Memorandum of Contract Recording Question
Ben Birchenall
Attorney and Counselor at Law
Edward J. Cuccia, PC
121 Walker Street
New York, NY 10013
(212) 966-7775
HOWARD BERGLAS
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Chris Minor
CM
At 07:21 AM 4/22/2021, Ben Birchenall wrote:
Hello all:
In a residential real estate contract that requires the recordation of a Memorandum of Contract, if the contract is silent as to who is obligated to record the Memo, which party would customarily be responsible?
My inclination is that the duty would fall on the purchaser as the Memo protects the purchaser and puts the others on constructive notice of the existence of the contract.Â
I also note that RPL § 294(2) does not explicitly address this question, but RPL § 294(1) does state that an executory contract can be recorded "upon the request of any party."
Thank you in advance for your insight,
Ben
Benjamin P. Birchenall, Esq.
Attorney and Counselor at Law
Edward J. Cuccia, PC
Any transactional document sent, delivered, or received is subject to the review and approval by our client, and is not valid or binding until fully executed by, and delivered to, all parties.Â
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Chris (John Christopher) Minor
Minor, Bandonis & Haggerty, PC
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Bill Davis
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whitm...@gmail.com
I find this whole discussion perplexing. So far as I can see, the only purpose of recording a memorandum of a contract of sale is to prevent the seller from subsequently entering into a competing contract with another buyer; if the first contract (or a memorandum of it) is not recorded and the subsequent buyer is a BFP (and in half the states, records a memorandum of his/her own contract), the subsequent BFP will be able to buy the property, thus “pulling the rug out from under” the original buyer, and in effect negating the first contract.
However, this scenario assumes that the seller is basically a crook – someone who is willing to enter into a binding contract but still keep his/her property on the market and keep looking for a better deal. (I’m not talking about a so-called “back-up contract, but a subsequent firm purported contract of sale.) While there are such people in this world, they must be pretty rare. If I were a buyer dealing with a seller who had a bad reputation or a criminal history, I might consider recording a memorandum of my contract. But in dealing with the vast majority of sellers, I wouldn’t bother. I just don’t see the point of routinely recording a memorandum of contract as a matter of course.
There’s another subtlety to consider. For the recording to be effective as constructive notice, in most states you’d need an acknowledged signature of the seller. A memorandum signed by the buyer alone probably won’t give constructive notice. In fact, in most states it’s probably not legally recordable. If the recorder’s office will accept and actually record a memo signed only by the buyer, one can argue that as a practical matter, subsequent title searchers will pick it up, and thus it will give actual notice, whether it gives constructive notice or not. Maybe that’s good enough. So, a question to Chris and others who may be routinely recording memorandums of contracts: When you represent the purchaser, are you actually getting an acknowledged signature of the seller on the memorandum? Doing so would certainly be unusual in the areas of the country where I have lived, and bought and sold residential property.
Dale
Dale Whitman
Professor of Law Emeritus, University of Missouri
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Jonathan Moore
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Stuart Siris
Professor Whitman raised an interesting question as to whether a memorandum of contract signed and acknowledged only by the buyer , yet improperly recorded so as to fail to constitute record/constructive notice, may result in actual notice thereof.
In New York, a contract of a sale or memorandum of contract of sale must be signed and acknowledged by the party to be charged- the seller- in order to be recorded and to provide record/constructive notice thereof. If a buyer unilaterally records such with only its signature acknowledged and notarized, notwithstanding that it was (erroneously) allowed to be recorded by the clerk or register, it does not constitute notice of any kind, record, constructive, inquiry (or I believe, actual). There is both statutory and case law to support this in New York.
It would also appear that such conclusion should be universal in States where, in order to constitute notice , recorded documents must be signed and acknowledged by the party to be charged . Since a recorded document that is not signed and acknowledged by the seller, or party to be charged, fails to constitute record and constructive notice , it cannot (or certainly should not) result in actual knowledge to one who discovered the document by searching the records. If such document did provide actual knowledge, then the whole premise and purpose of such laws would be defeated, and would eviscerate the State laws denying record and constructive notice effect to an otherwise ineffective recorded document (IMHO).
As always, Professor Whitman’s encouragement for us to think, his insights , and his contributions to this site and to legal profession are greatly appreciated.
Stuart Siris
Solomon & Siris P.C.
Garden City Center
100 Quentin Roosevelt Blvd.
Suite 504
Garden City, New York 11530
Tel: (516) 228-9350
Fax: (516) 228-4305
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Chris Minor
I have seen a few instances where lay persons have created a contract of sale using a home baked document, without recording, and eventually it results in a disaster for one or both. I don't know of any Oregon lawyer who would let either a buyer or seller enter into a land sale contract without a title search and policy and a recording (signed by both parties). I don't think our document recorders would accept for recording a memorandum signed by only one side of the transaction, but that is speculation...I have no experience with such having been submitted for recording.
