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Recording Documents in Property Law

The principle of first in time, first in right may seem unquestionably right and fair. Someone shouldn’t be able to give away someone else’s property rights. But selling an interest that conflicts with a prior interest may also be unfair to the later grantee.

If the grantor doesn’t tell the later grantee about the prior interest and the later grantee can’t reasonably discover the prior interest, then the later grantee may innocently and reasonably pay value for a property interest that turns out to be impaired or useless.

He might be able to sue his grantor for damages, but a judgment against the grantor may not be collectible and may not be a satisfactory substitute for the desired property interest.

If a prior interest isn’t reasonably discoverable, the later grantee can’t do anything to avoid the unfair result. But the prior grantee can do something, and it’s pretty easy. A simple way to avoid unfairness to the later grantee is to have the prior grantee notify him of the prior interest.

The prior interest holder knows she has an interest in the property, and she knows that other people may consider acquiring interests in the property, too. She doesn’t know who those later grantees may be, of course, but she knows that such people may come along. If she can give notice to the world generally, she can avoid the unfairness to a later grantee.

That’s what the recording system does. In all 50 states, a person who acquires an interest in real property can give notice of that interest to the world by filing a document with the local government where the real property is located.

Thereafter, anyone who considers acquiring an interest in real property can search those recorded documents to see whether any conflicting prior interests exist. From those records, he can determine whether his intended grantor actually owns the interest she’s offering to sell and whether that interest is encumbered.

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