Torrens Land Registration Explained

Property Records Industry Association
Torrens Land Registration
Carol Foglesong
Peter Rabley/Justin T Holl, Jr
Mark Monacelli
David Ewan

Property Records Industry Association • www.pria.us
Introduction
 A year ago (March 2009) Peter Rabley
presented “Land Registries Around the
World”
 Inquires followed:
 I’ve heard about Torrens land registration but I
have no idea what it is!
 Is it better or just different?
 So, this is your educational session

Introduction
 They mean to be thought-provoking
 So THAT’S why they do it that way!
 What IF we did it differently?
 Might this change my view of other
proposed changes in the industry?
 Can this information help me do my job
better tomorrow?

Introduction
 Presentation is founded on a
whitepaper currently being drafted
titled:
“The Earthen Vessel: Land Records in
the United States”
 Special thanks to Justin Holl of ILS

Introduction
 Peter Rabley, International Land Systems
 Background & History of Torrens in the US
 Mark Monacelli, St. Louis County Recorder
 A Day in the Life
 David Ewan, NJ Title Insurance Company
 Torrens & the Title Insurance

Background on Torrens
 Peter Rabley
International Land Systems

Background on Torrens in the
US – Why?
 Government function to maintain land
records
 The earliest written records from 4th
century
B.C.E. in Mesopotamia
 Last two centuries legal rights and
responsibilities in real estate transactions
have become a primary concern

Background on Torrens in the
US – Why?
 Good land records inspire market and
public confidence
 Property rights are a major engine to
economic development
 Transparent property rights and processes
are essential to stable economic growth

Background on Torrens –
Principles of Land Systems
RIGHTS
• Ownerships
• Leaseholds
• Servitudes
• Restrictions
• Encumbrances
• Caveats
PARTIES
• Owners
• Tenants
• Mortgagors
• Trustees
• Caveators
• Attorneys
PROPERTY
• Parcels
• Buildings
• Construction
• Apartments

Expectations of Land Systems
 Simple & Understandable Procedures
 Effective & Secure Documentation of Rights
 Protection against Infringement of these Rights
 A Public Record of these Rights so Others Know
 Records Complete and Incontrovertible Proof
 Convenient Methods for Transferring these Rights
 Effective Procedures for Preserving the Record

Background on Torrens – Early
Land Systems - US
 Turf & Twig
 Livery of
Seisin
 Terminus
”stake and
heaps of
Stones”

History of Land in the US
 Spain in Florida and the
Southwest,
 France east of the
Mississippi and north of the
Ohio River,
 The Netherlands present
day New York,
 England along the eastern
seaboard,
 Russia extreme NW
including Alaska.

 In the original thirteen colonies a charter for the land from
the King.
 William Penn received a charter from Charles II for
Pennsylvania.
 The London Company received a charter to establish a
settlement that became Virginia, and the
 Plymouth Company received a charter for what is present
day Maine
 Pilgrims received a patent from the London Company for a
settlement in New England near Cape Cod.

 Governing Subdivisions in Virginia
based on those of England of the
time.
 1634 8 Shires in Virginia
 Boundaries extended Westward
 Land records first office established
in early government divisions
 “Conveyances of land must be registered in the
court of the county wherein they lie, or in the
general court, or they are void, as to creditors
and subsequent purchasers.” T. Jefferson
 Vital and land records were
established at the county level in the
original colonies

 1787 Constitution created Federal
Government
 Article X
“The powers not delegated to the United
States by the Constitution, nor prohibited by it
to the states, are reserved to the states
respectively, or to the people.”
 Laws of Real Property were left to
the States.
 Treaty of Paris 1783 British cede
land to the United States
 Land Ordinance of 1785 & Northwest Territory Ordinance of 1787

 1812 General Land Office (GLO) in the
Department of Treasury managed the
lands in these “other” states
 In 1946, the GLO was merged with the
Federal Grazing Service to create the
BLM
 “253 million acres (1,023,855 km2
) or one-eighth of
the landmass of the country. BLM also manages 700
million acres (2,832,800 km2
) of subsurface mineral
estate underlying federal, state and private lands”
 Establish method for organizing and
subdividing the federal land through the
public land survey system (PLSS).

