When Unrecorded Documents Affect Your Title

Occasionally a title examiner will come across an instrument which references or cites an unrecorded easement, restriction or agreement.  Therefore, the question arises:  Does an unrecorded matter affect the underlying title to real property?  Of course the answer is – it depends.

Florida is a race-notice state. The priority of a lien or encumbrance is determined by the recording date, assuming the recorder was not given notice of an intervening matter. Therefore, the first to record (race) without notice of a superior matter (notice) wins. Notice can be either Actual or Constructive. Actual notice occurs when an individual actually knows that a matter exists (e.g. “David, before you buy my property you should know that Bill has an easement across the rear 30 feet of the property.”). Constructive notice exists when an instrument is recorded in the Public Records of the property’s county. Since Florida is a Race-Notice state, any matters that the owner, the agent, or the underwriter is put on notice of must be dealt with.

Constructive notice matters will be identified by the title examiner and shown on Schedule B-1 or B-2 of the title commitment. If the title examiner is told by anyone of other, unrecorded, matters – they will also be required to show it as a requirement to be terminated or an exception to title. Examples of this include: 1) References to unrecorded easements or agreements on a deed; 2) At the closing table, the seller mentioning that they have a second mortgage (second mortgage was not shown on the commitment); and 3) A survey showing a dirt road across the property. Alternatively, if an unrecorded matter is unknown to the owner, agent and underwriter – the insured buyer (or lender) will take title (or lien priority) free and clear of the unrecorded matter.

There are some exceptions to this rule – mainly dealing with MRTA (Marketable Record Title Act) and Statutes of Limitations. Under MRTA, most matters of record would be extinguished if they’re not re-imposed within 30 years of the root of title (the first deed older than 30 years in the chain of title). Therefore an unrecorded easement older than the root of title may be extinguished. It is important to note that MRTA prohibits easement which are still in use from being extinguished, 712.03(5), F.S. Additionally, Florida Statute 95.11(1)(b) states that within 5 years a ‘legal or equitable action on a contract, obligation or liability founded on a written instrument’ shall expire. Therefore, an unrecorded agreement existing in 1990 may expire by virtue of the statute of limitation.

To be safe, an examiner should show any unrecorded matters they’re aware of. It is also the responsibility of the seller, borrower, or agent to provide the underwriter with any matters that should be taken into consideration when insuring the property or lien of mortgage. Always consult an underwriter with questions regarding unrecorded instruments.

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