GAZETTE
JAN/FEB 1993
Title Insurance -v- Title
Registration in the United States
by John G. Olden, BCL, Solr.
Member, California Bar.
Introduction
Difficult questions relating to the
certainty of title and the priority of
competing inerests in real property
confront conveyancers in the United
States as in Ireland and elsewhere.
The title concerns of purchasers,
mortgagees and others are alleviated
to a greater or lesser extent by
various statutory schemes and
conveyancing practices which have
evolved in each jurisdiction over time.
One legislative system designed to
offer more than a modicum of title
protection - the registration of title
- has been widely regarded as a
superior means to eliminate
uncertainty in land titles, to simplify
the conveyancing process and to
cheapen the cost. However, title
registration has been vigorously
resisted in the United States since its
inception. The preferred and
prevailing custom in most areas of
the country is to insure the accuracy
of title through a policy of title
insurance underwritten by a title
insurance company. This article looks
at the historical development and
operation of these two mutually
exclusive concepts Stateside, explores
the nature of title insurance and
«amines the reasons for title
registration's general lack of success.
Firstly, it is helpful to briefly discuss
the
recording system
1
which affects
unregistered land in the United States.
L The Recording System
The earliest known evidence of a
conveyance in North America is that
of a deed written into a record book
°f the Plymouth Colony in 1627, a
practice which appears to have had
Dutch origin.
2
The new settlers, who
believed land was essentially an
economic commodity, made it a
Priority to devise methods to protect
good faith purchasers and quickly
John G. Olden
enacted recording statutes of limited
scope and purpose, the non-English
colonists basing theirs on continental
European title systems and the
English colonists on the Statute of
Enrollment.
3
One feature of the
early statutes, found in present day
recording statutes in the United
States, provided for the copying of
conveyancing instruments in their
entirety into a public record. An
important evidentiary effect has
resulted from this in that prima facie
proof of title may generally be
established solely from the public
records. As a practical matter, this
has removed the need for American
land owners to maintain historical
documents of title so copiously
accumulated by those holding
interests in Irish property.
A fundamental element, but
certainly not unique, of the
recording system is that a purchaser
is bound by constructive notice of
existing recorded rights and takes
title subject to them. While an
unrecorded conveyance is enforceable
as between its parties, it is generally
unenforceable as against a third
party who acquires an interest in the
subject property without notice.
4
Accordingly, it is essential to search
the public records to determine
whether or not a vendor of
unregistered land has (a) the right to
convey and (b) possesses clear and
marketable title.
There are three types of recording
statutes affecting unregistered land
found in the United States today.
Firstly, the so called
race type
statute,
where priority is given to the
first conveyance recorded of two
successive purchasers from a
common grantor regardless of notice
("first in time, first in right").
Secondly, the
notice type statute
where priority is given to a bona
fide purchaser who takes without
notice of an earlier conveyance of
the same interest. Thus the earlier
conveyance would prevail if it is
recorded prior to the delivery of the
subsequent conveyance (constructive
notice) but not if it is recorded after
the delivery of the subsequent
conveyance whether or not the
subsequent conveyance is recorded.
Thirdly, the
race-notice type statute,
where a subsequent grantee of an
interest which has previously been
conveyed obtains priority only if he
is a bona fide purchaser without
notice and his instrument gets
recorded first. Most states have
statutes of the third type, some have
notice type statutes, and a few have
the first type.
II. Registration of Title
Land title registration in the United
States, known as the
"Torrens
system,"
5
was originally introduced
as a voluntary alternative to the
recording system in twenty one states
beginning at the end of the last
century. However, for reasons
discussed below, the Torrens system,
in all but a few parts of the country,
never generated enough lasting
excitement to be a viable competitor
to the methods of title protection
which have arisen for unregistered
land under the recording system.