Why didn't Torrens title catch on in the US?

[Muffin]

@Ken001

Do you guys use Caveats to protect unregistered title interests? NetLaw - Civil Law We use them sparingly and they are very useful.

We use a Certificate of Pending Litigation (via motion to a Court) in conjunction with the commencement of a claim, which does not prohibit a property transfer, but does record (and deems that all are put on notice) that the there is a claim against the property – it changes the nature of the action from in personam to in rem, so just as the Torrens trumps a lien if a lien is not registered in time, a Certificate of Pending Litigation clouds the title despite it being under Torrens. That usually scares away potential purchasers and potential mortgagees.

Beyond this, we use an Injunction (via motion to a Court) to prohibit transactions, but the test is a bit tougher.

Apart from this, under the Torrens/Land Titles legislation, a Caution (via application to the Land Registrar) is used to block transfers for a couple of months. By running into the Land Title’s office with one’s hair on fire, an application for a Caution can sometimes be a quicker way of blocking a transaction than putting together a claim and making a motion for a Certificate of Pending Litigation. (In my region, judges tend to be available, and the Land Registrar is not thrilled about dealing with litigation, so I go by way of a quick and dirty claim and CPL motion without notice, and then amend my claim once the CPL is in place, rather than go through the Land Registrar for a Caution.)

[barbitu8]

@Noel_Prosequi

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.

Where do you live? Canada? In the US, you must bring an action to get the property into Torrens. All necessary parties must be made parties. The Torrens Dept. in Cook County, Ill. had examiners who examined the title before the initial registration to ensure the proceedings covered all bases. They didn’t rely on papers you brought in but made their own independent search, using the tract books right across the aisle in the Recorder’s Office, judgment searches, and tax searches. (Since Torrens has now been abolished, I suppose there is just a skeleton staff there now.)

Other possibilities of claims are forgery and federal tax liens. No state law is going to preempt the federal government’s lien on taxes, which do not have to be recorded, registered, etc. As to state insurance, I was referring to a previous post that stated the Queen had much more resources than any title company. I agree that the Torrens system is not state insurance, as there is an indemnity fund set up.

Muffin, your link to the Canadien case refers to Canadien law, and the Mechanics Lien law refers to registration. Illinois law has no reference to registration, and the only county in Illinois which ever had Torrens (Cook) now has repealed the Torrens Act.

Ken oo1

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.

FDIC is a quasi-government corporation set up by the federal government to guarantee loans. SCOTUS long ago ruled that SSA disability insurance benefits are not insurance payments, but entitlement benefits.

[Northern_Piper]

[QUOTE=barbitu8]

[QUOTE=Ken 001]

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.
[/QUOTE]

FDIC is a quasi-government corporation set up by the federal government to guarantee loans. SCOTUS long ago ruled that SSA disability insurance benefits are not insurance payments, but entitlement benefits.

[/QUOTE]

I think Ken 001 was responding to your post that stated:

[QUOTE=Barbitu8]
(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.
[/QUOTE]

The Federal Deposit Insurance Corporation is in fact a federal government entity which provides insurance, not for loans, but for the deposits of ordinary citizens in accounts in banks which participate in the FDIC. And while the bulk of the insurance fund comes from premiums paid by the banks, the ultimate guarantee is the United States government, as the FDIC explains on its web-site:

[QUOTE=FDIC]
Symbol of Confidence

Each depositor insured to at least $250,000
…

When a Bank Fails
The FDIC pays depositors within just a few days after an insured institution fails, usually the next business day. The FDIC protects depositors in one of two ways – by either:

Facilitating a merger with another FDIC-insured institution, or

Issuing a check to each depositor for the insured portion of their accounts at the closed institution.

FDIC’s Deposit Insurance Fund
The FDIC is funded by its member institutions through premiums and assessments paid on deposits. And, if ever needed, the FDIC can draw on a line of credit with the U.S. Treasury.

Full Faith and Credit of U.S. Government
FDIC deposit insurance is backed by the full faith and credit of the United States government. This means that the resources of the United States government stand behind FDIC-insured depositors.

The Federal Deposit Insurance Corporation is an independent federal agency created in 1933 to promote public confidence and stability in the nation’s banking system.
[/QUOTE]

So saying that Torrens couldn’t be adopted in the United States because no government would provide an insurance system is met by the counter-example of an extremely important federal agency which does just that.

If the federal government can provide an insurance system to protect bank deposits of ordinary citizens, why can’t the state government provide an insurance system to protect land title, which is an equally important asset for the average citizen?

[Northern_Piper]

@Muffin

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.
…
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.
…

Torrens combined with electronic search and registration is the shiznits.

Glad to hear it. It would make Professor H.R.S. Ryan proud.

