Real Property MBE Tip of the Day

Answer to the Real Property MBE Question

Subject: Real Property

Legal Issue: The priority of ownership interests in a race-notice jurisdiction

Legal Rule and Analysis:  When faced with a priority battle for ownership of land, the common law rule is “first in time, first in right.”  State-enacted recording statutes have the power to change that result.  A race-notice recording statute protects subsequent bona fide purchasers for value who take without notice and are the first to record.  There are three types of notice: actual (the grantee has actual knowledge of a prior interest, resulting from, for example, someone telling them about it), inquiry (circumstances are such that the grantee should have investigated whether there was another interest in the land), and record (a prior interest is recorded in the chain of title).  The shelter rule protects grantees that take from those protected by the recording statute, even if they themselves would not be protected.

If you get to a question with complicated facts like this, it is helpful to jot them out:

• 3/1 B –> I (BFP. No rec)
• 4/1 B –> S (BFP. Record)
• 5/1 I rec
• 6/1 S –> F (BFP. No rec)
• 7/1 B –> Brother (not BFP. Records)

In this case, the investor was the first to receive a conveyance.  However, he did not record immediately.  The son was next to receive the property.  The son took for value, there are no indications in the facts that he had any notice of the prior conveyance, and he recorded before the investor.  Therefore, the son holds priority over the investor.  The son then conveyed his interest to his friend.  The friend did have at least inquiry notice of the interest of the investor, as the property was undergoing construction.  Although the friend had notice, he is still protected under the shelter rule, as he took from someone who was protected by the recording statute.  Therefore, the friend holds priority over the investor.  Note: The investor recorded outside of the chain of title so the friend would not have record notice of the investor’s deed. If you see someone’s act of recording (“rec”) out of place (e.g., it is not by the conveyance to him – it is after the B –> S transaction) then it is outside of the chain of title!

If you struggle with the shelter rule, remember the purpose of it. The purpose is not to protect the friend in this case. The purpose is to protect the son – who did everything right under the statute, so should be allowed to do whatever he wants with the land, including selling it to his friend who may have notice of the investor’s interest.

The brother was last to receive a conveyance but is not protected by the recording statute for many reasons.  The brother did not pay value for the property and had notice of a prior interest. He is not protected by the recording act.  Accordingly, the friend has priority over the brother.

Conclusion: The friend would win in an action to quiet title.

Look at the answer choices provided. Choose an answer choice that matches your conclusion. Review the other answer choices provided.  The answer choice (C) is therefore correct. (A) is incorrect because the investor did not record before the son.  The son is protected under the recording statute, and his conveyance to his friend then makes the friend protected under the shelter rule. (B) is incorrect because the son conveyed his interest away. (D) is incorrect because the brother was not a bona fide purchaser for value who took without notice and is therefore not protected under the recording statute.

MBE Tip: Pay close attention to the facts in Real Property questions! It is very helpful to write out the facts as you see them. (In fact, we highly recommend writing out recording act problems as we did above!) That way, you will not have to re-read the fact pattern several times. Instead, the facts will be clear after one reading and even a seemingly complicated fact pattern will be simplified!