Notice and Race-Notice Jurisdictions

Terms:
Recording Acts:
State laws that determine which party prevails when the same property is transferred to multiple
people.
Bona-fide Purchaser (for value):
A buyer who pays fair consideration for property without any knowledge or reason to have
knowledge that the seller previously transferred the property to a different person.
Notice Jurisdiction:
A jurisdiction whose rule allows a subsequent bona-fide purchaser to prevail over an earlier
purchaser if the earlier purchasers deed was not recorded and the subsequent purchaser did not
know of the earlier transfer.
Race-Notice Jurisdiction:
A jurisdiction whose rule allows a subsequent bona-fide purchaser to prevail over an earlier
purchaser if, and only if, the subsequent purchaser did not know of the earlier transfer and the
subsequent purchasers deed was recorded before the first purchasers deed.
Race Jurisdiction:
A jurisdiction whose rule determines which party prevails in a twice transferred property case
strictly on the basis of whose deed is recorded first.
This subchapter discusses the complications that arise when the same property is conveyed to
two or more different grantees by the same person. Put more colloquially, this subchapter deals
with the problem of the dirty double dealer. For example:
Oleg conveys Whiteacre to Andrew on October 1 by deed. On October 15, Oleg draws up
another deed to Whiteacre and conveys Whiteacre to Brenda. Who gets Whiteacre, Andrew or
Brenda? In this case, of course, Oleg is the dirty double dealer. He conveyed the same
property to two different people.
The answer to the question posed by this hypothetical depends, in large part, on which party, if
any, recorded their deed. In the last subchapter, we discussed the recording system. In this
subchapter, we discuss, to a large extent the consequence of recording, or failing to record ,your
deed.
The simplest case occurs when neither party records their deed at all. The rule in that case is
simple. Where neither party records at all, the first transferee defeats the second transferee. This
was the common law rule that existed until the recording systems were instituted. The logic
behind it is simple. Once the first conveyance occurs, the transferor no longer has title to the

property. Therefore, he or she has no right or power to transfer it to the second transferee. The
second transfer was simply a meaningless transfer between two parties with no relevance to the
ownership of the property. For example:
Bilbo conveys Bag End to Frodo on October 10 by deed. On October 15, he conveys Bad End to
Merry, also by deed. Under the common law rule, and under the current rule, if neither deed is
ever recorded, Frodo would own the rights to Bag End, because, by the time Bilbo transferred
Bag End to Merry on October 15, he no longer owned it and thus had no power to transfer it to
Merry.
The problem with this rule is that it does nothing to encourage the recording of deeds. Quite the
contrary, once the first transferee receives the property, he or she would win over a subsequent
purchaser anyway, so there is no point in recording the deed. Therefore, the rules have been
altered to encourage people to record their deeds as soon as possible after they receive the deed.
Therefore, a rule has developed in all jurisdictions that states that the second transferee will
prevail over the first transferee as long as:
a) The second transferee is a bona-fide purchaser for value. A bona-fide purchaser for value is a
party who bought the property for fair consideration (a fair price) and who acted in good faith in
that he bought the property without notice that the property had previously been sold to
somebody else;
AND
b) The second transferee recorded his deed before the first transferee recorded his deed.
Again, the logic behind this rule is simple. We want to encourage people to record their deeds. In
this case, the first purchaser was negligent in failing to record her deed. Therefore, since
somebody has to lose out on the property, we would rather have the party who was negligent in
failing to record their deed lose out than the innocent second purchaser who bought the property
in good faith and did record the deed. Here's an example:
Bilbo sells Bag End to Frodo and conveys Bag End to Frodo on October 10 by deed. Frodo fails
to record his deed. On October 15, Bilbo sells and conveys Bag End to Merry, also by deed.
Merry did not know of the earlier sale to Frodo. Merry records his deed on October 16. Frodo
finally records his deed on October 18. Under this rule, which is applied in all U.S. jurisdictions
(and unlike the common law rule, of course), Merry would prevail over Frodo because he is a
subsequent bona-fide purchaser for value who did not have notice of the earlier sale and who
recorded his deed before Frodo did. Frodo is therefore out of luck. (Of course, he can still turn
around and sue Bilbo for his purchase money back.)
However, if the first transferee records his or her deed before the second transfer happens, then
the first transferee will prevail.

