The Gazette 1993

JAN/FEB 1993 '

GAZETTE

It is not surprising to discover that there are parallels in the general operation of the Torrens system with that of the Land Registry in Ireland. Title is registered in an official book which is "conceived as being a permanent and complete record of the exact status of the title and the sole and conclusive legal evidence of title 6 ," an owner's certificate of title with an identifying number is issued by the registrar, a duplicate of which is delivered to the holder of the registered estate; subsequent interests in the registered estate are valid only if filed and noted on the face of the original certificate; transfers are effected by presenting to the registrar a fully executed instrument in a form prescribed by statute; transferees are not bound to inquire behind the official certificate and, in the absence of fraud, take title without being charged with notice of unregistered interests; and assurance funds have been established to compensate those demonstrating a loss caused by the registration process. To initiate registration a property owner must petition a court by means of an in rem action against the property. Notice must be published and an order made for an examiner of titles to examine the records and investigate the claims and allegations made in the petition. If title is found in the petitioner, the court issues a decree which enables the property to be registered. The high cost and expense of this judicial proceeding (perceived as essential to satisfy constitutional due process requirements) has been called the greatest theoretical and practical barrier to the establishment of the Torrens system in the United States not counting the opposition of various vested interest groups. 7 A major player among those groups is considered next.

title, eventually became a standard conveyancing practice for unregistered land in most areas of the country. In 1868 the Supreme Court of Pennsylvania held that a title abstractor could be found negligent in performing a title search, 8 a decision which is generally credited with influencing the establishment of the title insurance industry. 9 Title insurance companies were soon after incorporated in the major East Coast cities and, beginning in the early part of this century, competed with the new land title registration systems. 10 In the 1920s institutional lenders began making record numbers of mortgage loans as a result of the nationwide residential building boom. They soon realised that a more standardised form of title protection could be obtained for their mortgages by using title insurance instead of lawyers' title opinions. The advantages of title insurance also became clear to the lenders in marketing the bulk sale of discounted mortgages in the newly developed secondary mortgage market. 11 While most institutional lenders traditionally made loans to their business base, life insurance companies began to lend nationally and buy discounted mortages in bulk from other lenders. Life insurance companies were instrumental in influencing the title insurance industry to standardise the policies issued by its constituent members so that the type of coverage available was similar nationwide. This enabled the life insurance company's home office, from a title perspective, to quickly and accurately decide whether a second hand mortgage would be acceptable wherever the property was located. One result of the lenders' actions was a tremendous increase in title insurance business and a recognised presence for the industry. Today, title insurance companies are permitted to sell title insurance in all states except Iowa and in 1989 alone their combined yearly operating revenues were $4.1 billion. 12 While the lawyer's title opinion is still used in

some, particularly rural, areas of the country, in some states, such as California (which no longer has a system of title registration), real property transactions are rarely conducted without title insurance. b) How does title insurance work? In essence, a title insurance policy is an indemnity to make good a loss up to a stated maximum if it is determined that the actual title of insurance differs from almost all other types of insurance in that the risks insured against are not based on the occurrence of a future event. As one commentator put it: "with other forms of casualty insurance, the effective date from which coverage commences means that the insurance policy will reimburse the insured for loss caused and suffered after the effective date shown on the policy. However, title insurance is entirely different in this regard. The title insurer will reimburse the insured, subject to the policy terms, for loss caused before but suffered after the effective date of the policy." 13 the interest insured is not as described in the policy. Title "Title insurance differs from almost all other types of insurance in that the risks insured against are not based on the occurrence of a future event." Typically, after the opening of an order with a title insurance company a title search is usually conducted. Title insurance companies or their agents, usually abstract companies, own and operate "title plants" which literally contain, by arrangement with the Recorder's office in each county, complete copies of all documents and instruments affecting real property recorded in that county. Title plants are, however, organised differently than most Recorders' offices and use a " t r a c t" index which identifies all recorded interests pertaining to a particular parcel of property (similar

III. The Title Insurance Industry

a) History. The preparation of abstracts of title by professional abstractors or examining lawyers together with, in many instances, a lawyer's opinion as to the state of

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