PastPaperHero | Titles - Hidden risks

Learning Outcomes

This article explains hidden risks affecting title to real property on the MBE, including:

How doctrinal delivery requirements operate, and why lack of delivery renders a deed legally ineffective to pass title.
How to distinguish physical transfer of the deed from the grantor’s present intent to make an immediate conveyance.
Why forged and undelivered deeds are classified as void, and the consequences for subsequent grantees and apparent chains of title.
The characteristics of voidable deeds arising from fraud in the inducement, duress, minority, or limited capacity, and their exam treatment.
How fraud in the factum differs from fraud in the inducement, and how that distinction controls whether a deed is void.
How recording acts, bona fide purchaser status, and the shelter rule interact with void and voidable deeds in priority disputes.
Typical escrow and conditional-delivery fact patterns that appear on the MBE and the proper analytical sequence for resolving them.
Strategies for spotting hidden title defects in seemingly clean recording chains and eliminating distractor options built on void transfers.

MBE Syllabus

For the MBE, you are required to understand hidden defects in title and their impact on conveyancing and recording, with a focus on the following syllabus points:

The delivery requirement for deeds and the legal effect of undelivered deeds.
The nature and consequences of forged deeds.
The distinction between void and voidable deeds, including fraud in the factum versus fraud in the inducement.
The definition and protection of bona fide purchasers under different recording acts.
The limits of recording statutes in curing title defects and the role of the shelter rule.
How these doctrines affect chains of title and competing claims to the same property.

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.

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.
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.
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.
An owner gives a signed deed to an escrow agent with instructions to deliver it to the buyer only when the buyer pays the full purchase price. Before payment, the escrow agent wrongfully delivers the deed to the buyer, who records and then sells to a bona fide purchaser for value. Who has title?
1. The buyer, because the escrow agent had physical possession of the deed.
2. The bona fide purchaser, because she had no notice of the escrow condition.
3. The buyer and the owner as tenants in common.
4. The original owner, because the condition for delivery was not satisfied.
A homeowner signs a deed knowing it is a deed, but is tricked into selling for a fraction of the property’s value by the buyer’s lies about the market. The buyer records and sells to a bona fide purchaser for value without notice of the fraud. What is the likely result?
1. The original deed is void, so the bona fide purchaser takes no title.
2. The original deed is voidable, so the bona fide purchaser takes good title.
3. The original deed is voidable, so the bona fide purchaser takes no title.
4. The original deed is void, but the bona fide purchaser is protected by the recording act.

Introduction

Hidden risks to title can defeat even a careful purchaser who searches the public records. Two of the most significant hidden defects on the MBE 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. That, in turn, affects the rights of subsequent purchasers, the operation of recording statutes, and the outcome of disputes over title.

On MBE questions, a common pattern is a clean-looking chain of recorded deeds that actually rests on a defect at an earlier step. The key is to test whether there was ever a valid conveyance out of the true owner. If the “root” deed is void, no later transfer in that chain can pass good title, no matter how diligent the later purchaser.

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. Without delivery, the deed is legally ineffective.

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 person who fabricates the grantor’s signature.

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

Key Term: Voidable Deed
A deed that is valid and operative unless and until it is set aside by a court. Until it is avoided, it can pass good title to a bona fide purchaser who acquires without notice of the defect.

Key Term: Bona Fide Purchaser (BFP)
A person who acquires an interest in property for value, in good faith, and without notice (actual, record, or inquiry) of prior claims or defects in title.

Key Term: Delivery
The grantor’s act or words demonstrating a present intent that the deed operate immediately to transfer an interest in the property, coupled with acceptance by the grantee.

Key Term: Escrow
A method of delivery in which the grantor gives the deed to a neutral third party to hold and deliver to the grantee upon satisfaction of specified conditions.

Key Term: Recording Act
A statute that establishes rules for priority among competing claimants to the same property, generally protecting certain subsequent purchasers who record their deeds.

Key Term: Shelter Rule
The principle that a transferee from a bona fide purchaser takes the same protection as the BFP, even if the transferee has notice of prior claims, so long as the BFP had good title.

Key Term: Fraud in the Factum
Fraud that misleads the grantor about the nature of the document being signed (e.g., the grantor thinks the document is a contract, not a deed).

Key Term: Fraud in the Inducement
Fraud that induces the grantor to sign a deed by misrepresenting other facts (e.g., the price, the purpose of the transfer), where the grantor knows the document is a deed.

Key Term: Chain of Title
The recorded sequence of conveyances by which title passes over time from one owner to the next.

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 is fundamentally about intent, not about physical possession of the paper.

Delivery requires more than physically handing over the deed; it requires the grantor’s present intent that the deed have immediate legal effect.
Delivery can occur without physical transfer—for example, when the grantor executes and records the deed with that present intent.
The grantee must also accept the deed, but acceptance is presumed if the transfer is beneficial.

If a deed is signed but never delivered, or if the grantor retains control and does not intend the deed to operate immediately, no title passes—even if the deed is later recorded.