On our first day of Land Trans, Ryan, then in his late 70s, said to us:

"You may in your life time see all of Ontario under a Torrens system.

As for me, I have given up hope."

[Northern_Piper]

@barbitu8

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?

Yes, a lien is a charge on the land. But to be effective in burdening the land title, the lien must be registered.

[Noel_Prosequi]

@barbitu8

Where do you live? Canada? In the US, you must bring an action to get the property into Torrens. All necessary parties must be made parties. The Torrens Dept. in Cook County, Ill. had examiners who examined the title before the initial registration to ensure the proceedings covered all bases. They didn’t rely on papers you brought in but made their own independent search, using the tract books right across the aisle in the Recorder’s Office, judgment searches, and tax searches. (Since Torrens has now been abolished, I suppose there is just a skeleton staff there now.)

Other possibilities of claims are forgery and federal tax liens. No state law is going to preempt the federal government’s lien on taxes, which do not have to be recorded, registered, etc. As to state insurance, I was referring to a previous post that stated the Queen had much more resources than any title company. I agree that the Torrens system is not state insurance, as there is an indemnity fund set up.

Muffin, your link to the Canadien case refers to Canadien law, and the Mechanics Lien law refers to registration. Illinois law has no reference to registration, and the only county in Illinois which ever had Torrens (Cook) now has repealed the Torrens Act.

Ken oo1 FDIC is a quasi-government corporation set up by the federal government to guarantee loans. SCOTUS long ago ruled that SSA disability insurance benefits are not insurance payments, but entitlement benefits.

I live in Oz, home of all things Torrens. No wonder it failed in Cook if you have to go to the trouble of bringing suit to get Torrensed. The way it worked here was that whenever you wanted to sell a property after the cutoff date, you had to transfer it to Torrens. Mortgagees were protected because they had the title deeds (that’s how old system mortgages worked) so the transfer couldn’t go ahead without them knowing about it. And the vendor and purchaser all had a clear interest in going ahead. In those days (the 1860s), exotic encumbrances on title other than mortgages were rare. And there wasn’t a Federal Govt in existence to worry about. So while land title is a state matter and income tax a federal matter here, the historical reality that the Federal Govt did not come into existence until after Torrens was well established throughout the colonies meant that we have no problems with the Feds registering whatever interests they may claim.

[Ken001]

@Muffin

We use a Certificate of Pending Litigation…it changes the nature of the action from in personam to in rem, so just as the Torrens trumps a lien if a lien is not registered in time, a Certificate of Pending Litigation clouds the title despite it being under Torrens.

…a Caution (via application to the Land Registrar) is used to block transfers for a couple of months. By running into the Land Title’s office with one’s hair on fire, an application for a Caution can sometimes be a quicker way

May I say how much I’m enjoying this discussion. Thankyou Muffin and everyone else. By golly I haven’t heard in personam and in rem used in a conversation in decades.
Sounds like the Caution is similar to our Caveat, the main difference being a Caveat can sit on a title for years if the registered proprietor doesn’t try to sell or encumber the property.

[Ken001]

@Northern_Piper

So saying that Torrens couldn’t be adopted in the United States because no government would provide an insurance system is met by the counter-example of an extremely important federal agency which does just that.

If the federal government can provide an insurance system to protect bank deposits of ordinary citizens, why can’t the state government provide an insurance system to protect land title, which is an equally important asset for the average citizen?

YES! Northern Piper for the win! Thank you.

[barbitu8]

@Northern_Piper

Yes, a lien is a charge on the land. But to be effective in burdening the land title, the lien must be registered.

That sounds like something from Alice in Wonderland. Muffin’s cite to the case re mechanics liens appears it hinged to some degree on the fact that the mechanics lien law referred to registration, something the Illinois law doesn’t. The court there acknowledged the conflict between the two laws.

It would take a great change in mindset for the state government to begin insuring land titles. Taxes would have to be increased to cover the loss contingencies. It sounds like in Canada, or at least in Ontario, the government is very active in the conversion. That is something that a non-socialist government is not apt to do.

FDIC was created to foster the nation’s banking system. Funds are primarily paid out of the indemnity fund, and, if needed, the government would cover any further loss. It guarantees the loan. Insurance is secondary, if needed. I believe SCOTUS has ruled that the federal government cannot be in the insurance business, and it upheld Social Security not because it is insurance, but it is an entitlement program.

[Northern_Piper]

It sure sounds like a federal insurance program to me: the FDIC charges premiums to the banks, based on the size of the accounts they hold; if the bank gets into financial trouble, FDIC pays out on the insurance to the account-holders as needed.

