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COVID-19: Help! Can I Still Buy My Dream House if the Registry of Deeds is Closed?

Written by: David K. Moynihan

3/18/2020

Due to the focus on safe practices of social distancing and avoiding crowd-gathering areas, many Registry of Deeds in Massachusetts have closed public access and allow only electronic recording of documents, and some have restricted electronic recording as well.  How do these restrictions and limitations affect the time for performance, more commonly called “the closing”? 

Conveying title in Massachusetts is effective upon the proper execution and delivery of the deed to the grantee (buyer).  While the deed is not required to be recorded at the Registry of Deeds, failure to do so places the grantee at risk that the property could be conveyed to a third party because mere delivery of the deed to the grantee does not put the public on notice of the conveyance.  In that case, the third party may have a paramount claim to title so long as the third party was unaware of the prior unrecorded conveyance. 

To address a delay in the recording of the deed, title companies developed what is known as a “gap closing.”  In such a closing, the transaction closes, the deed is delivered, and the funds of the buyer and lender (if a loan is involved) are released to be disbursed as agreed by the parties.  This occurs despite a delay in recording the deed because a title insurance company has committed to issue title insurance to protect against intervening liens or defects that may arise between “delivery” and “recording.”  The title company will assume this risk upon the seller executing an agreement to indemnify the title company for any “intervening liens or encumbrances.”  A seller unwilling to perform under a “gap closing” will incur delay in receipt of funds until the deed is recorded.  By contrast, sellers who wish to receive the funds immediately will agree to such a closing.  

Since most Massachusetts “closings” are completed the same day as the deed is delivered, “gap closings” are not as common as in other states.  Because most purchase and sale agreements require “acceptance and recording” of the deed, the parties agree that the closing funds are to remain in escrow until title is confirmed to be free and clear of all intervening liens and encumbrances of record since the date title was searched.  This common practice in Massachusetts typically avoids “gap closings”. 

With the impact of COVID-19 on the Registries of Deed, delay in recording is inevitable.  “Gap closings” may therefore become a normal procedure until this emergency is resolved.

Real estate practitioners should consider revising their standard purchase and sale agreements, riders or addenda to address delays due to COVID-19, etc.  The Real Estate Bar of Massachusetts (“REBA”) just released a “… provisional residential purchase and sale agreement force majeure form or rider for COVID-19 (Coronavirus) delays in performance … [which] can also be used as text for a condition in an offer.”  The form is available to REBA members and may be essential to avoid potential defaults or disputes during the COVID-19 emergency. 

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