Titles - Hidden risks (e.g., undelivered or forged deed)

Learning Outcomes

After reading this article, you will be able to identify and explain the main hidden risks affecting title to real property, including undelivered and forged deeds. You will understand how these defects impact the validity of title, the rights of bona fide purchasers, and the operation of recording statutes, enabling you to answer MBE questions on title problems with confidence.

MBE Syllabus

For the MBE, you are required to understand the risks that can undermine the validity of title to real property, even when the record appears clear. This article focuses your revision on:

• The legal effect of undelivered deeds and forged deeds.
• The consequences of these defects for subsequent purchasers and recording acts.
• The distinction between void and voidable deeds.
• The rights of bona fide purchasers and the limits of recording statutes in curing title defects.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. If a deed is forged and later recorded, which of the following best describes its effect on title?
   1. The deed is void and passes no title, even to a bona fide purchaser.
   2. The deed is voidable but may be enforced by a bona fide purchaser.
   3. The deed is valid if recorded first.
   4. The deed is valid if the grantor later ratifies it.
2. A grantor executes a deed but never delivers it to the grantee. The grantee records the deed. What is the status of title?
   1. The grantee has good title if the deed is recorded.
   2. The grantee has no title because delivery never occurred.
   3. The grantee has voidable title.
   4. The grantee has title if consideration was paid.
3. Which of the following is most accurate regarding the effect of a forged deed on a subsequent bona fide purchaser?
   1. The bona fide purchaser takes good title.
   2. The bona fide purchaser takes no title.
   3. The bona fide purchaser may enforce the deed if recorded.
   4. The bona fide purchaser may enforce the deed if the forgery was not obvious.

Introduction

Hidden risks to title can defeat even the most diligent purchaser. Two of the most significant hidden defects are undelivered deeds and forged deeds. These defects may not be apparent from the public record but can render a purported transfer of real property void or voidable, affecting the rights of subsequent purchasers and the operation of recording statutes.

Key Term: Undelivered Deed A deed that has been signed by the grantor but has not been delivered with the intent to transfer a present interest in the property.

Key Term: Forged Deed A deed that has been signed without the true grantor’s authorization, typically by someone impersonating the grantor or by a fraudulent agent.

Key Term: Void Deed A deed that is legally ineffective from the outset and passes no title, even to a bona fide purchaser.

Key Term: Voidable Deed A deed that is valid until set aside by a court, and may pass good title to a bona fide purchaser under certain circumstances.

Key Term: Bona Fide Purchaser (BFP) A person who acquires property for value, in good faith, and without notice of any defect in the title.

Hidden Risks: Undelivered Deeds

A deed is not effective to transfer title unless it is delivered with the present intent to convey an interest. Delivery requires more than physical transfer; it requires the grantor’s intent that the deed have immediate legal effect. If a deed is signed but never delivered, or if the grantor retains control and does not intend the deed to operate, no title passes—even if the deed is later recorded.

If a grantee records an undelivered deed, the recording does not cure the defect. Title remains with the grantor, and any subsequent purchaser from the grantee acquires nothing.

Hidden Risks: Forged Deeds

A forged deed is one signed without the true owner’s authorization. Forgery renders the deed void. No title passes to the forger or to any subsequent transferee, even if the transferee is a bona fide purchaser for value and records the deed. Recording statutes do not protect against forged deeds because the forger had no title to convey.

Void vs. Voidable Deeds

It is critical to distinguish between void and voidable deeds:

• Void deeds (such as forged deeds or undelivered deeds) are nullities. They cannot convey title to anyone, including a bona fide purchaser.
• Voidable deeds (such as deeds obtained by fraud, duress, or incapacity) are valid until set aside, and may pass good title to a bona fide purchaser who acquires without notice of the defect.

Effect on Bona Fide Purchasers and Recording Acts

Recording acts protect bona fide purchasers against certain hidden defects, but not all. If the defect makes the deed void (as with forgery or lack of delivery), the BFP takes nothing. If the defect makes the deed voidable, the BFP may take good title if the deed has not been set aside before purchase.

Worked Example 1.1

A grantor signs a deed to Blackacre but keeps it in her desk, intending to deliver it only after her death. Her niece finds the deed, records it, and sells Blackacre to a bona fide purchaser for value. Who owns Blackacre?

Answer: The grantor retains title. The deed was never delivered with present intent to transfer, so no title passed to the niece. The bona fide purchaser acquires nothing, because the grantor never parted with title.

Worked Example 1.2

A forger signs a deed to himself purporting to transfer Whiteacre from the true owner. The forger records the deed and sells Whiteacre to a bona fide purchaser for value, who records. The true owner discovers the fraud and sues to recover Whiteacre. Who prevails?

Answer: The true owner prevails. The forged deed is void and passes no title, even to a bona fide purchaser who records.

Worked Example 1.3

A grantor is tricked into signing a deed by a fraudster, believing she is signing a contract. The fraudster records the deed and sells to a bona fide purchaser for value. Is the deed void or voidable, and what is the effect?

Answer: If the grantor did not realize she was signing a deed (fraud in the factum), the deed is void and passes no title. If the grantor knew she was signing a deed but was induced by fraud (fraud in the inducement), the deed is voidable and may pass good title to a bona fide purchaser.

Exam Warning

Recording statutes do not protect against forged deeds or undelivered deeds. Even a bona fide purchaser who records cannot acquire good title if a deed is void.

Revision Tip

Always distinguish between void and voidable deeds. Only voidable deeds may be cured by transfer to a bona fide purchaser; void deeds never pass title.

Key Point Checklist

This article has covered the following key knowledge points:

• A deed must be delivered with present intent to transfer title; undelivered deeds are void.
• Forged deeds are void and pass no title, even to bona fide purchasers.
• Void deeds cannot be cured by recording or by transfer to a bona fide purchaser.
• Voidable deeds may pass good title to a bona fide purchaser if not set aside before transfer.
• Recording statutes do not protect against void deeds.
• Always distinguish between void and voidable deeds for MBE questions.

Key Terms and Concepts

• Undelivered Deed
• Forged Deed
• Void Deed
• Voidable Deed
• Bona Fide Purchaser (BFP)