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A deed is a legal document used to transfer real
property ownership from one person or entity (the grantor) to another (the
grantee). In most cases, the transfer occurs at the close of escrow of the sale
of the property with the seller being the grantor and the buyer being the
grantee. The escrow/title company will
then generally record the deed at the county recorder’s office.
Recording the deed gives the public notice
that the grantee/buyer now legally owns the property.
Arizona statute requires:
Any document evidencing
the sale, or other transfer of real estate or any legal or equitable interest
therein, excluding leases, shall be recorded by the transferor in the county in
which the property is located and within sixty days of the transfer. In lieu
thereof, the transferor shall indemnify the transferee in any action in which
the transferee's interest in such property is at issue, including costs,
attorney's fees and punitive damages.
A.R.S. §33-411.01
But there are times when deeds are signed
and delivered, but not recorded. This may be done in the mistaken belief that
the unrecorded deed will avoid probate in estate planning, to avoid taxes, or a
variety of other reasons – some done out of ignorance of the law and others in
violation of the law. Many of the cases filed
in court involving unrecorded deeds (or unrecorded deeds of trust) are complicated
with complex arguments on both sides.
Arizona follows a notice recording statute, which
means that, while unrecorded transfers are valid between the parties to the
deed (grantor and grantee), the grantor who, in violation of A.R.S. §33-411.01,
fails to record the transaction, opens the grantee up to claims from
future bona fide buyers for value. See, A.R.S.
§33-411 (No instrument affecting real property gives notice of its contents
to subsequent purchasers or encumbrance holders for valuable consideration
without notice, unless recorded as provided by law in the office of the county
recorder of the county in which the property is located.).
A.R.S. §33-412, states in part:
A. All bargains, sales
and other conveyances whatever of lands, . . . and deeds of trust and mortgages
of whatever kind, shall be void as to creditors and subsequent purchasers for
valuable consideration without notice, unless they are acknowledged and
recorded in the office of the county recorder as required by law.
B. Unrecorded
instruments, as between the parties and their heirs, and as to all subsequent
purchasers with notice thereof, or without valuable consideration, shall be
valid and binding.
An unrecorded deed can cause numerous problems
for the grantee, such as:
- The
grantee will likely be unable to obtain a loan using the property as
security, insure the property, or sell it.
- The
grantor may be able to sell the property to another buyer
since the grantor is still listed as the owner at the county recorder’s
office.
- Any
liens recorded against the grantor may also be recorded against the
property, since the grantor is still listed as the owner at the county
recorder’s office.
Ensure all deeds are recorded and title
insurance is obtained in every transaction.
All deeds transferring real property should be
recorded to protect the grantee.
Further, title insurance should always be obtained to protect the
grantee from covered title defects. See,
ABA
Title Insurance: Why It's Important and
What to Look For.
K. Michelle Lind, Esq. is an attorney who
currently serves Of Counsel to the Arizona REALTORS®. She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law
and Practice (3rd Ed.)
. Watch
for the Fourth Edition, which should be available soon.
For more real estate related articles, visit Michelle’s
Blog at Arizona Real Estate – A Professional’s Guide to Law
& Practice. (arizonarealestateprofessionalguide.blogspot.com)
This article is
of a general nature and may not be updated or revised for accuracy as statutory
or case law changes following the date of first publication. Further, this
article reflects only the opinion of the author, is not intended as definitive
legal advice and you should not act upon it without seeking independent legal
counsel. 6/28/23