Common undelivered-deed scenarios on the MBE include:

The grantor signs a deed and leaves it in a desk, file cabinet, or safe-deposit box, intending to give it to the grantee at some future time (often after death).
A relative or friend finds the signed deed and records it without the grantor’s knowledge.
The grantor gives the deed to a third party but clearly instructs the third party not to deliver it yet, and the third party disobeys.

In each of these, the critical question is whether the grantor intended a present transfer. If not, delivery has not occurred.

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. The recording act presupposes a valid conveyance; it does not transform a void transfer into a valid one.

Presumptions of Delivery

Courts use presumptions to decide whether delivery has occurred:

When a deed is physically handed to the grantee, there is a presumption of delivery and intent to transfer immediately. This presumption can be rebutted by strong evidence that the grantor did not intend an immediate transfer.
When a grantor records a deed, that also raises a presumption of delivery and acceptance.
When a grantor gives a deed to a third party as escrow with instructions to deliver upon a condition (such as payment of price), delivery is usually deemed effective when the condition is satisfied.

An undelivered deed arises when these presumptions are rebutted—for example, where the deed is never handed over, or a third party acts in violation of clear instructions.

Conditional Delivery and Testamentary Intent

Another common exam twist involves a grantor who hands the deed to the grantee but says something like “This will take effect when I die” or “Don’t record this until I die.”

If the language of the deed shows a present transfer (e.g., “I hereby grant Blackacre to A”) and the grantor hands over the deed, courts often treat this as a present conveyance of a future interest (e.g., a present transfer of a remainder, with the grantor retaining a life estate). Delivery is effective.
If the grantor clearly intends no present transfer and is trying to make a purely testamentary disposition without complying with will formalities, the deed is ineffective as a deed. Title does not pass by the deed.

On the MBE, focus on whether a present interest was intended at the time of delivery. No present intent means no delivery.

Hidden Risks: Escrow Misdelivery

Escrow is often used to make delivery conditional. A grantor may give a deed to a third party with instructions to deliver to the grantee only upon satisfaction of a condition (e.g., full payment of price).

If the escrow agent obeys the instructions and delivers after the condition is satisfied, delivery is effective as of that time.

If the escrow agent wrongfully delivers the deed before the condition is met:

There is no valid delivery, because the agent’s authority was limited by the condition.
The grantee obtains no title.
A subsequent bona fide purchaser from the grantee also gets nothing, because the grantee had no title to convey.

This is a classic hidden-risk situation: the public record may show a perfectly regular chain of recorded deeds, but the first deed in the chain was never effectively delivered.

Hidden Risks: Forged Deeds

A forged deed is one signed without the true owner’s authorization. The signature may be completely fabricated, or the signer may pretend to be the owner. Sometimes a notary’s acknowledgment itself is forged.

A forged deed is void. It is treated as if it never existed:

No title passes to the forger.
No title passes to any subsequent transferee, even if that person is a bona fide purchaser for value without notice.
Recording statutes do not protect against forged deeds because the forger had no title to convey and the true owner never authorized any transfer.

A forged deed also creates a misleading chain of title. A subsequent purchaser may see the forged deed in the records and assume it is valid. Nevertheless, such a purchaser cannot acquire good title.

Exam Tip: When the defect is a forgery or lack of delivery, stop the analysis: title never left the original owner, and the recording act does not change that result.

Void vs. Voidable Deeds

It is critical to distinguish between void and voidable deeds, because this determines whether a bona fide purchaser can be protected.

Void Deeds

Void deeds are nullities from the beginning. They never transfer title and cannot be made effective by later events or by transfer to a BFP.

Common examples for the MBE include:

Forged deeds (including forged signatures or fabricated notary acknowledgments).
Undelivered deeds, where the grantor did not intend a present transfer.
Deeds signed by a grantor who does not exist or who never owned the property.
Deeds signed by a grantor who has already conveyed the property away, where estoppel by deed does not apply.

Because a void deed transfers nothing, any later grantee in that chain, regardless of good faith, value, or recording, receives nothing.

Voidable Deeds

Voidable deeds are effective unless and until the injured party takes steps to set them aside. Until that happens, they can pass good title to a BFP.

Typical voidable-deed situations include:

Deeds obtained by fraud in the inducement (the grantor knows it is a deed, but is misled about important facts).
Deeds obtained by duress or undue influence.
Deeds signed by minors.
Deeds signed by persons with mental incapacity who have not been formally adjudicated incompetent.

If the wrongdoer transfers the property to a bona fide purchaser before the deed is avoided, the BFP takes good title, and the original grantor’s remedy is limited to damages against the wrongdoer.

Fraud in the Factum vs. Fraud in the Inducement

The MBE sometimes tests the difference between two types of fraud:

Fraud in the factum (fraud in the execution) occurs when the grantor does not realize the document is a deed—for example, the grantor is told it is a lease or contract. The deed is usually treated as void because there was no real assent to a deed at all.
Fraud in the inducement occurs when the grantor knows the document is a deed but is induced to sign by lies about the price, use, or consequences of the transfer. The deed is typically voidable, not void.