In any event, whether the federal government can run an insurance program or not is irrelevant to this discussion, isn’t it? Land titles systems are a state matter, not federal, and states have plenary powers, except as limited by the federal Constitution. So before you can say that the insurance fund would be unconstitutional, you would have to point to something in the state constitution that would bar it.

And sure, FDIC was created to foster the nation’s banking system - by providing certainty of protection to deposit holders. Their money is safe, up to a quarter million. That prevents runs on the bank, increases consumer confidence, all sorts of good things for both the individual deposit holder and the economy at large. But that same sort of policy can apply equally to land titles - by creating a more secure system of land titles, it creates greater confidence for the individual land-holder, and the economy generally. And by requiring that everything must be registered to be effective, it creates greater transparency in the system and may help prevent the slicing and dicing and lost mortgages that have been plaguing the housing market during the downturn. But I fail to see how any of that is socialism - it’s a government program that increases the security and confidence in the private real estate market, for individual and corporate property holders. That in turn helps keep that economic sector strong.

[Muffin]

It’s circular. If something is not wanted, it is called socialist. If something is called socialist, it becomes not wanted. Once looping about like this, the merits are no longer relevant. It helps explain why some immediate and obvious things are not done.

[barbitu8]

What percentage of Americans own houses? What percentage of Americans use the banks? I don’t have the statistics, but a great portion of the population don’t own their own homes, but do bank. Should a state get involved in a system in which many people will have no stake?

Why did Illinois, the only state I know of that allowed a county to have the system (although Wikipedia names others), rescind that law?

But your question was why didn’t Torrens catch on here? I think that has been answered. By the time of Torrens, most of the land was in private ownership. In Illinois, to enter the system, you had to file an action first. That part of Canada which is converting to Torrens is doing so with the help of the government, and, it appears, that no lawsuit need be filed. In the USA, in the late 1800s, abstracts were common, and many lawyers made a living examining them and issuing their opinions. Then title companies sprung up. A title policy guarantees good title - if there is good title to be had, but if not, the seller is given a chance to clear the title.

Even in Canada, the issue of mechanics liens being a lien if not noted on the Certificate was murky. In Cook County mortgagees demanded a policy whether the property was in Torrens or not, which is probably the reason for the rescission of the law: Most property in Torrens also has a title policy.

In addition, in many cases where there is new construction, mortgagees did not want “questions of surveys” as an exception to their title. That exception probably appears on Torrens certificates, too. Torrens cannot guarantee that a building is within the legal description described in the certificate. Mortgagees want to know that the construction is within the boundaries of the legal description. They pay title companies extra to have surveys done and get extended coverage over survey questions. How does that work in Canada? I suppose the mortgagee can hire surveyors and get the surveyors’ opinion, but the title company will guarantee that the survey is accurate and there are no encroachments.

[barbitu8]

I should add that extended coverage is not that important in single residential homes. But when you are lending millions of dollars in high rises, large commercial structures, etc., you sure want to touch all the bases.

[Muffin]

@barbitu8

That part of Canada which is converting to Torrens is doing so with the help of the government, and, it appears, that no lawsuit need be filed.

The government is performing conversions, and apart from this, properties are converted whenever a party wishes to change what is registered on title. For example, if Fred’s house is not under Torrens / Land Titles, and Fred sells to Wilma, the usual title searches will be done under the registry system by Wilma’s title searcher, and then handed over to the land registrar, who will the use this as part of converting over to Torrens / Land Titles, with no further bother to Fred or Wilma.

@barbitu8

Mortgagees want to know that the construction is within the boundaries of the legal description. They pay title companies extra to have surveys done and get extended coverage over survey questions. How does that work in Canada? I suppose the mortgagee can hire surveyors and get the surveyors’ opinion, but the title company will guarantee that the survey is accurate and there are no encroachments.

Be it Registery or Torrens / Land Titles, the placement of the buildings is not related to the property boundaries, and the owner / purchaser / mortgagee is not insured or guaranteed by the government with respect to where the buildings might be situated. Yes, private title insurance is always recommended by the real estate lawyers and usually purchased by the property purchases, and yes, such title insurance covers misplaced buildings, but even then we also recommend that a survey be done, for it is better to not have a problem in the first place than have a problem and recover from insurance. Almost always the mortgagee requires that title insurance be in place (along with fire insurance etc. for the buildings). My practice is to have the purchaser and mortgagee execute a release if title insurance is not put in place.

[Spoons]

@Muffin

Be it Registery or Torrens / Land Titles, the placement of the buildings is not related to the property boundaries, and the owner / purchaser / mortgagee is not insured or guaranteed by the government with respect to where the buildings might be situated. Yes, private title insurance is always recommended by the real estate lawyers and usually purchased by the property purchases, and yes, such title insurance covers misplaced buildings, but even then we also recommend that a survey be done, for it is better to not have a problem in the first place than have a problem and recover from insurance. Almost always the mortgagee requires that title insurance be in place (along with fire insurance etc. for the buildings). My practice is to have the purchaser and mortgagee execute a release if title insurance is not put in place.

