 1969 and 1984.
You find easement granted to
Electric Co. in 1971 & nothing
else until Bryan  Cohen deed
in 1984. What Next?
DQ89: Title Search with Grantor-Grantee Indexes
From Grantee Index:
Bryan  Cohen (1984).
Anderson  Bryan (1969).
U.S.Govt  Anderson (1962)
From Grantor Index
Anderson  Bryan (1969).
Bryan  Elec. Co. (1971) (Easement)
Bryan  Cohen (1984).
Check grantor index to see if Cohen
conveyed any interests between
1984 and the present PLUS
Check to see if Electric Co. released or
transferred the easement.
Nothing Additional. What Next?
DQ89: Title Search with Grantor-Grantee Indexes
From Grantee Index:
Bryan  Cohen (1984).
Anderson  Bryan (1969).
U.S.Govt  Anderson (1962)
From Grantor Index
Anderson  Bryan (1969).
Bryan  Elec. Co. (1971) (Easement)
Bryan  Cohen (1984).
Check all documents uncovered
through index for content and
references to unrecorded
interests.
Tract Indexes
• Index transactions by location not names of parties
• Much easier to use for most types of transactions
• Exist almost everywhere privately; and as official
public record in a few jurisdictions
• Many states have rules based on grantor-grantee
indexes even if public or private tract indexes exist
Shelter Rule (Notice Jurisd.)
OA
OB (BFP)
A records
• In a notice jurisdiction, B wins over A
as a subsequent BFP even though A
recorded first
• Note that for A’s recording to serve as
notice to B, it must have taken place
prior to the time B purchases the
land.
Shelter Rule (Notice Jurisd.)
OA
OB(BFP)
A records
BC
Who wins A v. C?
• The OA deed is recorded before C’s
purchase so C is not a BFP.
Shelter Rule (Notice Jurisd.)
OA
OB(BFP)
A records
BC
Who wins A v. C? C is not a BFP BUT:
Shelter rule: Subsequent purchaser from BFP
stands in shoes of BFP and defeats prior
interest
– even if not BFP
– unless original grantor
WHY?
Shelter Rule (Notice Jurisd.)
OA
OB (BFP)
A records
BC
• Protects title of a BFP from recording
or adverse publicity that occurs
subsequent to purchase. Otherwise, B
couldn’t sell, so victory over A
worthless
Uribe Sells Same Lot to Both Breslin and
Caliendo; Flees to Cayman Islands
Buyers Confused, Angry:
Who Will Get the Land
and Who Will Have to
Chase After Uribe?
Tattler Exclusive:
Seller’s Friends Say
Not Surprised.
Shelter Rule (Notice Jurisd.)
Urice Breslin
Urice Caliendo (BFP)
Massive Publicity on Slow News Day
Caliendo Duaban (Actual Notice; Not BFP)
Duaban wins over Breslin to give value to
Caliendo’s interest
CHAIN OF TITLE PROBLEMS
Problems in way things are recorded or indexed
that frustrate basic search. If significant
enough:
– Can mean no record notice
– Can mean not “recorded” for purpose of racenotice
CHAIN OF TITLE PROBLEMS: EXAMPLES (FYI; not
tested)
• Documents recorded out of usual order
• Document refers to several lots w/o listing
individually (all land owned by X)
• Same person referred to by different name on later
document (misspelling or name change(s))
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index going
forward?
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1950
Elizabeth Taylor Hilton
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1952
Elizabeth Taylor Hilton Wilding
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1957: Elizabeth Taylor Hilton
Wilding Todd
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1959 Elizabeth Taylor Hilton Wilding
Todd Fisher
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1964 Elizabeth Taylor Hilton Wilding
Todd Fisher Burton
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1975 Elizabeth Taylor Hilton Wilding
Todd Fisher Burton Burton
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1976 Elizabeth Taylor Hilton Wilding
Todd Fisher Burton Burton Warner
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
1991 Elizabeth Taylor Hilton Wilding
Todd Fisher Burton Burton Warner
Fortensky
1948 Grant to Elizabeth Taylor
Where do you look in the grantor index?
2010? Elizabeth Taylor Hilton
Wilding Todd Fisher Burton Burton
Warner Fortensky
Winters
NOTICE & THE RECORDING SYSTEM: WHAT
YOU NEED TO KNOW
•
•
•
•
Basic Use of Grantor-Grantee Index
4 Typical Situations (S128)
Shelter Rule (S129)
Three Types of Notice
– Actual
– Record
– Inquiry (including Possession as Notice)
POP CULTURE QUIZ:
NAME THAT BAND
• First Billboard #1 Hit in 1958
• Won 5 Grammy Awards; Nominated for 8 Others
• Won American Music Award for Best Soundtrack
Album
• Featured in a Major Studio Motion Picture
Released in 2009
NAME THAT BAND