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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.