When a purchaser of property receives oral or written notice of a third party’s interest in the property prior to taking title.
- Example : Oliver borrowed $100,000 from his sister, Sally. Sally failed to record her mortgage interest. Bart contracted to buy Oliver’s property. Bart obtained a title search, and found clean title to the property. At closing, Oliver’s deed to Bart stated that the property was sold “subject to the $100,000 mortgage;” however, Bart did not read the deed before accepting it. Here, Bart takes Oliver’s property subject to the mortgage interest held by Sally because Bart was given actual notice of the mortgage in the deed.