Formal Systems of Land in US
 Two formal systems of property
 Deeds Register Systems
 Title Register Systems
 Deeds Registers are older than Title
Register Systems
 Deeds
 Name Index
 Parcel Index

Deeds & Title Systems
LEGAL
RELATION
RIGHT(S)
0BJECT
LEGAL LAND
OBJECT
SUBJECT
RIGHTFUL CLAIMANT
(PERSON/ENTITY)
RELATIONSHIP BETWEEN MAN AND LAND IN DEED SYSTEM
SUBJECT
RIGHTFUL CLAIMANT
(PERSON/ENTITY)
0BJECT
LEGAL LAND
OBJECT
LEGAL
RELATION
RIGHT(S)
RELATIONSHIP BETWEEN MAN AND LAND IN TITLE SYSTEM
Source: Hansen 1995

 Deeds: little governmental scrutiny
 Title: high degree of governmental scrutiny
 Deeds: Rapid recording
 Title: Slower and bureaucratic
 Deeds: Burden on private sector to determine right
holders
 Title: Burden on government to determine right holders
for both first registration and subsequent transactions

Deeds System
 Relatively minor administrative
costs
 Normal administrative skills
 The number of staff depends
upon number of transactions
 Cost of maintaining registry is
much less for government
 Rights validity is determined by
private sector
Title System
 Major administrative costs
 Requires highly skilled legal
specialists
 Expensive
 Cost of maintaining system is
borne by government
 Rights validity determined by
government

Background on Torrens – Title
Registration Systems
 Title registration origins in
Germany, Austria, Switzerland.
 Hanseatic League
 Different use of the property
concept and organization of the
cadastre (fixed) and role of
private licensed surveyors.

Government Certified Title
 Appropriate Legislation
 Certificate of Title (Transparent to Public)
• Ownership
• All Encumbrances
 Indefeasible Title
 Government Maintains Adjudicated Title for Subsequent Transactions
 Parcel Based
 Guarantees (Mirror, Curtain, Possibly Monetary)
 Adjudication: Systematic or Sporadic

 There are two different phases in a title registration system
• First registration, that is bringing a property into the title system in
the first place
• Subsequent transactions after first registration
 First registration usually involves an adjudication process
• This can be administrative, or
• In a court action

First Registration – Combined Approach – Systematic and Sporadic
 May be most practical economically
 Trigger approach (most common) HMLR e.g.:
• transfers for value,
• mortgages,
• subdivisions resulting in three or more parcels of land,
• new condominium developments, and
• Any proceedings that result in an adjudication of titles.
 Use systematic registration in certain problematic areas, sporadic in
others

Guarantees
 Title registration systems guarantee that the persons named as owners in
a certificate of title have an indefeasible title
 They do not necessarily guarantee boundaries, but a few systems do
 They do not guarantee the validity of encumbrances
 Mirror guarantee: That the register reflects the current status of title
 Curtain guarantee: That the current register is the sole source of title
information and that no other source need be consulted, and
 Indemnity guarantee: Often government will reimburse persons suffering
loss caused by errors, omissions, or misfeasance of the Registrar under
legislatively defined conditions.

 Encumbrances can’t be guaranteed, because their validity
depends upon external facts
 Example: Mortgage
• Could be usurious
• Truth in Lending may have been violated
• Other consumer protection may not have been followed

 Registered title is considered adjudicated title
 Once a title is registered every transaction is scrutinized by
the registry office for its validity
 This is in contrast to deeds registration where the validity of
a transaction is not determined by the registry office
 The Registry office must be staffed with highly skilled
professionals

Examination
 The public needs access to the register in order to determine the current
status of title
 Because of the “curtain guarantee” there is no need for a title search and
examination of the “chain of title”
 There is no chain of title for a parcel that is registered in a title
registration system
 Some jurisdictions allow direct access to view the register for a parcel of
real estate