CM
At 09:08 AM 4/23/2021, whitm...@gmail.com wrote:
I find this whole discussion perplexing. So far as I can see, the only purpose of recording a memorandum of a contract of sale is to prevent the seller from subsequently entering into a competing contract with another buyer; if the first contract (or a memorandum of it) is not recorded and the subsequent buyer is a BFP (and in half the states, records a memorandum of his/her own contract), the subsequent BFP will be able to buy the property, thus “pulling the rug out from under†the original buyer, and in effect negating the first contract.
However, this scenario assumes that the seller is basically a crook – someone who is wiilling to enter into a binding contract but still keep his/her property on the market and keep looking for a better deal. (I’m not talking about a so-called “back-up contract, but a subsequent firm purported contract of sale.) While there are such people in this world, they must be pretty rare. If I were a buyer dealing with a seller who had a bad reputation or a criminal history, I might consider recording a memorandum of my contract. But in dealing with the vast majority of sellers, I wouldn’t bother. I just don’t see the point of routinely recording a memorandum of contract as a matter of course.
There’s another subtlety to consider. For the recording to be effective as constructive notice, in most states you’d need an acknowledged signature of the seller. A memorandum signed by the buyer alone probably won’t give constructive notice. In fact, in most states it’s probably not legally recordable.  If the recorder’s office will accept and actually record a memo signed only by the buyer, one can argue that as a practical matter, subsequent title searchers will pick it up, and thus it will give actual notice, whether it gives constructive notice or not. Maybe that’s good enough. So, a question to Chris and others who may be routinely recording memorandums of contracts: When you represent the purchaser, are you actually getting an acknowledged signature of the seller on the memorandum? Doing so would certainly be unusual in the areas of the country where I have lived, and bought and sold residential property.
Dale
Dale Whitman
Professor of Law Emeritus, University of Missouri
whitm...@gmail.com
From: 'HOWARD BERGLAS' via nyclarealprop <nyclar...@googlegroups.com>
Sent: Thursday, April 22, 2021 5:57 PM
To: nyclar...@googlegroups.com
Subject: Re: [nyclarealprop] Memorandum of Contract Recording Question
I would agree with you. I obviously am not aware of the particular circumstances, but whenever a memorandum is recorded, it’s done by the Purchaser. As you said, it’s the Purchaser who benefits.
Howard Berglas, Esq.
c/o Schiller Law Group, P.C.
Sent from my iPhone
On Apr 22, 2021, at 10:21 AM, Ben Birchenall < Benjamin....@gmail.com> wrote:
- Hello all:
- In a residential real estate contract that requires the recordation of a Memorandum of Contract, if the contract is silent as to who is obligated to record the Memo, which party would customarily be responsible?
- My inclination is that the duty would fall on the purchaser as the Memo protects the purchaser and puts the others on constructive notice of the existence of the contract.
- I also note that RPL § 294(2) does not explicitly address this question, but RPL § 294(1) does state that an executory contract can be recorded "upon the request of any party."
- Thank you in advance for your insight,
- Ben
- Benjamin P. Birchenall, Esq.
- Attorney and Counselor at Law
- Edward J. Cuccia, PC
- 121 Walker Street
- New York, NY 10013
- (212) 966-7775
- Confidentiality Notice: This email communication and any attachments may contain confidential and privileged information for the use of the designated recipients named above. If you are not the intended recipient, you are hereby notified that you have received this communication in error and that any review, disclosure, dissemination, distribution or copying of it or its contents is prohibited. If you have received this communication in error, please notify me immediately by replying to this message and deleting it from your computer.
- Any transactional document sent, delivered, or received is subject to the review and approval by our client, and is not valid or binding until fully executed by, and delivered to, all parties.
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Chris (John Christopher) Minor
Minor, Bandonis & Haggerty, PC
Attorneys
236 W. Olive St.
POB 510
Newport, OR 97365
541 265 8888 (voice)
541 265 9433 (fax)
George Peters
It seem that it is important to clarify what is meant by “contract” in this context, and it is not always clear in these discussions which type is involved. There are two types worth considering:
The first is what is also known in some localities as a “purchase and sale agreement” and relates only to an offer to purchase when a property is listed. I am not aware of areas where this type of short term, non-title transfer, contract is recorded. Once the transaction closes, the deed from the seller to buyer is recorded, along with whatever purchase money mortgage is part of the deal. I did not read the initial post as dealing with this type of contract.
