As you may know, when you buy a piece of real property, such as land, or buy an interest in a piece of real property, you usually receive a record of that transfer, such as a deed, that demonstrates you now own that property interest. Once you receive this document, it must be taken to the register of deeds and recorded. Essentially, you must give the government a copy of the document, so that it is a matter of public record, providing notice to all other individuals that you do, in fact, own, or have an interest in, this specific piece of real property.
What you may not know is that there are special rules in each state surrounding recording documents and what to do when two people mistakenly end up with the same deed and both try to record. These recording laws provide guidelines that tell us which individual, in a “double-dealing” scenario like the one mentioned, would end up the “winner,” and legally be the true owner of the property interest; these laws tell us which property transfer would be held valid.
There are three common types of recording laws: (1) Race Statutes, (2) Notice Statutes, and (3) Race-Notice Statutes. North Carolina falls into the first category and is, what many refer to as, a pure-race state. What this means is that, in a scenario where two individuals mistakenly end up with the same document purporting to transfer to them the same property interest, the first person who can record their document with the register of deeds is said to be the true holder of the property interest.
This law has many interesting implications. First, notice of other prior unrecorded conveyances is irrelevant. For example, say that the owner of a piece of land sells their land to A and gives him a deed. However, A doesn’t record their deed with the register of deeds. Then, A’s friend, B, hears about A’s purchase and decides he wants the piece of land for himself. As a result, B also purchases the land from the owner, receives a deed, and records his deed. Because North Carolina is a pure race state, even though B knows that A has previously purchased the property, because B has recorded his deed before A, this means that B is considered to be the true owner of the land.
Another interesting implication of NC’s race statute has to do with mortgages and who is liable for mortgage payments. For example, say the owner of a piece of property sells their land to A, but A does not record their deed right away. Then the owner decides to take out a mortgage on that property and gives a mortgage to the local bank. The bank then ends up recording their mortgage with the register of deeds before A records their deed to the property. In this scenario, because the bank recorded their mortgage first, A would own the property, but the land would be subject to the bank’s mortgage. If the previous owner of the property stopped making his mortgage payments, A, the new owner, would be required to begin making the payments himself. Otherwise, the bank would be able to foreclose on the property and A could lose his newly purchased home. Therefore, the race to be the first person to record your interest in a property is also a highly relevant issue when it comes to mortgages and whether or not lenders may foreclose upon a home for lapsed payments.
King Law Offices is a full-service law firm with an outstanding team of professionals who work diligently, creatively, and compassionately on behalf of our clients each day. If you find yourself in a conflict regarding NC’s recording laws or need assistance with any other type of property dispute, contact King Law at 888-748-KING (5464) for a consultation.