Legal Question in Real Estate Law in California

It is not illegal to not record a deed of trust, but it is unwise on the part of the trust deed beneficiary because it exposes the beneficiary to just this sort of tragedy. How was the other lender to know that you also had a lien on the property if your deed of trust was not recorded? It is the responsibility of the trust deed beneficiary to record it in the local county recorder's office. Never rely on the borrower to do this for you!

You have now lost your lien but not the debt, which is now unsecured. You may still sue on the unsecured promissory note that I presume you received to evidence the debt.

First, be clear about what a deed of trust is, and what it is not. A deed of trust is not a deed. It is a security device, like a mortgage. YOU, the owner and borrower, create, sign and deliver the deed of trust to your lender, along with the promissory note that the deed of trust secures. The deed of trust gives the lender's trustee the right to sell (foreclose) if you default on the note.

A deed, on the other hand, is the instrument used to transfer ownership of property. Deeds are signed by the (soon to be) former owner and delivered to the new owner,

So, failure to record the deed of trust does not deprive you of ownership. It may deprive the lender of the right to foreclose, or make foreclosure more difficult. In order to be "on title," someone would need to record a deed showing you as the grantee. If the property is in Las Vegas, the place to look would be the Clark County Recorder's office. Failure to record a document is not "illegal" in the usual sense, but it may be negligence if the person responsible for the failure to record was your agent, broker, attorney, etc. - but it is dumb.

I suspect that you were not absolute purchasers here, but that you entered into a conditional sale agreement, sometimes called a "contract for deed" or "land contract," under which the seller retains title until you have made all the payments. You have certain rights in the property and also a lien on the money you've advanced toward buying the property, but you are not the legal owner and don't get title until you've made all the payments. This is like buying something on a lay-away plan, except the conditional vendee on a conditional sale agreement usually also gets the right of possession. However, this explanation seems inconsistent with there being a deed of trust in the deal.

I note that you do not make a sharp distinction between the lender and the seller in your facts, Were they the same private (non-bank) business, maybe a land developer? That would be consistent with a conditional sale.

You might be entitled to return of some of the money invested, but read your contract; it probably treats the payments like rent and they are probably forfeited if you don't complete the contract.

You may also have a case for some kind of fraud, truth-in-lending, failure to disclose, etc. violation, but a lawyer could not tell without reviewing all your documents, including the deed of trust.