No Recording Clause in contract? - Posted by AW_(WI)

Posted by Dr. Craig Whisler CA on March 21, 2002 at 18:25:22:

Just recopy your contract without the NO RECORDING clause. Its often used by unscrupulous or overbearing wheeler dealers types whose selfishness and greed exceed their common sense and integrity.

Remember also that such a clause is unnecessary because a notary’s acknowledgment is usually required before you can record a document. So unless the document is notarized you wouldn’t even have any reason to use this clause because it isn’t recordable anyway.

Now to answer your question: The person using this clause wants to avoid public notice period. There are many reasons to want to avoid public notice. Some such as privacy could be ligitimate, others are not so legit. Recording would would put a cloud on his title. This could prevent him from breaching his contract by selling to someone else. This could be a sign that someone isn’t a square shooter, or there could be a valid reason for it. I would investigate any clause that doesn’t have Santa written before it. You were wise to question this uncommon clause.

What if you have a contract to buy a foreclosure property for instance, and you want to show the property to someone you hope to resell it to after you buy it, and the seller tries to go around you and sell for a higher price to YOUR buyer instead of you? They often try to cheat you out of your profitatble deal this way. Well, if you realize what is happening you can run down to the county recorder’s office and record your contract or a memorandum of your contract IF you have been wise enough to have it notarized AND IF you have it in recordable form. You can’t record just anything that is notarized. Being in recordable form in most jurisdictions means that the top part must have certain size spaces as prescribed by law. In California for instance, the law specifices that to be recordable each space must be so many inches high and so many inches wide. Just look at the top part any deed or other commonly recorded document in your state and copy the EXACT size and location of the two boxes at the top. Make the top of your “to be recorded” documents conform to these measurements and you should be ok.

Any time you have a great deal going, try to type up your documents in recordable form and get them notorized. This doesn’t mean that you will want to record every document. I generally only record them if I suspect the other party may not be playing with a full deck.

If you want to record to protect yourself, but you don’t want ever busybody in town to know the details of your business (such as how much you paid etc.) you can just record a “memorandum of agreement”. This gives coustructive notice to the public that someone has somekind of interest in this property, and that they should investigate before invest. Constructive notice just means that the law will imply that everyone has notice even if they don’t have actual notice, because it is part of the public record. The memorandum can (and should be) be really sketchy. It primarily needs to identify the parties to the transaction and have the legal description of the property.

I can think of only one legitmate use of such a clause. That would be if the seller plans to refinance the property before coveying it. There probably are other legitmate reasons for using this clause, but I can’t think of any right now. Just ask your self “who benefits and why” before using a document with this clause in it.

Note that I am not an attorney. I am not advising you what to do in your particular circumstance. You should consult with your own attorney before using any ideas from this post. This information is offered for general eudcational purposes only and some or all of it may be wrong. If you use any of this information, without first checking with your attorney you are dumber than you look (: There, I hope this is enough of a disclaimer to satisfy the peanut gallery.

Regards doc

No Recording Clause in contract? - Posted by AW_(WI)

Posted by AW_(WI) on March 20, 2002 at 15:06:09:

I received a copy of someone’s sales contract which listed a NO RECORDING clause. This was to keep the agreement out of all public records and specified that recording the contract would be a material breach and liable for slander of title, if recorded by the buyer. Why is this necessary? Can you still (should you still) have all forms notarized and kept out of public records? Any advise would be appreciated. I am on my way to making an offer soon on a mh to purchase and want to make sure all my forms are ready when I get a buyer for it.