Bona Fide Purchaser
Under common law systems, a bona fide purchaser, also known as BFP and is a shortened term for bona fide purchaser or values without notice. The term is utilized mainly within jurisdiction sunder common law within personal property and real property law. Bona fide purchasers have to purchase for value, therefore, the purchaser is responsibly for paying for the property, compared to just being a beneficiary for a gift.
In addition, this holds true even in circumstances when the property is fraudulently conveyed by a party to the bona fide purchaser. For instance, by selling the bona fide purchaser property which was previously conveyed to another party. Based on the jurisdiction’s laws, the bona fide purchaser will take the valid property title, in spite of any competing claims by another party. Thus, by recording interests, the owner can be protected from loss of the interest to subsequent purchasers that qualify under bona fide purchaser.
Furthermore, there are certain jurisdictions, also known as ‘race-notice’ jurisdictions where the bona fide purchaser is required to record their interests to make sure his/her rights are enforced. However, all parties that have claims to ownership within the property retains the right of suing (cause of action) against any party which conducted a fraudulent conveyance.
In addition, a bona fide purchaser is not bound by the equitable interests that the BFP does not have an actual imputed or constructive notice, long as the purchaser has put forth “inspections which were reasonably to be conducted”.
There are situations when a bone fide purchaser might be called “equity’s darling”. Although, as pointed out by Jeffery Hackney, a legal academic specialist within legal history, law of trusts, and property law, this title can be rather misleading. Under circumstances of legal title passing to the BFP for value with no notice, it isn’t as much the equity provides any amount of great affection on the purchaser’s behalves, but more of the equity refusing to intervene with the preservation of any rights that may be held by the previous beneficial property owner. Therefore, the relationship between the bona fide purchaser and courts of equity may be characterized better as being benign neglect. Although, equity continues to recognize the beneficial owner’s rights to claim against the previous legal property owner of which an improper sale was conveyed.
Within the United States, bona fide purchaser rule is codified under patent law 35 U.S.C. 261. Therefore, according to this rule the statue is eliminated from both the legal claims as well as the equitable claims to the property title, unlike under jurisdictions with a common law system. The rule also stipulates that interests, conveyance, or grants may be void against subsequent mortgagee or purchaser as value consideration, with no notice, unless it has been legally recorded within three months of mortgage or subsequent purchase, being recorded with the Patent and Trademark Office.