Bona fide purchaser

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Property law

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A bona fide purchaser (BFP) – referred to more completely as a bona fide purchaser for value without notice – is a term used in the law of real property and personal property to refer to an innocent party who purchases property without notice of any other party's claim to the title of that property. A BFP must purchase for value, meaning that he or she must pay for the property rather than simply be the beneficiary of a gift. Even when a party fraudulently conveys property to a BFP (for example, by selling to the BFP property that has already been conveyed to someone else), that BFP will, depending on the laws of the relevant jurisdiction, take good (valid) title to the property despite the competing claims of the other party, so long as the BFP properly records the transaction pursuant to local property law. However, parties with claim to ownership in the property will retain have a cause of action (a right to sue) against the party who made the fraudulent conveyance.

A BFP will not be bound by equitable interests of which he/she does not have actual or imputed notice, as long as he/she has made "such inspections as ought reasonably to have been made".^[1]

BFPs are also sometimes referred to as "Equity's Darling." However, as Jeffrey Hackney has pointed out,^[2] the title is somewhat misleading; in cases where legal title is passed to a bona fide purchaser for value without notice, it is not so much that equity has any great affection for the purchaser - it is simply that equity refuses to intervene to preserve any rights held by the former beneficial owner of the property. The relationship between the courts of equity and the BFP are better characterised as benign neglect. However, equity still undoubtedly recognises the right of the beneficial owner to claim against the former legal owner where the sale was improper.

In the United States, the patent law codifies the bona fide purchaser rule, 35 U.S.C. § 261. Unlike the common law, the statute cuts off both equitable and legal claims to the title.

[edit] See also

• Nemo dat quod non habet
• Title insurance in the United States

[edit] Footnote