December 1, 1993

Jerry Peterson
Gregory County Register of Deeds
P.O. Box 437
Burke, SD 57523

OFFICIAL OPINION NO. 93-12

Notices of Contract for Deed

Dear Mr. Peterson:

You have requested an official opinion regarding the following factual situation:

FACTS:

At a recent workshop attended by registers of deeds, there was considerable discussion pertaining to notices of contract. The effect of a notice of contract is interpreted differently by the various registers of deeds. Typically, a notice of contract is brought to the register of deeds office to be recorded. This document states that a contract for deed has been entered into between the two parties involved, the buyer and seller. The legal description of the property involved also is included. Some registers of deeds treat the document similarly to a contract for deed, record it in the deed book in the register of deeds' office and complete a transfer form pursuant to SDCL 7-9-10 notifying the Secretary of Revenue, county auditor and director of equalization that a transfer took place requiring the document to be accompanied by a certificate of value form. Others record it as a miscellaneous record and do not require that the document be accompanied by a certificate of value form. Apparently the buyer and seller are recording the notice of contract instead of a contract for deed in an attempt to avoid revealing the purchase price and other conditions.

Concerning these facts, you have asked the following questions:

QUESTIONS:

1. What obligation does SDCL 7-9-10 impose with regard to the notice of contract?

2. Does a certificate of value form need to accompany the notice?

IN RE QUESTION NO. 1:

SDCL 7-9-10 provides:

It shall be the duty of the register of deeds in each county to keep in his office and to enter therein the name of the grantor and the grantee and a sufficient description of the real estate in each transfer to perfectly identify the same and, on the last working day of each calendar month, he shall certify to the secretary of revenue, county auditor and director of equalization a list of transfers for the current month. (Emphasis added.)

The type of transfer contemplated is not limited or restricted by qualifiers in the statute. Without express limitations in the statute, I am of the opinion that the transfer of any interest in real estate must be reported pursuant to SDCL 7-9-10. However, the notice of contract is not itself a transfer; it merely provides notice that a transfer has taken place. Nonetheless, SDCL 7-9-10 is not limited to transfers for which the transfer document has been recorded. Therefore, I am of the opinion that upon receipt of a notice of contract under the circumstances you describe, SDCL 7-9-10 obligates a register of deeds to certify the specified information to the secretary of revenue, county auditor and director of equalization.

IN RE QUESTION NO. 2:

The requirement to file a certificate of value form stems from SDCL <185> 7-9-7(4), which provides:

No register of deeds may accept for record in his office:

(4) any deed or contract for deed dated after July 1, 1988, used in the purchase, exchange, transfer or assignment of interest in real property which is not accompanied by a certificate of value containing, the name and address of the buyer and seller, the legal description of the real property, the actual consideration exchanged for the real property, the relationship of the seller and buyer, if any, and the terms of payment if other than payment in full at the time of sale.

The language of SDCL 7-9-8(4) thus requires a determination of whether a notice of contract constitutes a deed or a contract for deed. I note that the purpose of the certificate of real estate value and its connection with a deed or a contract for deed is, quite simply, to provide information to the director of equalization regarding the valuation of real property within the county.

A "deed" is defined as "any instrument for the purposes of transferring or conveying the fee title to real property." SDCL 43-4-20(1). A notice of contract for deed clearly does not transfer a fee title to real property. Therefore, we must examine the "contract for deed" portion of SDCL 7-9-7(4).

A notice of contract for deed or a memorandum of contract for deed typically are used when parties to the contract wish to protect themselves by a recording in the office of the register of deeds, but do not wish to record the full contract, for whatever reason. The full contract may be lengthy or may contain provisions that the parties necessarily do not want to make public. In any event, the notice of contract for deed or the memorandum of contract for deed nonetheless stand in exactly the same position as a contract for deed when it comes to recording the instrument. None of the three instruments passes legal title to the purchaser. All three instruments note that an equitable interest has passed to the purchaser and that the legal interest eventually will pass to the purchaser when certain contingencies have been met. For all intents and purposes, a notice of contract for deed or a memorandum of contract for deed have the same legal effect as a contract for deed when they are recorded in a register of deed's office. They put all of those on notice that a contract for sale of the real property is in place.

Notices of contract for deed, memoranda of contract for deed, addenda to contracts for deed and assignments of contract for deed are all instruments necessarily within the subset of the family of contracts for deed. Therefore, I am of the opinion that a certificate of real estate value must accompany the filing of a notice of contract for deed or a memorandum of contract for deed.

MB:DDW:mas