A Reprint From 1267

VOLUME 13, NUMBER 1, DECEMBER 1998 SOLUTIONS THROUGH RESEARCH

BY JUDON FAMBROUGH For public policy reasons, having a financial or beneficial Deeds and the Texas interest in a transaction dis- qualifies notaries from taking acknowledgments. If they Recording Statutes proceed to do so and the dis- ecording a deed is the For a deed to be recorded (or qualification is apparent on the critical, final step in any registered), the grantor’s signa- face of the deed, the recorded Rreal estate transaction, yet ture must be properly acknowl- deed is ineffective. the process receives little atten- edged or witnessed (Texas Prop- A deed signed and acknowl- tion because it occurs after erty Code, Section 12.001[b]). An edged by the grantor in the closing. In Texas, title companies acknowledgment is a statutory presence of two or more cred- handle most closings as well as procedure whereby persons ible, subscribing witnesses the responsibility for recording (or signing a document declare their qualifies for recording, even filing) the deed. Buyers are rarely action before a qualified person, though it is not notarized. aware of when, where or why usually a notary public. The However, one of the witnesses recording occurs. Nevertheless, purpose is to authenticate the must later appear before a real estate purchasers and practi- instrument, the identity of the notary to acknowledge and tioners should be familiar with signers and their signatures. swear that the witness: the basic rules and the protection Persons qualified to take acknowledgments (referred to in • saw the grantor sign or afforded by the Texas recording personally acknowledge the this article as “notaries”) are statutes. signature and First, it is important to note listed in Chapter 121 of the that recordation gives public Texas Civil Practices and Rem- • signed at the grantor’s notice of deed contents but does edies Code. The list varies, request. not validate an otherwise invalid depending on where the deed is The notary must then certify deed. Texas statutes and case signed. If signed in Texas, the the acknowledgment by signing law dictate five requirements for acknowledgment must be before or affixing an official seal. This a valid deed. It must: a notary public, district court certification is necessary to clerk, or the judge or clerk of a validate the acknowledgment so • be in writing, county court. that the deed or other docu- • be subscribed (signed by the Regardless of where the sign- ment can be accepted for grantor at the end of the ing occurs, special rules apply to recording. document), military personnel and their urthermore, notaries must • include the grantee’s name, spouses. Commissioned officers keep a record of each • contain the legal description in the U.S. armed forces or the F acknowledgment in a of the property and armed forces auxiliary may take bound book. The record must acknowledgments of any armed include the dates of the acknowl- • be delivered to and accepted forces member, auxiliary member edgments and instruments, the by the grantee. or member’s spouse. It is pre- signers’ names and signers’ Not all deeds qualify for record- sumed that the military officer is addresses. If the notary does not ing. Although a deed may effec- commissioned at the time of know the signers personally, tively transfer title to the buyer, acknowledgment and that the then the record must include the the county clerk may refuse to person signing is in the service name and residence of the person record when it fails to satisfy the or married to someone in the who introduced them. If the statutory requirements. service. instrument involves a conveyance of land, the record must reflect The proper place for filing a documents. The grantor-grantee the grantee’s name and the deed is the county clerk’s office. index (or direct index) lists all county where the land is located. When a deed is submitted for the grantors’ last names in Once a deed is acknowledged, recordation, the clerk charges a alphabetical order. The grantor’s it should be filed in the county $3 fee for the first page and $2 name appears next to the where the land is located. If the for each succeeding page (Texas grantee’s name. The grantee- tract extends into more than one Local Government Code, Section grantor index (or indirect index) county, the deed alphabetically lists may be recorded in all the grantees’ last any county where names, with the part of the property respective grantors’ is located (Texas "Filing a deed in the names next to Property Code, Sec- them. tion 11.001[a]). To Both indices group avoid problems, how- wrong county has the transactions accord- ever, the deed should ing to recording be recorded in every dates. One set of county where the same effect as not books, for example, tract extends. may index all Filing a deed in the documents recorded wrong county has having filed at all." from 1967-86 and the same effect as not another from 1987- having filed at all. To 97. Modern indices correct the error, the are generated by grantee-owner computer; whereas should submit either the original 118.011). A document signed older indices may be handwritten deed or a certified copy of it for after 1981 must include the and difficult to read. The older recordation in the proper county. grantee’s mailing address. indices often group names Title will be protected only after Otherwise, the clerk assesses a starting with a certain letter but the date of recording in the penalty of $25 or twice the do not alphabetize them beyond correct county (Texas Property amount of the normal recording the first letter. Code, Section 13.003). fee, whichever is greater (Texas Indices do not contain the On the other hand, if a docu- Property Code, Section 11.003). actual recorded documents. ment is filed in the proper pon payment of the Instead, they reference where county and the land is later recording fee, the county the documents may be found— incorporated into a new county, Uclerk records and indexes usually by volume and page the original filing remains the deed. But what happens when number—in a separate set of effective. The county court in the county clerk indexes a deed books. However, some counties the new county must obtain a incorrectly? Is the clerk personally put all the documents on micro- transcript of all the land affected liable? Does any responsibility fall film, while others have a com- and deposit the records with the on the person who submitted the puter program containing both county clerk in the new county document for recordation? the indices and document copies (Texas Property Code, Section Texas law provides that the from the most recent transac- 11.001[b]). clerk may be liable for a civil tions. Texas law requires documents penalty not to exceed $500 for, The indices provide a means presented for recordation to be among other things, not provid- for researching title to real in English unless signed before ing and maintaining the indices property. The grantor-grantee 1897, in which case a translation required by law (Texas Property index traces the chain-of-title must