The classification matters because a subsequent bona fide purchaser can be protected when the deed is voidable but not when it is void.

Effect on Bona Fide Purchasers and Recording Acts

Recording acts are designed to resolve disputes between competing claimants, typically arising from two transfers by the same grantor. They do not validate deeds that are void for other reasons.

Key points:

If the defect makes the deed void (forgery, lack of delivery, fraud in the factum), the BFP takes nothing. The recording act does not apply because there was never a valid conveyance from the true owner in that chain.
If the defect makes the deed voidable (fraud in the inducement, duress, incompetency, minority), a BFP who purchases before the deed is avoided can take good title.
The shelter rule protects later transferees of a BFP. However, the shelter rule only helps if the BFP had good title in the first place. It cannot transform a void deed into a valid one.

Recording statutes (race, notice, race–notice) protect only subsequent purchasers for value who meet the statute’s requirements. But all such protection presupposes a valid deed from someone who had title to convey.

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.

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 niece’s recording does not cure the lack of delivery. Because the grantor never parted with title, the bona fide purchaser acquires nothing.

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. Since the forger never acquired title, he had nothing to convey, and the recording act cannot protect the purchaser.

Worked Example 1.3

A grantor is tricked into signing a document by a fraudster, believing she is signing a contract for property management services. The document is actually a deed. 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:
This is fraud in the factum. The grantor did not realize she was signing a deed, so there was no true assent to a conveyance. The deed is void and passes no title. The bona fide purchaser takes nothing, despite lack of notice and proper recording.

Worked Example 1.4

Owner signs a deed that states, “I hereby convey Greenacre to A, but this deed shall not become effective until my death.” Owner hands the deed to A and tells A to hold onto it and record it after Owner dies. Owner later dies, and A records. Owner’s heirs claim the deed was ineffective. Who prevails?

Answer:
The key issue is Owner’s intent. The language and circumstances show that Owner did not intend the deed to have present effect; he attempted a testamentary transfer without complying with will formalities. There was no valid present delivery. The deed is ineffective, and Owner’s heirs prevail.

Worked Example 1.5

Seller gives a signed deed to an escrow agent with instructions to deliver it to Buyer only when Buyer pays the full purchase price. The escrow agent mistakenly delivers the deed to Buyer before payment. Buyer records and then sells to a bona fide purchaser for value. Buyer never pays Seller. Who owns the property?

Answer:
Seller owns the property. The escrow agent’s authority was conditional on Buyer’s payment. Because the condition was not satisfied, no valid delivery occurred. Buyer acquired no title, so Buyer could not convey title to the bona fide purchaser. Both Buyer and the BFP take nothing.

Worked Example 1.6

Owner is persuaded by Fraudster to sell Blackacre for half its true value based on Fraudster’s false statements about zoning changes that will allegedly make the land worthless. Owner signs and delivers a deed to Fraudster, fully understanding that it is a deed. Fraudster records and then sells Blackacre to BFP for fair market value. Owner sues BFP to recover Blackacre. Who prevails?

Answer:
This is fraud in the inducement. Owner knew he was signing a deed but was misled about important facts. The deed from Owner to Fraudster is voidable, not void. Because BFP took for value and without notice before the deed was avoided, BFP takes good title. Owner’s remedy is against Fraudster for damages, not against BFP for the land.

Worked Example 1.7

Seventeen-year-old Minor owns an inherited lot and conveys it by deed to Buyer, who pays fair value and records. After turning eighteen, Minor disaffirms the deed and sues Buyer to recover the property. Before the lawsuit, Buyer had sold the property to BFP, a bona fide purchaser for value without notice of Minor’s age at the time of the first transfer. Who has title?

Answer:
A minor’s deed is typically voidable, not void. Minor may avoid the deed against Buyer, but once Buyer conveyed to BFP (a bona fide purchaser) before avoidance, BFP acquired good title. Minor cannot recover the property from BFP and is limited to remedies against Buyer.

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 and transfer no interest.
Recording an undelivered deed does not cure the lack of delivery; the grantor retains title.
Forged deeds are void and pass no title, even to bona fide purchasers who record.
Recording statutes do not protect against void deeds such as forged or undelivered deeds.
Void deeds cannot be cured by transfer to a bona fide purchaser or by application of the shelter rule.
Voidable deeds (e.g., those obtained by fraud in the inducement, duress, or from minors) are effective until avoided and can pass good title to a bona fide purchaser.
Fraud in the factum usually renders a deed void; fraud in the inducement usually renders a deed voidable.
Delivery can be made directly to the grantee or through escrow; misdelivery by an escrow agent before conditions are satisfied results in no valid delivery.
In exam problems, start by asking whether the true owner’s deed was valid; if not, later purchasers cannot acquire good title regardless of recording.

Key Terms and Concepts

Undelivered Deed
Forged Deed
Void Deed
Voidable Deed
Bona Fide Purchaser (BFP)
Delivery
Escrow
Recording Act
Shelter Rule
Fraud in the Factum
Fraud in the Inducement
Chain of Title

Titles - Hidden risks