Examination
 Some jurisdictions require that an application be submitted stating the
reasons for viewing the information,
 All systems will provide a title report,
 No title search to construct chain of title,
 Attorney simply reviews the information on the certificate of title
 Mortgages, liens will have to be paid at closing
 These will be listed in the encumbrance section of the certificate of title
 Very easy to use for attorney
 Understandable to client

Examination
 Title Registration systems are often perceived as being bottlenecks in a
transaction because they require additional scrutiny
 There is often a high rejection rate of documents
 The registry office often requires multiple trips by parties to satisfy examiners

Background on Torrens – Who
was Torrens?
 Sir Robert Torrens the colonial treasurer and registrar-general for South
Australia in 1852.
 He advocated for conveyancing reform
 Published a Torrens bill in 1856 and as member of the House of
Assembly introduced a bill in 1857, which was adopted as law on
January 28, 1858,
 His “system” can now be found in Australia, New Zealand, US, some
provinces of Canada, and some countries in the Caribbean, Asia and
Africa.
 Modified Torrens – starting in late 1950’s in Kenya
 Entered US through Illinois in 1897

Background on Torrens – Why
the Torrens System?
 “by reason of complexity the community is firmly bound
to use a solicitor,
 heavy costs are thereby imposed no matter how simple
the transaction may be,
 "losses and much perplexity" are occasioned to
purchasers and mortgagees by reason of the
uncertainty of title,
 the time involved in the legalities of the transaction is
unsuited to the needs of a progressive community, and
 the operation of this law (the English Law of Real
Property) diminishes the value of land as a secure and
convenient basis of credit.”

Background on Torrens – Why
the Torrens System?
 Three Key Underpinnings:
 “All properties were to have one
document, a certificate of title, to
evidence ownership,
 All interests in every property had to
be registered on that certificate of
title, and
 The certificate of title had to be
guaranteed by the government. “

Features of the Torrens System
 “Every estate in freehold is represented by a certificate of title,
 Title to land is exhibited by registration,
 Every certificate of title is guaranteed by the government,
 Every registered proprietor named on the certificate of title can be
treated, so far as third parties are concerned, as possessing an
indefeasible title,
 Any person who contemplates a dealing with a registered proprietor
must be quite sure that they are in fact dealing with that person,
 Registration may correct a defect in title for bona fide purchasers,

Features of the Torrens System
 The certificate of title is the place where the general public is entitled,
and expected, to look for interests affecting a property,
 Knowledge, or notice, of an unregistered or outstanding interest in a
property is not considered of itself to be evidence of want of good faith,
and
 No trusts may be registered on the certificate of title.”

History of Torrens in the US
“ That it is the sense of the delegates of the World’s Real Estate
Congress that they should do what lies in their power to call
the attention of their various State Legislatures to the
benefits of the Torrens system and recommend its adoption,
so modified as to suit to our State Constitution and laws”
‘World’s Real Property Congress’ World’s
Colombian Exposition, Chicago 1893

 Used initially in US to clear problems in the record
 Torrens system was instituted in Cook County 1895,
Illinois following the destruction of all public land records
in the Great Chicago Fire of 1871, and in metropolitan
Boston as a response to the poor quality of historical
land records in New England.

 Enactment in California, Massachusetts, Colorado,
Minnesota, Washington, Ohio, and New York.
 Initial virulent opposition by conveyancing attorneys and
title insurance companies.
 Legal attacks on Constitutional grounds were common,
and successful in some instances.
 At one time more than twenty states had Torrens
statutes, but most have been repealed.

 Eight states currently utilize Torrens land registration
systems.
 Active Torrens registration include Minnesota,
Massachusetts, Colorado, Georgia, Hawaii, North
Carolina, Ohio, and Washington.
 The U.S. Territories of Puerto Rico and Guam also utilize
Torrens systems to some degree.

 New York and Illinois previously utilized Torrens systems.
Suffolk County was the last New York county to have
active Torrens certificates. All certificates were to be
delivered to the County Clerk for recording on or before
January 1, 2000. From January 1997 to December 1999
adverse instruments were allowed. Voluntary
instruments were disallowed on January 1, 1997.

