“Constructive notice is a legal term meaning that persons are assumed to have knowledge of something by virtue of the fact that it is in the public record. This principle means that someone cannot deny knowledge of a fact because they have a duty to inquire.
For example, if you purchase property, you are presumed to know the legal status of that property because it is available through public record.” ~Jean Murray at About.com
Title insurance underwriters become liable at the point when constructive notice of a transaction affecting a specific property is given to the public. Constructive notice of a transaction (for example the filing of a mortgage lien) is the responsibility, in most of the U.S., of the county recorder. Elsewhere, it is at the township level or state level (e.g. Alaska and Hawaii).
The recorders are ‘public’ agencies funded by the taxpayers and are required to make information available to the public at no charge. Recorders are also required to make the actual ‘recorded’ documents available for the public view at no charge. When copies of the documents are requested, rather than just viewing, many recorders’ offices charge a fee.
How do the recorders give constructive notice?
In almost all counties, the recorders maintain books of the documents. The books are organized by name and are commonly called grantor/grantee books. There is one book organized by grantor name and one by the grantee name. Generally, the grantor is the seller, and the grantee is the buyer. Similar words are used for other types of transactions: mortgagee/mortgagor, vendor/vendee, plaintiff/defendant, etc.
Finding information on transactions related to a property is done by using the county tor/tee books and searching by name. Most county tor/tee data does not contain enough detail to identify documents related to a specific property; hence the search must start with the name(s).
The mechanics behind a grantor/tee name search:
When the ‘public’ wants to find transactions recorded on a property, they need to know either the grantor or the grantee name. The first step is to find all documents recorded in the name of the property owner and find the other party to the transaction and look in the tor/tee books for documents recorded in that name . By viewing the actual documents, the ones relevant to the ‘property in question’ can be selected.
This name search can be a time-consuming task, because it could involve many documents that don’t affect the property in question (PIQ). For example, if the owner owns more than one property, documents affecting that other property would also be in the books and need review to parse. When the search is done in a large county or on a common name like ‘Smith’ or ‘Jones’, time can be almost prohibitive.
This is where title plants came in. For the second part of this blog series, please click here.