A lien, of course, runs with the land. There is no requirement to register it in the Torrens system, which, BTW, has been abolished in Illinois. The Torrens system in Illinois maintained an indemnity fund for claims against it.
The possibility remains that the court case placing the property under the Torrens Act may have been defective since a necessary party was not made a party, and that was overlooked.
In any event, mortgagees here require title policies now, which is the main reason they have become common in downstate Illinois (in lieu of an attorney’s opinion). The mortgagee just passes the fees unto the borrower.
For barbitu8, and any other interested folks, I was able to find an example of an Alberta title certificate. You can see it at page 15 of this link (warning, large PDF).
Notice that the example shows a legal description, and ownership as joint tenants in fee simple. It also shows all the encumbrances–in this case, there aren’t many, but the heading “Encumbrances, Liens, and Interests” should serve to show that this part of the certificate would list mortgages, liens, and easements as of the date and time that the certificate was pulled.
The booklet as a whole is worth a look for an explanation of how titles work locally, but I hope at least that the example certificate serves to illustrate Northern Piper’s original point: that he can pull a title in about a minute, and understand all there is to know about it.
A bit of follow-up that I should have mentioned earlier…
As Northern Piper mentioned, WYSIWYG. If any kind of encumbrance is not recorded on title, it doesn’t exist against the land. A contractor may have a valid reason to slap on a builder’s lien, but if he does not register it as an encumbrance on title, it does not exist, for purposes of enforcement against the title.
I’ll add my approval of Northern Piper’s earlier post: the Torrens “assurance fund” is backed by the provincial government, which likely has far more resources than any title company. A good point, and a fine post.
Short version: Illinois implemented a half assed system with little resemblance to proper Torrens, and like most half assed compromises, it doesn’t work.
A proper Torrens system doesn’t have these issues, as NP outlines
The Illinois law re mechanics liens do not require any recordation or registration. I tried to check the Torrens law in Illinois concerning that, but most of the sections have been abrogated as all new registrations have ended. It is true, however, that in Illinois, judgments had to be noted on the certificate to be a lien. (I couldn’t access your link. “Internet Explorer has stopped working.”)
Here we have a fundamental difference - there’s no “of course” in our system about the lien running with the land. It does, if it’s registered.
This is one of the advantages of implementing Torrens from scratch, which was the case in the western Canadian territories - the great majority of land titles started out registered under the Torrens system, so there was no need for a court action to bring the title under Torrens. There were some patents which pre-dated the land titles system and had to be brought onto it by application, but by and large that hasn’t needed to be done for over a century.
Torrens system is clearly better than the system which existed prior to it of having to keep a bunch of paper deeds back to Adam and Eve. Title Insurance is a less satisfactory arrangement than certainty in the first place. Title transfer under Torrens is not completely effortless, but it is still a lot simpler than the alternative.
All the ballyhoo about American banks post the GFC trying to foreclose and not being able to prove proper entitlement what with the bundling and reselling of mortgages would simply go away under the Torrens system.
I recall a lecturer at law school telling us that attempts at Torrensification in the US had resulted in very expensive litigation against the state. I couldn’t understand why this might be so, but the idea of an incomplete compromise Torrens system makes that feasible.
Where Torrens systems have been set up, it has typically been in an environment of nearly “green fields” land law, typically young colonies. As a result the costs of conversion were relatively low. I imagine the upfront costs of conversion from a well-established system would be very high indeed. Like converting from left hand to right hand drive. Once the system is set up, it works like a song, but getting there is massively disruptive. There is, as it were, too high an “energy hill” to climb before one sees the benefits on the other side.
I have been wondering about this point for some time - how could there be any doubt about who has the mortgage? but you’re right - if it’s a system of title registration, rather than Torrens title, there may not be a need to register it to keep the interest valid. Torrens requires that the mortgage instrument be registered to be effective, and the mortgage document must be identified with sufficient particularity that it is clear who holds the mortgage. Not all the dicing and slicing which appears to have happened in the US.
That’s exactly what the problem with going Torrens has been in Ontario. The earliest settled parts of Ontario (i.e. around the Great Lakes region) were settled pre-Torrens, and so are on a registry system; later settled areas are on a Torrens system of some sort, if I recall my Land Trans class correctly. There was some hope that the registry areas would be gradually converted to Torrens title, but I don’t know if that’s been happening.
I have to say this has been an extraordinarily interesting thread (and outstanding OP question, Northern Piper!), especially because I didn’t know what the Torrens title system wasn’t used in the US… it’s always struck me as such a fundamentally “right” way of doing things that I’m surprised to discover it hasn’t been implemented universally in the Western world.
By definition, a lien is a charge upon the land, not the persons. If the mechanics’ liens laws state that it is a lien, does the fact that it is in Torrens overrides that?
I think Noel Prosequi’s post is the main reason Torrens has not been popular in the USA. In the western provinces of Canada private ownership to most land did not come about until the concept of Torrens was developed.
So, the reasons why Torrens did not catch on in the US are the following:
(1) The time-consuming and expense of bringing a suit for each parcel of land to bring it into Torrens (“upfront costs of conversion”).
(2) America is not a socialist country. No government is going to be the insurer. In fact, the federal government has no authority under the Constitution to insure anything. The insurance is provided by an indemnity fund set up by registration fees.
This may be related to what I posted above.
(3) The Torrens system does not protect against fraud or forgery. True, there is that indemnity fund, but if it runs out, you are SOL.
(4) Mortgagees required title policies to even those parcels which were in Torrens in Cook County, Illinois.