accompany the document Code, Section 11.004[b]). Courts forward in time, and the (Texas Property Code, Section have held that the person filing grantee-grantor index traces it 11.002[a] and [b]). An acknowledg- a document with the county backward. For example, if you ment taken outside the United clerk and paying the recording know the current owners and States may be in a foreign lan- fees is not responsible for the want to trace their title back in guage as long as an English clerk’s errors (David v. Roe, 271 time to find who sold them the translation is attached and certain S.W. 196 [1925]). tract, you would look for the other criteria are met (Texas County clerks in Texas use a current owners’ names in the Property Code, Section 11.002[c]). name index to find recorded grantee-grantor index. Knowing either the grantor’s or grantee’s Texas case law has clarified for the interest of any third party name keys those interested these requirements. “Valuable in possession. Thus, to be classi- into the system. consideration” means the buyer fied as a bona fide purchaser, the bstract and title compa- paid a substantial amount for buyer must actually view, or nies typically do not go the property. Although the appoint an agent to view, the Ato the county clerk’s amount may be less than fair property before closing and make office to review recorded docu- market value, it cannot be appropriate inquiries about any ments. Instead, they get copies merely nominal or grossly third-party claims apparent on of the county records and create inadequate. The recipient of a the land. their own title resources using a gift deed, where no consider- Texas has adopted a type of “tract index.” This index is ation changes hands, cannot be recording system known as faster and easier. It allows the classified as a bona fide pur- “race-notice.” “Race” refers to examiner to research the title by chaser. Even if consideration is the competing bona fide pur- legal description of the land paid, the quitclaim deed recipi- chaser who first records the deed rather than by grantors’ and ent cannot achieve bona fide in the correct county. “Notice” grantees’ names. purchaser status. refers to what the buyer knew or Although recording a deed “Constructive notice” refers to could have known at the time of offers important safeguards to a information that the law imputes closing about another’s claim to buyer, it need not be recorded to to buyers. In Texas, this informa- the property. be binding on the parties to the tion includes the contents of all Like Texas, a majority of states transaction and to their heirs. recorded documents affecting the use the race-notice system, while On the other hand, a deed must property as well as any facts most others have adopted a pure be recorded to be effective that a physical inspection of the “notice” statute. The bona fide against a creditor or a subse- property would reveal. purchaser in a pure “notice” quent purchaser for valuable To discover the information in jurisdiction need not record a consideration without notice the deed records (sometimes deed to establish ownership (Texas Property Code, Section called the real property records), against an earlier bona fide 13.001[a] and [b]). the buyer may: purchaser holding an unrecorded This type of purchaser—one • examine the recorded deed. who pays “valuable consider- documents personally, using In contrast, Delaware, Louisi- ation” and takes title “without the county clerk’s indices; ana and North Carolina have notice” of a third party’s claim— adopted a pure “race” system. is called a “bona fide or inno- • require the seller to prepare The first buyer to record gets a title abstract and have it cent purchaser.” Bona fide title, whether or not a bona fide purchasers enjoy preferred status examined by an attorney purchaser. Although North chosen by the buyer; or under Texas law, and the courts Carolina requires the buyer to go to great lengths to protect • purchase title insurance. pay value for the property, none their ownership. Accordingly, a he Texas Real Estate of the three states penalizes a bona fide purchaser’s title is License Act (the Act) buyer for having notice of an superior to title held by any T emphasizes the need for earlier unrecorded deed. To earlier purchaser holding an buyers or their agents to search prevail in these states, the buyer unrecorded deed (Texas Property the deed records. The Act requires must win the race to the court- Code, Section 13.001[a]). licensees to advise purchasers in house. To be protected by the Texas writing at the time the contract All 50 states afford significant recording statutes, a buyer must is signed to have the abstract protection to buyers under the be a bona fide purchaser at the examined by an attorney or recording statutes, but recorda- time of closing. This means that obtain a title policy. Failure to do tion alone does not guarantee the buyer: so precludes the licensee from good title. A deed can still be • paid valuable consideration recovering a commission. The void for other reasons, such as for the property, promulgated contract contains fraud, forgery, incapacity or clauses fulfilling this requirement. failure of the seller to deliver the • had no actual knowledge of A title search of the county deed to the buyer. Furthermore, an earlier unrecorded deed if a seller conveys the same to the property and records is no substitute for a physical property inspection. An property to two competing • had no constructive notice attorney rendering a title opin- buyers, they may recover dam- of a third party’s interest in ion or a company issuing a ages against the seller, even if the property. basic title policy has no liability their deeds are not recorded. Although, the Texas recording facilitate the private ownership This article was written by system, and others used through- of land and allow property to be Cindy Cole Finley, a Dallas out the United States, do not bought and sold with relative attorney and a fellow with the solve every title problem, they speed and minimum risk. Real Estate Center.

The Letter of the Law is published quarterly by the Real Estate Center to provide timely legal information that may affect the practice of real estate. The Letter of the Law is for information only and is not a substitute for legal counsel. Cases should be researched carefully as some may have been repealed, reversed or amended after this issue was printed. The Center will not provide specific legal advice or regulatory interpretations. R. Malcolm Richards, director; David S. Jones, senior editor; Jenifer V. Hofmann, assistant editor; Robert P. Beals II, art director; Kammy Baumann, assistant editor; and Judon Fambrough, attorney and member of the State Bar of Texas. Real estate licensees receive this newsletter free automatically. Send address changes to: Gary Earle, Real Estate Center, Texas A&M University, College Station, Texas 77843-2115. For others, a one-year subscription— including the Center's quarterly magazine, Tierra Grande—is $30. To order, call 1-800-244-2144. © 1998, Real Estate Center. All rights reserved.