Constructive notice real estate
Also called “notice by record,” it is a doctrine, usually found in state law, which allows public access to certain documents and information regarding property ownership and rights. To give constructive notice means that the author of the instrument (or party who has an interest in the document) must list all parties with interests in the property so that members of the general public can perform due diligence on their own.
Constructive notice allows people with an interest or lien on a parcel of land to protect their interests without having to record it every time there’s a change, rather, they only have to make sure that the name on the title is kept up-to-date.
What are the types of constructive notice?
There are two types of constructive notice: “Advertent” (or “constructive”) notice and “non-advertent” notice. Both types relate to a person’s right to receive actual notice of a problem with the property. Actual notice simply means being aware that something is going on in your life it doesn’t necessarily mean you have the full details surrounding the problem or issue at hand. In contrast, having constructive knowledge means that you should have been aware of the situation because it arose from actions within your control or within reasonable proximity to your activities.
For example, when you buy a new car from Joe’s Car Shop down the street from where you live, Joe is expected to give you actual notice of any known problems with the car. But if you buy a used car from Joe’s Car Shop in Arizona even though neither you nor your family lives there, it is not reasonable for you to have constructive notice that the previous owner had a lien on the vehicle or that there was undisclosed damage done to the engine when he drove it into a ditch.
Advertent vs. Non-Advertent Constructive Notice
In a real estate situation where both advertent and non-advertent constructive knowledge appear to apply, such as, when a house is located near an airport or a factory emitting fumes courts may look at multiple factors to determine which type of actual notice these circumstances bring about, including:
- Whether the potential buyer would have reason to investigate
- The closeness of the transaction
- How significant the problem is?
- How much control the condition has over the property?
- Whether there would be a hardship for either party if they were not bound by the contract Because of these complexities, constructive notice is often litigated when it comes to real estate transactions. If you were in fact constructively put on notice about something related to your transaction and you add this information to your legal arguments about why you should be able to get out of the contract, a court will decide whether or not you have legal standing in such cases.
Process to purchase a home
When someone purchases a home and, as part of the transaction, receives a warranty deed from the previous owner, they receive constructive notice of all items mentioned in that document. The public can access this information by checking public records such as deeds and tax records.
A person who’s received constructive notice is expected to be aware of their rights and interests even if they haven’t actually seen or read the recorded documents (although doing so would certainly make them more informed). Similarly, real estate agents and brokers are often held responsible for ensuring buyers and sellers understand their position regarding properties; however, there is usually no requirement that people using constructive notice be notified of it beforehand.
If the deed to a property has not been recorded, it is technically possible for someone else’s interest in that land to be put on record. For example, if there are two siblings who own an undeveloped parcel of land together and one sells their interest without recording the transaction, they would still have constructive notice of the change in ownership even though there was no public notice.
Mortgage on real estate
This doctrine is most often used with regard to bank mortgages. If someone wants to take out a mortgage on a piece of real estate where there isn’t already another lien or mortgage on record, then the new lender will usually require that all interested parties (such as other encumbrances) must be listed with names and addresses (and sometimes social security number or financial information) so that the new lender can obtain constructive notice of their interest and protect it.
If these parties do not want to be notified, then they would need to record their own mortgage with a land records office (or possibly inform the bank directly). This demonstrates the importance of checking public records: If someone fails to do this and misses an important change of ownership or other interest on his real estate, he has no recourse.
Constructive notice in real estate transactions
When purchasing real property, both types of constructive notice come into play. Whether a problem falls under advertent or non-advertent constructive knowledge dictates whether potential buyers must be made aware of said problem. Generally speaking, when buying property in home state, only non-advertent constructive notice applies. In other words, generally, only if the homeowner actively conceals a legal matter from you can it be considered that you have been constructively put on notice of this issue by the seller.
Practical uses for constructive notice
There are many practical uses for using constructive notice in real estate, including foreclosures, defaulted mortgages, tax audits by local governments (where they try to place a lien on houses based on non-payment of taxes) and lawsuits against people who have assumed an obligation in their name (like paying off another person’s mortgage). The original owner or holder of the obligation must be properly notified. This means that if someone wants to sue you because you’ve paid all your mortgage payments but someone else has also been making them under the impression that they’re responsible for your loan, they cannot provide evidence of your liability for the loan unless it’s documented in the mortgage records.
Who must be given notice?
A person or company that you must notify is known as a “person affected by this section” (or, more simply, “affected person”). When there are multiple affected persons (e.g. when there are two people who could be liable for your loan), then constructive notice can only go to one of them, that is, you cannot guarantee that all affected persons receive constructive notice. This means that if both people think they’re responsible for your loan and respond according to what they believe their rightsholders status is in relation to paying off your debt, someone will probably get screwed over in the process.
Frequently Asked Questions
There is no need of any notice, as the property owner already knows all the terms and conditions.
The basic of constructive knowledge is that knowledge that any person can assume by the law.