In western Canada, the Western Law Societies Conveyancing Protocol, which can only be used for certain conveyances (but single-family residential properties are among them) looks after a lot of things. In most cases, the Protocol requires a survey when a property transfers. This helps to ensure that any buildings, etc. are sited correctly on the land; but more importantly, it reassures mortgagees. Consequently, mortgagees do not require title insurance policies, and so, very few title insurance policies are sold out here.

I don’t do a lot of real estate so I am not up on the fine points of Protocol transfers, but according to my colleagues who do a lot of real estate, a Protocol transfer under Torrens is about the safest you can get.

[Muffin]

@Spoons

In most cases, the Protocol requires a survey when a property transfers. This helps to ensure that any buildings, etc. are sited correctly on the land; but more importantly, it reassures mortgagees. Consequently, mortgagees do not require title insurance policies, and so, very few title insurance policies are sold out here.

Interesting. More thorough than Ontario.

[Spoons]

@Muffin

Interesting. More thorough than Ontario.

I can certainly understand if Ontario has a few challenges as it transitions. I (personally, not professionally) sold a piece of land in Ontario recently; it had originally (that is, many years ago) transferred under a registry system, and my recent sale of it brought it under Ontario’s Torrens system, much as was referred to in the “Fred and Wilma” example upthread. In spite of changing systems, the transfer was as smooth as glass; my Ontario lawyer looked after the details, and all I had to worry about was his bill. Which was reasonable.

IM personal E, when buying and selling land in Alberta, the Western Protocol has made things easy and cost-efficient; when selling land in Ontario, I found the transition to Torrens to be seamless. I’m unsure why things need to be more difficult.

[barbitu8]

How do title insurance companies remain in business in Canada if all transactions are in, or will be in, Torrens? Reference was made to one, but I have to assume that they all will go out of business.

[Muffin]

@barbitu8

How do title insurance companies remain in business in Canada if all transactions are in, or will be in, Torrens? Reference was made to one, but I have to assume that they all will go out of business.

If it were extended health insurance, or disability insurance, I would say that the insurance companies keep in business by collecting premiums and denying reasonable claims, but from what I have seen, title insurance companies are a bit different in this respect in that they seem to be pretty good at paying out on reasonable claims.

In Ontario, Land Titles (Torrens) covers loss from errors or omissions of the land registration system, errors in recording by land being brought under the act (note that fresh surveys are not needed to convert into Torrens here in Ontario), errors in recording an instrument in the automated land registration system (note that Ontario registration is entirely electronic/on-line now as opposed to paper based), and fraud (depending on the circumstances).

Title insurance covers the above plus things like work orders which arise from the failure of previous owners to obtain proper permits, encroachments of buildings over lot lines, access related problems, fraud, and problems that would have been identified by either on-title searches (e.g. mortgages) or off-title searches (e.g. filed writs, property taxes and some utilities). Some title insurance companies (for example the one started by the Law Society/bar association in Ontario) also cover errors and omissions by lawyers that do not affect title (for example, if a lawyer sets up expensive bridge financing when the client wanted to pay cash), and there is a Law Society/Bar Association fund that covers solicitor’s fraud.

Yes, there is some degree of overlap between what the government covers, what title insurance covers, what lawyers’ errors and omissions insurance covers, and what the Law Society’s/bar association’s fraud fund covers.

You wonder how title insurance companies stay in business here, but another way of looking at would be to wonder when real estate lawyers will be made less necessary for simple transactions by title insurance companies moving in to handle the transactions themselves, cutting back on the legal work, and simply re-insuring the hell out of everything, so as to ultimately be able to reduce the price to the clients.

DISCLAIMER: Some people believe in god. I don’t, other than to hold to the general premises that banks are not your friends, and insuance companies are evil, so before anyone goes running out to purchase title insuance figuring that it will take care of things when everything goes down the shitter in the house you thought you owned after you paid for it, or before anyone does not purchase title insurance figuring that the gub’m’nt will take care of it while you lay about on your neighbour’s couch, please note that the law will vary by jurisdiction, each insurance policy is different, I am not your lawyer, I am in fact a cat walking on a keyboard, I am not giving you legal advice, you should get off your ass and hire your own laywer to advise you, and if you should try to sue me, I will sue you for emotional shock and anonymously report you to homeland secuity for being a terrorist.

[barbitu8]

When my cat walks on my keyboard (which happens all too often), he makes more sense than I do.