Actual Notice and Constructive Notice as Part of the Innocent Purchaser Defense

Innocent Purchaser Defense and Actual and Constructive Notice

To benefit from the innocent purchaser defense in Texas, a party must not have actual or constructive notice that another person may have an ownership claim to the property. Knowledge of the claim may result in divestment of the purchaser’s ownership interest.

According to Texas Property Code § 13.001, actual notice means that the purchasers have personal information or knowledge about an issue, that they have direct awareness of a claim or lien against the property. If the purchaser has been directly informed of an encumbrance, for example, he or she has received actual notice of its existence. Constructive notice, on the other hand, means that a purchaser may not have direct information or knowledge, but public record reflects a claim against the property. If a lien is in writing and recorded in the correct county, for example, the purchaser has constructive notice of that deed because the court can reasonably presume that the purchaser had access to information about the claim. 57 Tex. Sup. Ct. J. 1297, 2014 WL 4745575 (Tex. 2014).

Property owners should note that actual and/or constructive notice of a third-party claim defeats the Bona Fide Purchaser status of the owner, allowing the third party to lay claim on the property instead of the purchaser. See Portman v. Earnhart, 343 S.W.2d 294, 297–299 (Tex. Civ. App.—Dallas 1960, writ refused n.r.e.).

Defending title to real property is a complex process and working with an experienced real estate attorney provides the best chance to protect an owner’s investment.

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