What Is the Effect of an Unrecorded Deed?
A deed is a legal document used to transfer real property ownership rights from one person or entity (the grantor) to another (the grantee). In many cases, this transfer occurs due to the property being sold, with the seller transferring the property to the buyer. Typically, a deed is recorded with the local county recorder of deeds. Recording the deed gives the public notice that the grantee now legally owns the property.
Not recording a deed can cause problems for the grantee. They may be unable to obtain a mortgage, insure the property, or sell it. Even more problematic, an unrecorded deed may make it possible for the grantor to sell the property to a buyer and subsequently sell the same property to a different buyer. This could result in the property being sold out from under the original buyer who failed to record the deed.
Whether this last scenario is legally permissible depends on state laws that determine which party prevails when there are conflicting ownership claims to a property.
Title versus Deed
A deed is a document that confers property ownership rights associated with title to a property. Both the deed and title to the property transfer from the grantor to the grantee when real estate is conveyed. But a title and a deed are not the same thing.
Title refers to a property owner’s legal rights, such as the right of possession, the right of control, and the right of disposition. Title is not a document—it is a legal right of ownership.
The deed, on the other hand, is a physical document that transfers ownership of property from the grantor to a grantee. It contains a legal description of the property and the names of the grantor and grantee. To make a property transfer official, the grantor must sign the deed, and the deed must be delivered to and accepted by the grantee. At the time of the conveyance or purchase, the deed and the title transfer from the grantor to the grantee.
If this sounds confusing, here’s a helpful metaphor: a property title is like a book title, while a deed is like a physical book. You can hold the book/deed in your hand, but property title and a book title are concepts—not tangible items.
Recording the Deed
Deeds should be recorded in the appropriate government office as soon as possible after the property is purchased by or conveyed to a new owner.
Recording a deed makes it a public document and provides de facto notice to third parties that the grantee owns the property. If the deed is not recorded, the party holding the deed may not be recognized under the law as the legal property owner to third parties, though the deed may be legally effective to transfer the property from the grantor to the grantee.
If a deed is not recorded, it is virtually impossible for the public to know that a property transfer occurred, and the legal owner of the property could appear to be the prior owner rather than the new grantee. This could present numerous problems. For example, a lender could deny a mortgage application if a property deed is not recorded in the new owner’s name.
Not filing a deed could also raise a bigger issue. In the absence of a public record of the deed, the grantor could transfer the property a second time to a different grantee. A subsequent buyer who did not have notice of the prior transfer may have a stronger ownership claim than the person who holds the title but did not record the deed.
Bona Fide Purchasers and Conflicting Property Claims
Arguably the strongest argument for recording a property deed is that, in most states, it eliminates the possibility of a subsequent sale of the same property to a bona fide purchaser.
A bona fide purchaser is a buyer who purchases a property for a reasonable amount with no reason to believe that it belongs to another person or is subject to another party’s claim. In the context of this article, a bona fide purchaser could emerge if the property’s owner conveys the same property to two or more buyers, and the first buyer failed to record their deed.
Remember, if a buyer does not record their deed, they are not publicly recognized as the property owner. Therefore, if the first buyer does not record their deed and a second conveyance of the same property occurs, the second buyer could be declared the rightful property owner as long as they record their deed before the first buyer.
Know the Law of Deeds Where You Live
The buyer’s or grantee’s title or escrow agent is typically responsible for filing the property deed at the local records office when a real estate purchase or conveyance closes. Therefore, it is advisable that all grantees use a title or escrow company. Grantees who do not record their deed themselves should request a copy of the recording page from their agent or local government office.
An unrecorded deed can pose significant problems—including the problem of conflicting ownership claims—and it should be recorded as soon as possible.
 Patrick Chism, Deed vs. Title, What’s The Difference?, Quicken Loans (Nov. 16, 2020), https://www.quickenloans.com/learn/deed-vs-title.
Posted in: Estate Planning, Legacy, Real Estate