Differentiating Between Recording & Registration Systems

Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Recording and registration systems help provide parties to real estate transactions information on the property, which makes transactions less risky. In this lesson, you'll learn about the difference between these two systems. A short quiz follows.

Importance of Real Property Records

Many people may have an interest or stake in a piece of real estate. Take, for example, a recently constructed single-family residence that's for sale by the developer. Obviously, the real estate developer has an ownership interest in the land, but that's almost certainly not all. The developer probably has a construction loan that is secured by mortgage on the property. Unpaid subcontractors like plumbers, carpenters and electricians may have mechanics' liens on the property. A utility company probably has an easement over the property for power lines. If the developer hasn't kept up on property taxes, the government may have a tax lien on the property. In fact, if the developer has a court judgment against it, the plaintiff may have filed a judgment lien on the property.

It's not all that important for the purposes of this lesson to understand what all these types of things are, but it is important to know that they can adversely affect the value of the real estate and a purchaser's interest in the property. Consequently, it's pretty important for potential purchasers and their lenders to be able to reliably find out about all the potential problems that may affect the property. This is where real estate records come into play.

Public real estate records permit you to identify any potential title defects and encumbrances on the real estate. A title defect is something in the property's chain of title that may put a purchaser's ownership of the property into dispute. A chain of title is the series of documents throughout time that has been used to transfer the real estate from one person to the next. An encumbrance is a claim against the property by another or a burden or restriction imposed upon the parcel. For example, a utility easement giving a power company the right to lay power lines on the property is an encumbrance. Likewise, a mortgage is an encumbrance because the lender will have a right to foreclose if the loan underlying the mortgage goes into default.

Property Recording Systems

Most states in the US use a recording system, which is created by the enactment of a statutory scheme known as a recording act. Under a recording system, people with some interest or claim in a particular parcel of real estate will record a document with the relevant government agency, usually the county recorder's officer or registrar of deeds, documenting the claim or interest. Indexes are available so that people can find and review all the recorded legal instruments (i.e., the documents) related to a parcel of land.

Once something is recorded, the law generally holds that the public, including potential purchasers and their lenders, will have constructive notice of the recording and the underlying claim or interest on the property. For example, if a utility easement is properly recorded, you'll take the property subject to the easement even if you didn't actually know about it because you have constructive notice. The public record gives you constructive notice because a reasonable person would have searched the public records and found the easement.

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