Jesse Dukeminier et al., Property p.712 (8th ed 2014) The shelter rule is a doctrine in the

common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipres ...

property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, r ...

under which a

grantee A grant, in law, is a transfer of property, generally from a person or other entity giving the property (the grantor) to a person or entity receiving the property (the grantee). Historically, a grant was a transfer by deed of that which could not ...

who has received an interest in property from a

bona fide purchaser A ''bona fide'' purchaser (BFP)referred to more completely as a ''bona fide'' purchaser for value without notice is a term used predominantly in common law jurisdictions in the law of real property and personal property to refer to an innocent ...

will also be protected as a bona fide purchaser, even if the grantee would not legally qualify for this status. The grantee is "sheltered" from other claims by the grantor's status as an actual bona fide purchaser. This rule comes into play in situations under a number of circumstances. For example, where a bad actor agrees to convey the same

real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or affixe ...

to multiple other parties. For example, if Oscar conveys Blackacre by deed to Andrew on Monday; before Andrew records the conveyance, Oscar conveys Blackacre to Bob, who is a bona fide purchaser and who is unaware of Oscar's previous conveyance of the same property. Bob then conveys Blackacre to Charles, but before the conveyance, Andrew notifies Charles of the deed conveyed from Oscar to Andrew. Since Charles has notice of the prior conveyance, Charles does not qualify to be a bona fide purchaser. However, under the shelter rule, Charles will receive the same treatment as Bob, and will prevail over Andrew in a legal contest over the ownership of Blackacre. The rule has several purposes. One is to allow a bona fide purchaser, who is entitled to hold and enjoy the property, to have a congruent entitlement to sell that property. Another is to prevent the use of the property from being held up in litigation. There are two exceptions to the shelter rule: # Where the property is reconveyed by the good faith purchaser to an original grantor who had notice of an outstanding interest in the property. # Where the property is conveyed by the good faith purchaser to a person who had violated a trust or duty with respect to the property. The shelter rule also applies to the transfer of

negotiable instrument A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...

s. If the recipient of a negotiable interest is a donee (that is, a person who receives by

gift A gift or a present is an item given to someone without the expectation of payment or anything in return. An item is not a gift if that item is already owned by the one to whom it is given. Although gift-giving might involve an expectation ...

), that person would generally not have the rights of a

holder in due course In commercial law, a holder in due course (HDC) is someone who takes a negotiable instrument in a value-for-value exchange without reason to doubt that the instrument will be paid. If the instrument is later found not to be payable as written, a h ...

- that is, a person who received the instrument for value and without notice of other claims. However, if the gift was received from a qualifying holder in due course of the same instrument, the shelter rule gives the donee the right to recover on the instrument.

References

Property law {{law-stub