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GAZETTE

JAN/FEB 1993 '

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

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," 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.

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A

major player among those groups is

considered next.

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

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,

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a decision which is generally

credited with influencing the

establishment of the title insurance

industry.

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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.

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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.

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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.

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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

the interest insured is not as

described in the policy. 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.

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."

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"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

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