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.