 In Illinois the use of the Torrens system declined in the
1930s,
 60 years of public records were available to private
insurance companies, who competed vigorously with the
Torrens system, and
 In January 1992 the Illinois legislature began the process
of phasing it out.

Torrens In Daily Use
 Mark Monacelli
St. Louis County (MN) Recorder

Torrens In Daily Use
 When/why was Torrens introduced in MN
 The difference between Torrens and Abstract
Title
 View a Torrens Title certificate
 Torrens benefits
 Torrens drawbacks

History of Torrens in MN
 Introduced in 1901 as an alternative way
to title property
 Legislation authorized three MN counties
with a population over 75,000
 Hennepin, Ramsey and St. Louis

From the 500’ Level
 Abstract title-a quite title action, by Court
order, will provide evidence of title
 Torrens system the title is registered in the
name of the owner, with legal description, and
a new source of title is created
 Torrens and abstract title are separate
 Torrens is an adjudicated title process
 Under the jurisdiction of the District Court

To Register property/boundary
 Owner files an application with the Court
 Examiner of Titles examines the abstract
 Legal advisor to the Registrar
 If boundaries are unclear may request a Registered
Property Survey
 Public notice is served
 Examiner cites defects, etc.
 If no contest-title is issued
 If contested the Court will determine ownership, etc.

Certificate of Title
 Transfer of ownership can only be by deed,
court order or certificate from the Examiner of
Titles
 Subject to seven statutory exceptions
 The Registrar issues the Certificate of Title
 What if there’s a mistake?
 Assurance Fund compensates for loss
 $1.50 per document held by the state
 Few claims

COT

Benefits…
 Not subject to claims/adverse possession
 Peace of mind as the boundary, etc. is set
 Owners duplicate prevents fraud
 Cleaner and more perfect form of title
 All title information is listed on cert., title research is
easier
 Fewer legal description issues
 Most new developments use Torrens
 System is automated
 MN Chapter 508A is streamlined process/uncontested

It’s not all smooth sailing…
*Mgmt. perspective*
 Two title plants
 Increased cost/requires more employees
 Two separate job skills

Staff requires more skills and training
 Cross training is more problematic
 Cannot commingle operations

Microfilm, etc.
 Can be confusing to the public
 Can have two forms of title in a parcel
 Takes more time

Torrens & Title
 David Ewan
New Jersey Title Insurance Company

Background of Title Insurance
 As discussed, deed
recording/registration has been used in
the US for hundreds of years.
 As with Torrens, title insurance is a
relatively “new” development.
 Title insurance only began in 1876 in
Philadelphia, PA

 Before title insurance, buyers in real
estate transactions bore sole
responsibility for ensuring the validity of
the title held by the seller.
 If the title were later deemed invalid or
found to be fraudulent, the buyer lost
his investment.

 Question: Why did Abraham Lincoln wind
up living in Illinois?
 Answer: Because his father (Thomas
Lincoln) was the defendant in a title claim
in Kentucky where he was born. Rather
than pay to defend against the claim, they
moved to Indiana (and then later to
Illinois).

 In 1868, Watson v. Muirhead was heard by the
Pennsylvania Supreme Court.
 Muirhead (plaintiff) had lost his investment in a
real estate transaction as the result of a prior
lien on the property.
 Watson (defendant), the conveyancer, had
discovered the lien prior to the sale but told
Muirhead the title was clear after Watson’s
lawyer had (incorrectly) determined that the lien
was not valid.

 The court ruled that Watson was not liable
for mistakes based on professional (the
lawyer’s) opinions.
 Like Thomas Lincoln, Muirhead lost big
time.
 As a result, in 1874, the Pennsylvania
legislature passed an act allowing for the
incorporation of title insurance companies.

What is Title Insurance?
 Title insurance originated as a contract of
indemnity that covers the insured person
against loss or damage arising out of
existing title defects or encumbrances
other than those specifically excepted.
 Modern extended coverage policies also
include protection for certain post-closing
events, such as forgery.

Torrens AND Title Insurance?
 If the Torrens System says the State
provides assurance as to title, why
would we need title insurance?

