Legal Memorandum: Priority of a Life Estate in OH

Issue: What is the priority of a life estate granted pursuant to a property division in a divorce that is being challenged by two mortgagees?

           In general, Ohio law provides for the recording of any interests in real estate to be valid; however, prior interests are valid against those taking afterwards with notice.

All deeds, land contracts . . . and instruments of writing properly executed for the conveyance or encumbrance of lands, tenements, or hereditaments, . . . shall be recorded in the office of the county recorder of the county in which the premises are situated, and until so recorded or filed for record, they are fraudulent, so far as relates to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of such former deed or land contract or instrument.

Ohio Rev. Code Ann. § 5301.25(A) (1997).  The Ohio courts have not hesitated to afford unrecorded interests superiority in cases where notice is proved.  See, e.g., Riley v. Rochester, 105 Ohio St. 258, 136 N.E. 919 (1922) (subsequent lessee is not afforded priority against a prior unrecorded lease notwithstanding subsequent lessee’s assumption the prior lease had been cancelled since statute only affords protection to subsequent holders with absolutely no knowledge).  See generally Deal v. Garaux Bros., 42 Ohio App. 191, 181 N.E. 920 (1930).

In Huntington Nat’l Bank v. McCallister, No. CA96-07-144 (Ohio Ct. App. Feb. 18, 1997), the defendants had obtained a line of credit from Huntington, secured with a mortgage on their home.  Five years later, they executed a second note, to a different lender and again secured it with a mortgage on their home.  The […]