The Statewide Title Newsletter and Legal Memorandum

The Statewide Title Newsletter and Legal Memorandum Printable Article - Statewide Title, Inc.

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Issue  22  Article  52
Published:  5/1/1997

Time is of the Essence!
Chris Burti, Vice President and Legal Counsel

The timing of the recording of an instrument conveying an interest in real estate can obviously make an important difference. Generally speaking, a mortgage or deed of trust meeting the requirements for validity has priority from the time of valid registration (G.S. 47-20: G.S. 47-20.1). With respect to its recording statutes North Carolina is what is referred to as a "pure race" jurisdiction and first in time equals first in priority with few exceptions such as Chapter 44A labor and mechanic’s liens and Federal judgment liens. Another exception to this rule is found in Carolina Builders, Corp. v. Howard-Veasey Homes Inc., 72 N.C. App. 224, 324 S.E. 2d 626, cert. Den., 313 N.C. 597, 330 S.E. 2d 606 (1985) which sets forth the effects of the doctrine of "instantaneous seizin". If a Judgment or mechanic’s lien exists against a party before the party acquires title to real estate, and the party gives a deed of trust to secure all or part of the purchase price, the purchase money deed of trust will have priority over those liens if certain conditions are met. The secured debt must only represent purchase money (including costs directly attributable to the transaction), the deed of trust must be executed, delivered and recorded as close to simultaneously as possible with the deed, and both instruments must be part of one transaction. This doctrine holds true when the lender is the seller or when it is a third party lender. Our courts have not clearly defined the term "simultaneous" and therefore many practitioners prefer to record the instruments at the exact same time. Because of the doctrine of "estoppel by deed" most would agree that the security is effective even if the page order of the instruments were reversed from the usual practice (priority problems may arise from reverse recording, see our March 1996 newsletter for a brief discussion).

This practice of simultaneous recording occasionally gives rise to a priority problem when multiple deeds of trust are recorded. Two deeds of trust recorded at the exact same time have equal priority (unless second priority or subordination is specified in the junior instrument) Hood Comr. Of Banks v. Landreth 207 N.C. 621 (1935). Logic would suggest that the instrument recorded first in page order would have priority but while the case referred to the order of indexing it contains this statement, " Obviously two entries could not occupy the same space at the same time on the records, and consequently it is necessarily apparent that in the act of entering a list of names on a record that one name had to come first" and it would seem that such would be the conclusion as applied to page order as well as indexing. Therefor, when preparing multiple instruments for recording in a single transaction, it would be advisable to insure a time separation between the recording of the instruments as well as to state in the junior instrument the status of its priority with respect to the senior deed of trust. This is especially true where the pre-printed form warrants that it is a first lien.

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