Minnesota Statutes Section 541.023 (a/k/a the “40-year law”) has confounded attorneys since its enactment in 1943. Even among real estate practitioners, the 40-year law is somewhat of a nebulous concept. Most practitioners harbor the mistaken assumption that when one is examining title, he or she only needs to go back forty years and then move forward from that point to the present date. An additional assumption is that one can disregard any cloud on the title that is more than forty years old. While there may be some truth to both of these statements, they are both gross oversimplifications.
For starters, it is probably easiest to think of the 40-year law as a statute of limitation. Indeed, it is codified in Chapter 541, which is entitled “Limitation of Time, Commencing Actions.” Basically, the 40-year law operates to bar actions affecting possession of, or title to, real property that are older than the pertinent 40-year source of title. Thus, the first task when seeking to apply the 40-year law is to identify the amorphous “source of title.”
There are two main considerations when determining what constitutes the 40-year source of title. First, as its name implies, the “40-year source of title” must have been “of record” for at least forty years preceding the date of examination.
Second, the instrument creating the 40-year source of title must transfer, or confirm the transfer of, a fee simple title. This instrument can include a deed, judgment, decree or sheriff’s certificate. Perhaps counterintuitively, the statute also provides that the 40-year source can originate from a grantor who was not the record owner at the time of the conveyance, provided that two conditions are met during the forty years following the recording of the transfer: (i) another instrument was recorded which transfers fee simple title from the grantee or transferee identified in the source instrument to another person; and (ii) no instrument was recorded which purports to transfer an interest by the individual who was the actual fee simple record owner. Thus, even if the 40-year source of title was not derived from the record owner, the statute remedies this defect by providing a built-in cure if the above two conditions can be met.
Once an examiner has found the “40-year source of title,” then he or she can move forward with the examination and disregard most rights, claims, interests, encumbrances or liens that precede that source. However, there are exceptions to this general rule, which include the following:
- The owner of an adverse right has either filed notice of the right, or commenced an action to enforce the right, within the preceding 40 years;
- The owner of the adverse right is in “possession of” the real estate (for example, under a party wall agreement or pursuant to an easement if the easement is actually used consistent with the nature of the easement);
- A mineral estate that has been severed from the surface estate;
- A mortgage that has not matured; and
- Those rights preserved by Section 541.023, Subd. 6 (including rights of the federal government and certain rights for land acquired for railroad purposes).
It is also worth noting that the 40-year law does not apply to registered (i.e., Torrens) property. In these cases, examiners should carefully review the Certificate of Title and inquire into all appropriate exceptions. For more information on the applicability of the 40-year law, interested individuals can also take a look at Title Standard 61.