Innocent or Bona Fide Purchaser Defense in Texas

Bona Fide Purchaser Defense in Texas

The Latin phrase bona fide translates to “something of good faith, authentic, and genuine.” A Bona Fide purchaser, then, is someone who purchases property in good faith, assuming that things are as they seem, that the purchase is legitimate, and the title is unencumbered. If a third party presents a claim against the property, a Bona Fide Purchaser is protected from that claim by a Bona Fide Purchaser Defense because that person has not received actual or constructive notice of the claim. Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001). Essentially, Texas law protects unsuspecting buyers of property from third party claims if the buyer had no knowledge of the claim.

The Importance of Recording

"An instrument that is properly recorded in the proper county is: (1) notice to all persons of the existence of the instrument; and (2) subject to inspection by the public." Tex. Prop. Code Ann. § 13.002 (West, Westlaw through 2013 3d C.S.). If the purchaser has received constructive notice through a prior recorded instrument, a party may make a successful claim against the purchaser, thereby defeating the purchaser’s ownership interest. It also important to note that constructive notice can never be attributed to a purchaser by a fraudulent or forged deed in a chain of title.

For an unrecorded instrument, Texas Property Code § 13.001 states the following:

(a) A conveyance of real property or an interest in real property or a mortgage or deed of trust is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for record as required by law.

(b) The unrecorded instrument is binding on a party to the instrument, on the party's heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.

(c) This section does not apply to a financing statement, a security agreement filed as a financing statement, or a continuation statement filed for record under the Business & Commerce Code.

When evidence of constructive notice is such that ordinary minds examining the evidence can only draw the same conclusion from the information presented, the purchaser cannot claim Bona Fide Purchaser or Innocent Purchaser status. Either actual or constructive notice may defeat Bona Fide Purchaser status.

Lawsuits that involve the affirmative defense of Innocent or Bon Fide Purchaser status are complex. It is critical to use an experienced real estate attorney in such matters.

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