In order to truly understand the benefits and limitations of title insurance we’re breaking it down for you in a four-part series. Last week in part 1 we discussed What is title?
Today’s blog will cover what is the “public records” doctrine, and why does it matter?
As briefly touched on in Part 1, not only must ownership transfers of immovables be recorded in the public records, in order to be effective against third persons. But, ALL interests in immovable property must be recorded in the appropriate recording office to have effect against third persons, that is, a person who is not party to or personally bound by an instrument.
Thus, the following examples of real rights, in order to have effect against the rest of the world, must be recorded:
- Rights of habitation
- Servitudes such as rights of passage and utilities
- Most liens/privileges, judgements, leases, oil, gas and mineral leases and servitudes
- Restrictive covenants
The list of interests in land is potentially endless as Louisiana law allows for parties to create real rights other than those stipulated in the Civil Code or other legislation, as long as public policy is not violated. Those listed above are more commonly seen in residential real estate transactions.
The public records doctrine is founded on public policy and serves the purpose of assuring the stability of land titles. Under Louisiana law, since unrecorded instruments affecting real estate have no effect upon third persons, the duty of a third person to inquire as to the status of the title of real estate is limited to recorded instruments. It is the public policy of Louisiana that in order to affect third parties, all transactions touching upon or affecting title to real estate must be recorded. There can be no actual owner of immovable property, insofar as third persons are concerned, other than the owner of record. The fact that a document is recorded does not mean that it is valid, that the person with record title is in fact the owner, or that the parties to the document had proper capacity or authority to enter the agreement.
However, third persons can instead rely on the “absence” from the public record of those interests that are required to be recorded. As such, a person may contract with respect to real estate without concern as to the potential rights of others in the property that are not recorded. Louisiana has a strict race system of recordation; first in time to file prevails. Instruments take effect as to third persons in the order in which the instruments are filed and have no effect as to third persons until so filed. Under the Louisiana Public Records laws, in order for a holder of an interest in property to protect his interest, he must record the writing, creating that interest in the public records. His failure to do so leaves him at risk that subsequently created rights in the same property may have the effect of superseding his interest, and perhaps eliminating it entirely.
To illustrate this rule, consider the following example: John sells Blackacre to Jack on Jan. 1, 2000. Jack fails to record the sale granting him ownership. John then sells Blackacre to Jill on Jan. 1, 2014, who immediately records her sale. In a dispute as to who is the owner, Jill prevails due to the effect of the public records law, despite the fact that Jack actually purchased the property first.
Thus, when acquiring an interest in immovable property, it is critically important for the person acquiring that interest to have a licensed attorney review the public records to determine what interests, if any, are in existence against the property, and the priority, or rank, of those interests in relation to each other.
∼ Andrew Mendheim
The author of this article has borrowed extensively from the scholarly writing of Mr. Peter S. Title, Louisiana Real Estate Transactions, which has proven to be an invaluable resource for the Louisiana real estate practitioner, and also from First American Title Insurance Company’s web resources.