Hidden Defects May Invalidate Deeds

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Recording real estate deeds in a county registry is intended, among other things, to prevent fraud and ensure that a prospective buyer can verify that the seller actually owns the property for sale. In the rare case where a seller sells a property twice, if the first buyer promptly records her deed, the second buyer is considered to be “on notice” that the seller no longer owns the property, and thus the second deed is treated as void in light of the first, recorded, deed. This rule protects “first buyers” who record promptly from claims of ownership brought by others, and it protects potential “second buyers” from unwittingly accepting an invalid deed.

Of course, every rule has its exceptions, and this one is no different. Recently, in Allen v. Allen, the Massachusetts Land Court ruled that a “second deed” was not void, even though there was an earlier-recorded “first deed” that appeared to be in order on its face.

In Allen, an elderly woman executed two deeds to the family home shortly before her death. The first deed was issued to her son, who promptly recorded it. The second deed was issued a few months later to a family real estate trust. Both the son and the trust claimed ownership of the property. The Land Court ruled that the first deed was invalid because it was not properly acknowledged. The acknowledgment of a deed is the portion where a notary public certifies that the seller voluntarily signed the deed in the presence of the notary. Although the first deed in Allen contained an acknowledgment signed by a notary that appeared to be in order, evidence at trial revealed that the grantor did not sign the deed in the presence of the notary. Rather, the acknowledgment was filled out by the notary at a later date, and was therefore invalid. Though a person conducting a title search and inspecting this deed would have no way of knowing that the acknowledgment was defective, the Land Court ruled that it nevertheless rendered the first deed void – meaning that the trust and not the son, owned the property.

The Land Court’s decision in Allen was limited to the particular facts of that case, a situation where both the first and second deeds were intra-family transfers made for only a nominal payment as part of an estate plan. The Court expressed no opinion as to whether the first deed would have been valid against a “bona-fide purchaser for value,” i.e., a third-party buyer paying market value for the property.

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