Underwriting Manual: Bona Fide Purchasers

A Bona Fide purchaser is one who acquires the apparent legal title to real property in good faith, for valuable consideration, and without actual or constructive notice of an outstanding equity or an adverse interest or title, that is, without notice of any claim or interest of a third person under the common souce of title. Thus the three elements essential to a bona fide purchase are: good faith, a valuable consideration, and absence of notice. Conversely, one who did not buy in good faith, for a valuable consideration, and without notice, is not a bona fide purchaser.

The absence of actual or constructive knowledge is essential to the creation of the bona fide purchaser condition at the time of the acquisition of the title, right, or interest in the property.

A bona fide purchaser derives protection from two sources:

• The equitable doctrine of bona fide purchaser.
• The recording act doctrine.

Although the scope of the protection afforded by the doctrines differs and the classes of persons protected by them are not the same, their combined application allows any bona fide purchaser to be protected under state recording or registration statutes against the rights of third persons whose interests in the property are prior to those of the bona fide purchaser, but were unrecorded or registered on the date the bona fide purchaser recorded or registered their instrument.

In order to be entitled to the rights and benefits of the bona fide purchaser doctrine, the purchaser's title must be apparently perfect, good at law, and made by a regular conveyance.

The doctrine protects purchasers against prior equities of which they have no notice. However, the doctrine is not applicable in the event of a total absence of title in the vendor.

Stewart Title does not rely upon the bona fide purchaser doctrine to waive any outstanding matters, claims, or adverse defects.