The reason for this is that the second purchaser cannot, by definition, be a bona-fide purchaser
in this case. Before people buy property, they are expected to do a title search. Since the first
deed is recorded before the second sale, the second buyer is presumed to know of the first sale,
as a proper title search would have uncovered the existence of the first sale. Thus, even if the
second buyer did not know of the first sale, this can only be because of the second buyers
negligence in not completing a proper title search. The second buyer is, therefore, not worthy of
protection as a bona-fide purchaser for value. For example:
Bilbo sells Bag End to Frodo and conveys Bag End to Frodo on October 10 by deed. Frodo fails
to record his deed. On October 12, Frodo records his deed. On October 15, Bilbo sells and
conveys Bag End to Merry, also by deed. Merry records his deed on October 16. In this case,
Frodo will prevail over Merry because Merry is not a bona-fide purchaser. Either Merry did a
title search and knew of the earlier conveyance and therefore was not a good faith buyer or he
failed to do a title search and was therefore negligent in not knowing about the earlier transfer.
Either way, Merry is not considered a bona-fide purchaser. Therefore, Frodo will get Bag End.
An interesting issue arises when the first transferee records his deed after the second transfer, but
before the second deed is recorded. For example:
Bilbo sells Bag End to Frodo and conveys Bag End to Frodo on October 10 by deed. On October
15, Bilbo sells and conveys Bag End to Merry, also by deed. Merry did not know of the earlier
sale to Frodo. Frodo records his deed on October 16. On October 18, Merry records his deed. On
the one hand, Merry was a subsequent good faith purchaser for value. On the other hand, Frodo
recorded his deed first. So, who wins?
The outcome of this case is a split among jurisdictions. Some jurisdictions protect the
subsequent bona-fide purchaser (Merry) even if he or she does not record before the first
purchaser (Frodo). These jurisdictions feel that a bona-fide purchaser should be protected as long
as he did not have notice of the first sale prior to making his purchase. These jurisdictions are
known as notice jurisdictions.
A typical notice statute will read something like this:
No conveyance is valid against a subsequent bona-fide purchaser who has no notice of the
original conveyance, unless the conveyance is first recorded.
See Langroise v. Becker, 96 Idaho 218.
In other words, the first purchasers deed has to be recorded before the second purchase to defeat
the second good faith purchaser. Thus, in the above case, Merry would prevail.
Other jurisdictions feel that the more important policy concern is to encourage the prompt
recording of deeds. Therefore, these jurisdictions will allow a second bona-fide purchaser to
prevail against the first purchaser, if and only if, the second purchaser (Merry) recorded first,
before the first purchaser (Frodo). These jurisdictions are known as race-notice jurisdictions.

A typical race-notice statute will read something like this:

No conveyance is valid against a subsequent bona-fide purchaser who has no notice of the
original conveyance and who has recorded the deed to his conveyance first.
In other words, the second purchaser, to prevail, must be a bona-fide purchaser and must record
his deed before the first purchaser does. Thus, in the above case, Frodo would prevail.
Finally, it should be noted that there is a third type of jurisdiction, called the race jurisdiction.
These jurisdictions, few though there are, simply look to which party recorded their deed first.
Whichever party records first prevails, even if that party did not purchase the property in good
faith! Thus, it is a race to get to the records office and record your deed first. For example:
Bilbo sells Bag End to Frodo and conveys Bag End to Frodo on October 10 by deed. On October
12, Merry tells Bilbo hed like to buy Bag End. Bilbo responds, sorry, I already sold it to
Frodo. Merry says Pleeease; Ill pay you double whatever Frodo paid you. Bilbo says Okay;
Ill sell it to you, but realize that I already sold it to Frodo. Merry buys Bag End from Bilbo.
Merry records his deed on October 13. Frodo records his deed on October 14. In almost all
jurisdictions, Frodo would win because Merry is not a bona-fide purchaser. He knew that Frodo
already bought that same property. However, in a race jurisdiction, Merry would win because
he recorded his deed before Frodo recorded his, even though Merry is not a good faith purchaser.
See Eastwood v. Shedd, 166 Colo. 136.
Note the following diagram:

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