 To promote ease of transaction, the Torrens
system reverses some of the property rules of
common law conveyancing.
 A purchaser for value (and, in some jurisdictions, a
gratuitous transferee) obtains upon registration a
title that cannot be impugned on the ground that
the seller’s title was defective, or that the
conveyance from the seller to the purchaser was
invalid for any reason.
 REGISTRATION = TITLE

 The Torrens system compensates the ‘true
owner’ for the loss of his or her property right
pursuant to this rule.
 Under the Torrens system, a man is to have
either his interest in the land or adequate
monetary compensation therefor.
 In reality, there are gaps in the coverage
provided by the State guarantee. The gaps,
and the extent to which title insurance can
remedy them, are as follows:

 Registration Gap
 The Torrens System operates only upon
actual registration (not submission).
 The period between acquisition of a
property right and the actual registration of
it is the “registration gap,” one of the major
problems facing the Torrens system.

 First Resort or Last Resort?
 Title insurance can improve upon the protection provided
by the Torrens indemnity by giving greater coverage
against risk and improved enforcement of rights.
 The Torrens statutes may vary considerably in their
provisions for enforcement of remedies. In some
jurisdictions, the Torrens indemnity operates as a fund of
last resort. In these jurisdictions, claimants must first
exhaust their remedies against the person who was
responsible for the loss or who has benefited by the error
before becoming eligible for payment from the fund.

 Additionally, the trend of recent legislative
change in Torrens jurisdictions has been
to restrict rather than to extend right to
indemnity.
 Governments have become increasingly
unwilling to indemnify for losses caused
wholly or partly by the fraud or negligence
of agents and professionals acting for the
claimant.

 With Title Insurance, the insured is
entitled to payment of the indemnity
without any necessity to bring a legal
action against the insurer or any other
person who caused the loss. (First
Resort).

 Post Acquisition Risks
 The extension of the modern title insurance policies to
cover post-acquisition risks makes title insurance more
attractive to holders of Torrens titles, since the principle of
immediate indefeasibility (some jurisdictions) has reduced
their security in the period following registration.
 Under the rule of deferred indefeasibility (other
jurisdictions), registered owners deprived of their interest
by the registration of a forged or otherwise void instrument
were entitled to be restored to the register.

 The shift from deferred to immediate
indefeasibility improves the security of
purchasers, but increases the risks that
“true owners” may be deprived of their
titles after registration through the wrongful
act of another.
 In effect, immediate indefeasibility
operates to shift risk of loss from the pre-
acquisition to the post-acquisition stage.

 Duty to Defend
 Under a title insurance policy, in addition
to indemnity, the insurer undertakes to
cover the costs, legal fees and expenses it
incurs in defending the insured’s title.
 The costs incurred by the insurer in
defending the insured’s title do not reduce
the amount of the indemnity for loss
payable under the policy.

Torrens AND Title Insurance!
 Each has its strengths.
 Each has its weaknesses.
 The two are NOT incompatible
 And actually can complement each
other.

Background on Torrens – What
happened in the US?
 Economies of scale are needed to realize costs savings for
Torrens systems,
 Secondary use is the major benefit not initial,
 Large initial volume is needed,
 Private sector initially provided strong opposition and
mobilized resources to transfer the volume to the market.
There was no such lobby for Torrens,
 Requires government to take liability and provide
guarantee,

Background on Torrens – What
happened in the US?
 Many benefits to the system are external to the person
receiving title,
 State had to compete with private sector to hire and train
highly skilled staff,
 Title Insurance developed quicker than State Assurance
Funds,
 US is large and land recording is fragmented to the local level
3592 offices, and
 Inertia. Historically deeds systems had been in place for 200
years before Torrens was introduced.

Open Discussion
 Questions?
 Comments?
 Interrogatives?

Property Records Industry Association
Torrens Land Registration
Carol Foglesong
carol.foglesong@occompt.com
Peter Rabley
prabley@landsystems.com
Mark Monacelli
monacellim@co.st-louis.mn.us
David Ewan
DEwan@njtic.com

Torrens Land Registration Explained

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Editor's Notes