Race, Notice and Delivery – The Importance of Filing Your Real Estate Deed
The Meaning of “Race Notice”
Michigan is a race notice state. When there are conflicting claims of interest in a property, the party who has recorded their interest first can claim rightful ownership provided that other requirements of the state’s recording statutes are met. Essentially, parties in interest must “win the race” to record their deed to property. Land owners can protect their interests by recording as soon as possible. To record the deed, you or your agent must file the original deed with the appropriate government agency in your county. This local authority is usually known as the Registrar of Deeds. It is their responsibility to manage the recording of all property instruments, such as deeds, land contracts, claims of interest, liens, and mortgages.
Public Policy Reasons That Make the Race Notice System Appealing
Some states use a pure notice system instead of race notice system when dealing with claims on real estate. In a pure notice system, a subsequent bona fide purchaser who lacks actual notice of a prior property interest will prevail, whether or not they recorded first. A race notice system gives deference to the subsequent purchaser as long as they are first to record. The public policy reasoning behind the race notice system is to encourage the filing and recording of deeds. When more people record their deeds, it protects against future confusion or disputes when there are subsequent property sales. If there is a dispute, someone has to lose out on the property. From a public policy perspective, we would rather have the party who negligently didn’t record their deed lose out. The interest of the innocent subsequent purchaser, the bona fide purchaser, who bought the property in good faith and recorded the deed should be protected.
This policy encourages purchasers to record their real property interests with the government. When more persons record their deeds, it is easier to sort out a chain of title issues down the road.
Delivery of a Deed
Over the course of a real property transaction, the deed must be delivered from the seller to the buyer. This delivery constitutes the receiving party having constructive notice. What is considered an actual delivery of the deed? There must be an actual physical conveyance from party to party. For example, if the seller or their agent leaves the deed on a table for the buyer and the buyer does not physically accept it, the deed is not considered to be delivered. One should also note that it is also acceptable for the seller to convey the deed to an agent of the buyer, such as an attorney.
The concept of delivery is important since it prevents people from indiscriminately deeding properties out to unwary recipients. For instance, a seller owns a condemned building and wants to get rid of the legal obligations associated with it. An unwitting recipient does not need to accept the deed and therefore the conveyance is ineffective in creating a binding legal obligations upon the intended grantee.
Proper conveyance and recording of a deed are essential components for seamless real property transactions in Michigan. As mentioned, Michigan is a race notice state. To ensure your property interests are rightfully protected, you should record your deed upon delivery. By doing so, you will “win the race” to record, should your property interest be contested.
Should you have any further questions about your deed, or related real estate issues, feel free to contact one of our attorneys at 888.789.1715.