Deal structure

When to use a recorded memorandum of contract

A recorded memorandum of contract alerts third parties that you have an equitable interest in a property, preventing the seller from selling it to someone else. You typically use it when you need to secure your position after signing a purchase agreement, especially with a longer closing period or a potentially difficult seller.

October 17, 2026 · 4 min read

What a memorandum of contract is

A memorandum of contract, also known as a memorandum of understanding (MOU) or notice of agreement, is a concise legal document that officially records the existence of a purchase agreement. It is not the full contract itself, but rather a summary or notice of the key terms, primarily identifying the parties involved and the property in question. Its main purpose is to put the public on notice that a contract exists for the property.

This document establishes your equitable interest in the property. Equitable interest means you have a right to obtain legal title to the property, even if you do not yet own it outright. The memorandum serves as a public declaration of this right, protecting your claim to the property during the period between signing a purchase agreement and closing.

Why you would record it

Recording a memorandum of contract with the county recorder's office makes your interest in the property a matter of public record. This is crucial because it gives constructive notice to anyone performing a title search or considering buying the property. If a seller tries to sell the property to another buyer (a breach known as a double close or secondary sale), that new buyer is presumed to know about your existing contract.

Without a recorded memorandum, a seller could potentially sell the property to an unsuspecting third party, leaving you with little recourse beyond legal action against the seller himself or herself. The recorded memorandum acts as a deterrent, making it difficult for the seller to defraud you or for another buyer to claim ignorance of your contract.

When recording makes sense

You should consider recording a memorandum of contract in situations where there is a prolonged period between signing the purchase agreement and the scheduled closing date. The longer the escrow period, the more opportunity there is for a seller to potentially change his or her mind or attempt to sell to someone else. It offers a layer of protection during this vulnerable time.

It also makes sense when you are dealing with a seller who seems hesitant, untrustworthy, or has a history of changing his or her mind. If you have any concerns about the seller's commitment to the deal, recording the memorandum provides a strong disincentive for him or her to back out or seek other offers. Additionally, for complex deals like subject-to acquisitions or longer lease options, recording can cement your interest.

Before you record, always consult with a local real estate attorney who is familiar with your state's laws. This is not legal advice.

The process of recording

The process typically involves drafting the memorandum, which usually requires specific language and formatting depending on your state and county. This document will identify the property, the parties to the agreement, and reference the original purchase contract. You may need to include the date of the purchase agreement and other pertinent details.

Once drafted, the memorandum must be signed by the parties, often requiring notarization. You then submit the original, notarized document to the county recorder or county clerk's office where the property is located. There will be a filing fee, and once recorded, the document becomes part of the public record for that property. Again, consult with a local real estate attorney for guidance on specific state and local requirements. This is not legal advice.

Risks and considerations

While recording a memorandum offers protection, it can also raise questions from title companies or subsequent buyers if the original deal falls through. If you decide not to proceed with the purchase, you will need to file a release of the memorandum to clear the title. Failing to do so can create a cloud on the title, potentially causing issues for the seller down the line and even opening you up to liability. This is not legal advice.

Some sellers might be wary of signing a memorandum of contract, viewing it as an unnecessary complication or a sign of mistrust. You should be prepared to explain its purpose clearly and assure him or her that it is a standard protective measure. Always discuss the implications with your attorney and the seller, ensuring transparency. This is not legal advice.

Questions people ask

Is a memorandum the same as the actual contract?

No, a memorandum of contract is a separate, shorter document that serves as a public notice of an existing purchase agreement. It summarizes key terms but does not contain all the detailed provisions of the original contract.

Can recording a memorandum scare off buyers?

It can. If another investor or buyer sees a recorded memorandum, it signals that the property is already under contract. If your deal falls through, you will need to promptly release the memorandum to avoid issues for future sales.

What happens if I do not record it?

If you do not record a memorandum, your contract is still valid between you and the seller. However, your equitable interest is not publicly known, making it easier for a dishonest seller to attempt to sell the property to another party without the new buyer having official notice of your claim. This is not legal advice.