What is an unregistered deed?
An unregistered deed refers to the situation where the Title to a property, usually real estate, is not registered with the appropriate public records service.
Key points to remember
- An unregistered deed refers to the situation where the title deed, usually real estate, is not registered with the appropriate public records service.
- Unregistered deeds can present many issues for sellers (or grantors) and buyers (or beneficiaries), such as proof of ownership and tax implications.
- A buyer could have great difficulty selling, insuring or obtaining loans for a property if financial institutions and insurance companies cannot establish clear title.
- An unregistered deed creates the possibility for a seller to commit to a subsequent sale of the same property to another buyer.
Understanding an unregistered deed
An unregistered deed is a real deed property that neither buyer nor seller has turned over to an appropriate government agency. Unregistered deeds can present many issues for sellers (or transferors) and buyers (or transferees) such as proof of ownership and tax implications.
A act transfers specific ownership rights to real property between two parties. Most jurisdictions require sellers to file an original deed with a government agency that maintains such records in a given municipality. In the United States, this often takes place at the county level. This registration serves to notify the public of the sale of an asset, which in turn provides assurance of current ownership to any entity involved in transactions affected by the asset, such as the issuance of a mortgage or one home equity loanwhen the property serves as collateral.
Failure to register a deed effectively makes it impossible for the public to know of the transfer of property. This means that the legal owner of the property appears to be someone other than the buyer, a situation that can have serious ramifications. A buyer, for example, could have great difficulty selling, insuring or obtaining loans for a property if financial institutions and insurance companies cannot establish clear title. Worse still, an unregistered deed creates the possibility for a seller to commit to a subsequent sale of the same property to another buyer.
Most mortgage companies require potential buyers to complete a title search and secure title insurance on the property to be purchased. The title search examines existing public documents to ensure a proper transfer of title, a process that could be disrupted by privileges or overdue property taxes.
Self-financed buyers would do well to consider doing a title search and purchasing title insurance for any property they wish to purchase.
Title insurance provides an additional safety net by protecting the insurance holder from loss due to gaps in the title not revealed by the title search. Buyers should note that lenders often require a separate title insurance policy that protects only the lender’s interest in the property. Therefore, buyers may wish to purchase a policy that also covers their interests.
Suppose, for example, that a homeowner self-finances a home purchase with an unregistered deed and the seller neglects to close an existing second mortgage. If the seller were to default on the loan, the bank would post a lien on the collateral, which would still appear to belong to the seller due to the unregistered deed.