The second is a long term contract that is a form of seller financing. It’s a long term payment program, with a promise of a “fulfillment” deed when the contact is paid off. At least in Washington, the deed often goes into an escrow account, and payments often are handled by a formal escrow as well, with escrow instructed to record the final deed at that time. They are common in some parts of the country, and depending on a lot of factors, the practicality or utility of using this (rather than a deed with a mortgage) wanes or increases over time. (No need for lender qualification of borrower, desire to postpone or minimize capital gains by the seller, high interest rates, etc.) They are often considered akin to an equitable transfer of title or an equitable mortgage, and require formal forfeiture or a general judicial foreclosure in the event of a default. Liens against the purchaser during the term of the contract usually attach. This contract should be recorded, just like a deed, to protect the buyer, and for the same reasons. Some states allow a memorandum, just like leases are often memorialized on the record by a short form or memorandum. Perhaps these are not common in all parts of the country.
Because the original post talked about recording in the first place, something that doesn’t come up in context of an offer, and acceptance, to purchase based on a real estate listing, this is the type of contract that came to my mind.
I’m not offering an opinion on acknowledgments, the need to record, etc., but only interested in clarifying which type of contract is under discussion here.
George
George Peters
Executive Director
Washington Land Title Association
http://washingtonlandtitle.com
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Biff Godfrey
B.F. "Biff" Godfrey
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Sent: Friday, April 23, 2021 12:13 PM
To: nyclar...@googlegroups.com <nyclar...@googlegroups.com>
whitm...@gmail.com
George, I completely agree with you (as always). My previous comments assumed that the original question was about a short-term earnest money contract. It’s absolutely essential from a purchaser’s viewpoint that a long-term installment contract (or a memorandum thereof) be recorded; the purchaser has a great deal more to lose, and stands a much greater risk of bad behavior on the part of the seller.
That means that in a long-term installment contract, the purchaser should absolutely get the seller’s signature acknowledged, so that it is in recordable form. When this isn’t done, and the purchaser still wants to record something I’ve seen several “tricks” tried by purchasers: recording a “notice of interest,” recording a memorandum signed and acknowledged only by the purchaser, or recording a sham “assignment of contract” by the purchaser to a straw party that recites the essential terms of the original contract. Depending on the details of recording acts in various states, some of these techniques may work, but I think they are all dubious. By far the best approach for the purchaser to insist that the seller’s signature on the contract (and if desired, on a separate memorandum of contract) be acknowledged.
Dale
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DAVID M. LINDSEY
What are the requirements for recording equitable title? Can equitable title be recorded unilaterally? Somewhere in the great archives of DIRT THERE ONCE EXISTED guidelines for the recording of memorandums of existing documents.
Professor Whitman raised an interesting question as to whether a memorandum of contract signed and acknowledged only by the buyer , yet improperly recorded so as to fail to constitute record/constructive notice, may result in actual notice thereof.
In New York, a contract of a sale or memorandum of contract of sale must be signed and acknowledged by the party to be charged- the seller- in order to be recorded and to provide record/constructive notice thereof. If a buyer unilaterally records such with only its signature acknowledged and notarized, notwithstanding that it was (erroneously) allowed to be recorded by the clerk or register, it does not constitute notice of any kind, record, constructive, inquiry (or I believe, actual). There is both statutory and case law to support this in New York.
It would also appear that such conclusion should be universal in States where, in order to constitute notice , recorded documents must be signed and acknowledged by the party to be charged . Since a recorded document that is not signed and acknowledged by the seller, or party to be charged, fails to constitute record and constructive notice , it cannot (or certainly should not) result in actual knowledge to one who discovered the document by searching the records. If such document did provide actual knowledge, then the whole premise and purpose of such laws would be defeated, and would eviscerate the State laws denying record and constructive notice effect to an otherwise ineffective recorded document (IMHO).
As always, Professor Whitman’s encouragement for us to think, his insights , and his contributions to this site and to legal profession are greatly appreciated.
Stuart Siris
Solomon & Siris P.C.
Garden City Center
100 Quentin Roosevelt Blvd.
Suite 504
Garden City, New York 11530
Tel: (516) 228-9350
Fax: (516) 228-4305
STATEMENT OF CONFIDENTIALITY
The information contained in this electronic message and any attachments to this message are intended for the exclusive use of the addressee(s) and may contain confidential or privileged information. No representation is made as to the accuracy or completeness of the information contained in this electronic message. Certain assumptions may have been made in the preparation of this material as at this date, and are subject to change without notice. To the extent this document constitutes tax advice, this tax advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. No name or other information in this e-mail is intended or shall be deemed to constitute an electronic signature unless otherwise expressly stated herein. If you are not the intended recipient, you are hereby notified that any dissemination, distribution or copying of this e-mail and any attachment (s) is strictly prohibited. If you received this email in error, please email the sender or call Solomon & Siris P.C. at (516) 228-9350, and destroy all copies of this message and any attachments from your system. Thank you.