Constructive notice

Key Takeaways

• Constructive notice is knowledge the law presumes a person has because information sits in the public record or is visible on the property, whether or not that person ever looked.
• Recording a deed, mortgage, easement, lien, or lis pendens is the act that puts the world on constructive notice of it.
• Actual notice is what a person truly knows or was told; constructive notice is what the law charges a person with knowing.
• In Washington, an unrecorded conveyance is void against a later purchaser or mortgagee in good faith and for value whose conveyance is recorded first (RCW 65.08.070).

What It Means

Constructive notice is knowledge the law assigns to a person whether or not that person in fact has it. Two things create it. One is a document properly filed in the county public record. The other is open, visible possession of the property by someone other than the record owner. Once either exists, the law treats every later buyer, lender, and lienholder as if they had read the document or walked the land.

That presumption is what makes a title search worth doing. A recorded deed, easement, mortgage, or judgment is available to anyone who looks, so the law stops asking whether one particular buyer bothered to look. Compare Actual Notice, which is what a person knows because they read the document, were told, or saw the condition first hand. The two run independently: a buyer can have constructive notice of a recorded easement, be caught completely off guard by it at closing, and still be bound by it.

For a licensee the working rule is short. Anything on record, and anything a walk of the property would reveal, is notice your buyer cannot later disclaim.

How It Works in Washington

Constructive notice is the engine of Washington's recording system. Chapter 65.08 RCW lets an acknowledged conveyance of real property be recorded with the county recording officer, and RCW 65.08.070 supplies the consequence: a conveyance not so recorded "is void as against any subsequent purchaser or mortgagee in good faith and for a valuable consideration from the same vendor, his or her heirs or devisees, of the same real property or any portion thereof whose conveyance is first duly recorded." Each state's recording act sets its own priority rule, and Washington's is a Race Notice Rule: to take free of an earlier deal, the later buyer must both act in good faith (no notice of it) and record first. That makes Recording a substantive step, not paperwork.

The same idea runs through litigation. Under RCW 4.28.320 a party to an action affecting title to real property may file a notice of the pendency of the action with the county auditor, and "from the time of the filing only shall the pendency of the action be constructive notice to a purchaser or encumbrancer of the property affected thereby." Filing the Lis Pendens is what turns a private lawsuit into notice binding on the world.

Example

In March, Priya sells her Spokane duplex to Marcus for $410,000. Marcus pays, takes his deed home, and never records it. In June, Priya sells the same duplex again, this time to Elena for $425,000. Elena orders a title search, finds nothing but Priya's ownership, has never heard of Marcus, and records her deed the day she closes.

Elena wins the duplex. Marcus gave her no constructive notice, because nothing was on record and he was not in possession, so a visit to the property would not have revealed him either. Under RCW 65.08.070 his unrecorded deed is void as against Elena, a purchaser in good faith and for a valuable consideration whose conveyance was recorded first. Marcus is left suing Priya for his $410,000 and hoping she still has it. Had he recorded in March, for the price of a county recording fee, Elena's search would have turned up his deed, she would have had constructive notice, and she could not have taken free of it.

Common Mistakes and Exam Traps

• Constructive notice does not require anyone to read anything. An answer that turns on whether the buyer saw the document is the distractor.
• Recording does not transfer ownership. Delivery and acceptance of the deed transfer it; recording protects the new owner's priority by creating constructive notice.
• Visible possession creates constructive notice on its own, so a buyer who never inspects an occupied property is still charged with whatever an inspection would have shown.
• Constructive notice, constructive fraud, and constructive eviction share a word, not a concept. Read the second half of the term.