(5) Title companies will defend your title, which can be quite costly if you had title to the Prudential Building, for example, as noted in the prior thread to which you linked.
Here in Ontario, a construction lien must be preserved by registering it on title (following which it must be perfected by a claim being commenced). If the property is properly transferred (i.e. no fraudulent conveyance) prior to the lien being registered, then the lien fizzles, leaving the contractor having to seek relief against the owner, often resulting in a merry chase for the proceeds of the sale.
We use the Torrens land registration system in New Zealand and nobody here can understand why other countries have no adopted it everywhere.
A piece of land, usually with a house on it, is the most significant investment most people can make. It stands to reason that certainty of the title to that land is guaranteed and sacrosanct.
In New Zealand all land titles are issued by the government and the government guarantees title. The only exception under Torrens is fraud - but even then a bone fide purchaser for value obtains an indefeasible title. The defrauded owner can try to claim compensation but they cannot get the land back.
Frazer v Walker [1967] 1 AC 569. The wife mortgaged the property, forged her husbands signature on the Memorandum of Mortgage, took the money and ran. He only learned when the mortgagees auctioneer knocked on the door. Curiously enough he later reconciled with his wife.
barbitu8, it’s not necessary to bring a suit to bring a piece of land under Torrens. The way the transition works is that after a certain date, all conveyances of land have to be done under Torrens, which just means bringing your old system papers in for certification where they are checked, and then the purchaser gets a shiny new Torrens title instead of a bunch of mouldy old papers. This requires a large bureaucracy to manage the initial transfer to Torrens, but once the system is set up, the work does not need to be repeated for every conveyance thereafter.
To say Torrens does not protect against forgery or fraud is not really an issue. There is enough capacity to bring suit to correct the record that a plan to steal land by fraud is rarely viable in practice. I see that someone has mentioned Fraser v walker- that case does not really affect my primary point that such things are rare.
The issue of “socialism” is a red herring. If the state certifies land in error, the state is liable for the loss. This is not insurance as such-primary liability vests in the state, but the state does need a prudential fund to cover the unlikely contingency.
There are modest problems. For example, in speculation driven booms, the titles office is sometimes swamped so that transfers can’t be managed as quickly as properties are being flipped, but even that is manageable.
Yes, the transition is going quite nicely. The government has been busy as beavers at converting properties from one system to the other, and apart from that, when something is placed on or removed from title, the property is brought over into Torrens at that time.
Once under Torrens, it saves having to make a forty-year title search every time title is changed, which gets to be a bit redundant. This speeds up transactions while at the same time cutting the cost passed on to clients.
What has really made Torrens in Ontario shine is the move to electronic search and registration, which has been phased in while the transition to Torrens has been made. The real estate clerks have the information they need at their fingertips, and when they register, they don’t have to fiddle about getting papers over to the registry office. For litigation folks, it makes fact gathering quicker and cheaper.
Torrens combined with electronic search and registration is the shiznits.
In New Zealand construction liens were abolished in 1989 because of the litigation and complexity they imposed on innocent property owners who just wanted a house built. There is an alternative Building Resolution procedure.
Let me say that as a conveyancing lawyer I envy those of you who retain the Deeds System. Why? The extra work required, the intellectual puzzle of tracing a piece of land back into history, the litigation possibilities…Dang!! You guys have it made.
Torrens is straight-forward. Unfortunately that means clients undervalue lawyers work and conveyancing fees are very low.
As a matter of interest we still have a Deeds Registry but its under Torrens and I suspect most young lawyers aren’t even aware of it these days. It makes no difference in practise and I’ve never heard of a claim against an old deeds based title.
Everythings computerised these days after watching our Canadian cousins trial that first. I do miss the old goatskin and waxed paper titles though. An A4 printout of a computer register title looks so bland and cold by comparison.
I can certainly see why that was done. Here we try to simplify that by treating construction liens in a manner that is somewhat similar to class actions – gather up all the various pissed off contractrators and sub contractors, mortagees and owner into one case, and then have a single judge ride herd on it all (or if everyone is on-board and judge time is scarce, divert it to alternative dispute resolution, such as arbitration). It works for commercial projects quite nicely, but for Joe homeowner, it is confusing, for holdbacks, sheltered liens, and mortgage/lien priorities make most folks jump out the nearest window, and some litigation lawyers avoid it due to the technicalities, making it a bit of a boutique practice area (for example, in my region of our province, we have so few lawyers who are comfortable handling construction lien litigation matters that there is considerable passing of clients about so as to avoid conflict of interest).
When I was working in the States 20 years ago my bank account was insured by the Federal Deposit Insurance Company which is an agency of the American government. I and everyone I knew believed the federal government guaranteed our meagre savings.
As for fraud, nothing can protect against that. Dishonesty happens. However Torrens does protect the innocent buyer who obtains clear title and certainty. The loser can be compensated - that isn’t ideal but its a tradeoff which provides land dealings with utter integrity.
Torrens works best under a government hand. Unlimited funds and a dispassionate interest in keeping land ownership clear for all citizens. There is no vested interest, no insurance companies, no title companies, no aspect open to the vagaries of human behaviour.
Yes been there, done that in my youth. As you say, it works for large projects where there is a lot of money at stake. Still I never want to have to argue competing priority of builders liens again. That is head churning stuff.
Do you guys use Caveats to protect unregistered title interests? NetLaw - Civil Law We use them sparingly and they are very useful.
A post further up refers to an encumbrance being registered followed by seeking a court order to sustain or validate it. That’s really the same thing as a Caveat although you don’t have to sustain it here by court order until notified by the Registrar of Land - who does so immediately upon the owners request.
