HBA-ATS H.B. 1397 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1397
By: Pitts
Business & Industry
3/3/1999
Introduced



BACKGROUND AND PURPOSE 

The Texas Property Code provides for the recording of real property
transfers.  Although it is not necessary that a deed be recorded in order
to be effective as a conveyance of title, the law limits the validity of
unrecorded deeds and instruments.  Section 13.001(a), Property Code,
provides that an unrecorded conveyance is void as to a creditor or to a
subsequent purchaser for valuable consideration, without knowledge.
Section 13.001(b), Property Code, provides that an unrecorded conveyance is
binding on the parties to the instrument, the parties' heirs, and those who
have knowledge of the conveyance.  Accordingly, actual or constructive
notice to a subsequent purchaser will generally validate the unrecorded
conveyance between the prior and subsequent purchasers. 

Texas case law holds that a purchaser of real property by quitclaim deed (a
deed of conveyance intended to pass any title, interest, or claim which the
grantor may have in the premises, but not professing that such title is
valid, nor containing any warranty or covenants for title (Black's Law
Dictionary, Abridged Sixth Edition)) is charged with constructive notice of
an unrecorded instrument, such as a secret lien, even if the purchaser had
no actual knowledge of an unrecorded instrument.  The rule precludes a
purchaser by quitclaim deed from relying on the deed to claim title to real
property in the event an unrecorded deed is discovered since the unrecorded
conveyance binds the purchaser, who is charged with notice of the
unrecorded instrument.  This is the case even if the purchaser acted in
good faith and paid valuable consideration for the land.  Because
unsophisticated buyers commonly use quitclaim deeds to purchase real
property, these purchasers may not suspect that they will be unable to rely
on the quitclaim deed should a title dispute arise. 

H.B. 1397 amends Section 13.001(b), Property Code, by adding the provision
that a subsequent purchaser of land, which is the subject of an unrecorded
conveyance, does not have constructive notice of the conveyance solely
because the property was conveyed to the subsequent purchaser by a
quitclaim deed.  The change in law allows a purchaser to rely upon the
quitclaim deed if the purchaser acted in good faith, paid valuable
consideration for the land, and did not have actual knowledge of the
unrecorded conveyance. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 13.001(b), Property Code, by adding the
provision that a subsequent purchaser of land,  which is the subject of an
unrecorded conveyance, does not have notice of the conveyance solely
because the property was conveyed to the subsequent purchaser by a
quitclaim deed. 

SECTION 2.  Effective date: September 1, 1999.

SECTION 3.  Emergency clause.