A deed is a legal document used to transfer real property ownership rights from one person or entity (the grantor) to another (the grantee). In many cases, this transfer occurs due to the property being sold, with the seller transferring the property to the buyer. Typically, a deed is recorded with the local county recorder of deeds. Recording the deed gives the public notice that the grantee now legally owns the property. An unrecorded deed can cause problems for the grantee. They may be unable to obtain a mortgage, insure the property, or sell it. Even more problematic, an unrecorded deed may make it possible for the grantor to sell the property to a buyer and subsequently sell the same property to a different buyer. This could result in the property being sold out from under the original buyer who failed to record the deed.

Whether this last scenario is legally permissible depends on state laws that determine which party prevails when there are conflicting ownership claims to a property.

Title versus Deed

A deed is a document that confers property ownership rights associated with title to a property. Both the deed and title to the property transfer from the grantor to the grantee when real estate is conveyed. But a title and a deed are not the same thing.

Title refers to a property owner’s legal rights, such as the right of possession, the right of control, and the right of disposition. Title is not a document—it is a legal right of ownership.

The deed, on the other hand, is a physical document that transfers ownership of property from the grantor to a grantee. It contains a legal description of the property and the names of the grantor and grantee. To make a property transfer official, the grantor must sign the deed, and the deed must be delivered to and accepted by the grantee. At the time of the conveyance or purchase, the deed and the title transfer from the grantor to the grantee.

If this sounds confusing, Quicken Loans provides a helpful metaphor: a property title is like a book title, while a deed is like a physical book. You can hold the book/deed in your hand, but property title and a book title are concepts—not tangible items.^[1]

Recording the Deed

The grantee is responsible for recording the property deed under state law. Deeds should be recorded in the appropriate government office as soon as possible after the property is purchased by or conveyed to a new owner. In Texas, that office is in the real property records of the county where the property is located. Example: property purchased in Austin will be recorded in the Travis County Real Property Records.

Recording a deed makes it a public document and provides de facto notice to third parties that the grantee owns the property. If the deed is not recorded, the party holding the deed may not be recognized under the law as the legal property owner to third parties, though the deed may be legally effective to transfer the property from the grantor to the grantee.

If a deed is not recorded, it is virtually impossible for the public to know that a property transfer occurred, and the legal owner of the property could appear to be the prior owner rather than the new grantee. This could present numerous problems. For example, a lender could deny a mortgage application if a property deed is not recorded in the new owner’s name.

Not filing a deed could also raise a bigger issue. In the absence of a public record of the deed, the grantor could transfer the property a second time to a different grantee. A subsequent buyer who did not have notice of the prior transfer may have a stronger ownership claim than the person who holds the title but did not record the deed.

Bona Fide Purchasers and Conflicting Property Claims

Arguably the strongest argument for recording a property deed is that, in most states, including Texas, it eliminates the possibility of a subsequent sale of the same property to a bona fide purchaser. A bona fide purchaser is a buyer who purchases a property for a reasonable amount with no reason to believe that it belongs to another person or is subject to another party’s claim. In the context of this article, a bona fide purchaser could emerge if the property’s owner conveys the same property to two or more buyers, and the first buyer failed to record their deed.

Remember, if a buyer does not record their deed, they are not publicly recognized as the property owner. Therefore, if the first buyer does not record their deed and a second conveyance of the same property occurs, the second buyer could be declared the rightful property owner as long as they record their deed before the first buyer.

Jurisdictions differ on how they deal with conflicting property claims. They can be divided into three different types^[2]:

• Notice jurisdictions allow a subsequent bona fide purchaser to prevail over an earlier buyer if the bona fide purchaser did not know about the previous transfer and the earlier buyer failed to record the deed. In a notice jurisdiction, recording a deed eliminates the risk of there being a subsequent bona fide purchaser, because all buyers have a responsibility to perform a title search that would reveal a previous property sale. If the deed has been recorded, any claim that a second purchaser was unaware of the initial sale would therefore be due to their own negligence, disqualifying them as a bona fide purchaser.
• Race-notice jurisdictions allow a subsequent bona fide purchaser to prevail over the first purchaser only if the bona fide purchaser records their deed before the first purchaser. The purchaser who records their deed first is recognized as the legal property owner. Thus, it is a “race” between the two buyers to record their deed—but the subsequent bona fide purchaser is only allowed to compete in the race if they did not know about the earlier property transfer (i.e., they did not have notice).
• Race jurisdictions do not consider whether a second purchaser had notice of the earlier purchase. That is, the second purchaser does not have to be a bona fide purchaser. It is a pure race between the two parties to record their deed first, even if the second purchaser knows that an earlier unrecorded conveyance has taken place. Race jurisdictions are uncommon.

Know the Law of Deeds Where You Live

Those in Texas find themselves in a Race-notice jurisdiction. Meaning they must 1) not have notice of the prior sale (due to an unrecorded deed), and 2) record their deed before the prior buyer. This is what makes recording deeds so important, as recording puts the world on notice you have purchased and are the legal owner of the property.

The buyer’s or grantee’s title or escrow agent is typically responsible for filing the property deed at the local records office when a real estate purchase or conveyance closes. Therefore, it is advisable that all grantees use a title or escrow company. Grantees who do not record their deed themselves should request a copy of the recording page from their agent or local government office.

An unrecorded deed can pose significant problems—including the problem of conflicting ownership claims—and it should be recorded as soon as possible. Earlier buyers that lose out to a subsequent buyer may be able to sue the seller and recover the purchase money. To ensure that your property hasn’t got a cloud on the title, give us a call with any questions. Nielsen Law PLLC provides family focused estate planning in the Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us. We look forward to hearing from you.

[1] Patrick Chism, Deed vs. Title, What’s The Difference?, Quicken Loans (Nov. 16, 2020), https://www.quickenloans.com/learn/deed-vs-title.

[2] Notice and Race-Notice Jurisdictions, LawShelf, https://lawshelf.com/coursewarecontentview/notice-and-race-notice-jurisdictions (last visited Dec. 21, 2022).