The “Chain of Title” concept is a principle of common law, developed to protect subsequent parties from being charged with constructive notice of the contents of those recorded instruments which a title searcher would not be expected to discover by the customary search of the general grantor-grantee indices and other appropriate indices and diligent inquiry of the Town Clerk as to matters left for recording, but not indexed. Notwithstanding the holding of Haner v. Bruce (146 Vt. 262), it is not reasonable or customary to examine the indices of the individual record books, where a general index is maintained.
An attorney has an obligation to identify those factual circumstances which constitute clouds on the title that are disclosed in the public records and report those matters to the recipient of the results of the search. An attorney has a duty to inform and explain to the client the implications of any clouds on title that would influence a reasonably prudent purchaser not to purchase the property. Fleming v. Nicholson, 168 Vt. 495 (1998) citing North Bay Council, Inc., v. Bruckner, 563, A.2d. 428, 431 (N.H. 1989)
Comment 1. The term “recorded instruments” includes, but is not limited to, deeds, leases, decrees, liens, judgments, maps, documents imposing covenants, restrictions or easements on property, agreements adjusting boundaries and all other documents by which an interest in real property may be transferred or claimed. The absence of a required state or municipal land use permit, the failure to discover a certificate of occupancy or the absence of available evidence in the form of written instruments confirming compliance with the terms of an issued land use permit, when required, may call into question the marketability of the title. Fleming v. Nicholson, 168 Vt. 495 (1998) citing North Bay Council, Inc., v. Bruckner, 563, A.2d. 428, 431 (N.H. 1989).
Comment 2. The “chain of title” concept makes it clear that neither contractual duty nor the duty to use reasonable care encompasses the duty of examining the land records at large, but only those which appear in the particular chain of title. This concept, at one and the same time, serves as a guide- line to determine the extent of the burden which will be imposed upon a title examiner as well as the extent of the examiner’s responsibility to the client. The examiner is required to search for, and thus be responsible for, those recorded instruments which are within the chain of title to a particular parcel. As regards those recorded instruments which are considered outside of this chain of title, the title examiner need not search for, nor is the title examiner accountable to the client for their existence on the land records.
Comment 3. Generally speaking, the period of constructive notice from the land records, and therefore the period of the title search, extends to a particular owner from the date such owner acquires title (not the date on which the transfer is recorded) to the date of the recording of a conveyance divesting the owner of the interest being examined. In this respect, such record notice and period of title search are corollary terms, the period of both being synonymous. If, after the recording of a deed from an owner, another deed is subsequently recorded from that same person to a different grantee (whether the date thereof is earlier or later is immaterial), a purchaser from the first grantee is not charged with constructive record notice of the second grantee’s conveyance, though it is on record when the title is searched. This principle has general application in the case of two successive deeds from the same grantor, both deeds recorded in the order of their execution. A party thereafter purchasing from the first grantee is not charged with notice by reason of the record then existing of the second deed. This principle will also control the required period of search when the first of two deeds has been the last to be recorded.
Comment 4. Any instrument which does not provide notice of the interest claimed because the instrument is outside the chain of title is effective against subsequent parties in the chain of title who have actual notice or are put on inquiry notice of the existence of such instrument. Richart v. Jackson, 171 VT 94 (2000).
Comment 5. Springing liens” are an exception to the general rule. Federal liens, Vermont tax liens (and those liens which purport to have the same effect as such liens) and judgment liens recorded against a person who does not own an interest in real estate at the time of the recording of such lien will attach by operation of law to any interest acquired subsequent to the recording of the lien for the effective term of the lien. The title examiner must search outside the traditional chain of title to find these liens. The recommended period of search for these liens is back twenty years plus 30 days from the date of the search. The twenty year period is dictated by the longest known period of an effective judgment lien, which is for Federal Civil Judgment liens. See, 28 U.S.C. §3201. The title examiner must check for liens filed against each person who had title to the property being searched back for the full twenty year period. The title examiner should also check the name of the client, if the client is acquiring the property being examined. As to judgment liens, See Powell, Law of Real Property §38.05(5).
Comment 6. Where an owner divides a tract of land, and, in conveying one portion of it, creates in favor of that grantee an easement or other right or interest over the portion retained, subsequent purchasers of such retained portion are charged with constructive notice of the existence of such easement or other right or interest, because the first recorded deed, even though conveying other land, is in the chain of title to the common grantor’s remaining land. Therefore, the lack of actual notice or knowledge on the part of the subsequent purchaser to the existence of the easement or the fact that the deed stated that remaining property was free and clear of all encumbrances, are all immaterial.
Comment 7. Because of these rules, the concept of chain of title and the corresponding duty of a title examiner, are not limited to transactions which involve the same land in which an interest is then being acquired but can and do extend to those transactions of the same grantor but involving other land.
Comment 8. There is an additional circumstance which the title examiner must consider. It is derived from the rule of law announced in the line of cases that includes Clearwater Realty Company v. Bouchard, 146 Vt. 359 (1985), Crabbe & Sweeney v. Veve Associates, 150 Vt. 53 (1988), and Lalonde v. Renaud, 157 Vt. 281 (1989) and the applicable provisions of the Vermont Marketable Title Act. The rule of law in the Clearwater line of cases may be stated concisely as — rights of way, easements, and the designation of areas as common space on a recorded plan used as the basis of the description in connection with the conveyance of one or more of the lots shown on the plan vests rights in the grantee and the grantee’s successors in title rights in those areas designated on the plan as rights of way, easements, and common space. In deciding the Clearwater line of cases, the issue of the provisions of the Marketable Title Act has not arisen. The provisions of 27 V.S.A. 604 exempt easements granted, reserved or retained in a deed from the provisions of the Marketable Title Act that would otherwise extinguish such rights, and therefore the rights of way shown on very old plans that are outside the chain of title may still be encumbrances on the title.
Comment 9. The term “other appropriate indices” as used in this title standard includes the general grantor-grantee index (but does not include the indices of the individual record books), lien index, road record books, index of discharged instruments if kept separately, and the uniform commercial code financing statement index.
Comment 10. PACER, an on-line data base maintained by the Federal Courts (http://pacer.psc.uscourts.gov/), provides for a search tool to determine if there has been a Bankruptcy filing in any of the Federal Bankruptcy Courts.
March 29, 2000:
- Comment 4 — Removed the word “constructive” before “notice” in the first line.
- Comment 5 — Removed the reference to “Department of Tax” and re¬placed with tax lien; changed capitalization of phrase “Judgment Lien” to lower case.
- Comment 8 – Changed capitalization of word “Rights” in right of way.
- Comment 9 – Revised beginning of parenthetical to read “but does not include”.
September 20, 2012:
- Comment 10 was added.
September 9, 2016:
- Standard revised to remove these last two sentences in the Standard.
- “This concept limits the duties and liability of a title examiner to a search of those documents which appear not only in the appropriate land record indices, but also in the chain of title to the particular parcel being searched. A subsequent party in the chain of title will not be charged with notice of an instrument which is outside the chain of title.”
- New second paragraph was added to the Standard.
- The second sentence in Comment 1 was added.
- Comment 5 was revised to add reference to Powell