The system of recording titles in most counties across the United States has not changed much over the years and there are some people who think it is high time some major changes were made.
Suggestions by people involved with the system in this area range from those who think that an update should be made on how the title is recorded to others who are in favor of doing away with the entire system. For the latter, the bank's requirement that mortgagees purchase title insurance after a title search is completed was one of the main complaints.
"We're paying government officials to maintain a usable list of records," said Martin Lobel of Lobel, Novins and Lamont, a D.C. law firm. And these officials are not doing an adequate job if home buyers, after paying for a title search, must then acquire title insurance to protect against claims that could be made in the future against the title, he said.
Lobel is in favor of changing the system to one of title registration. "If there is no defect on the title," said Lobel, "you then have clear title."
To register a title initially rather than just record it, a court hearing would be held where a judge would review claims by all interested parties, Lobel explained. If the judge determines that there are no defects in the title, he would certify it and it would be registered at the public registrar's office. A transfer after the initial registration is made would occur by the "buyer and seller presenting deeds of conveyance to the registrar who then issues a new certificate of ownership to the buyer and cancels the original and the seller's duplicate."
He added, "This system would eliminate the need for extensive searches. It would not eliminate the need for lawyers but would make their job easier, and it would make record keeping by the government a hell of a lot more efficient."
This is called a Torrens system, named after Sir Robert Torrens, who was chiefly responsible for enacting the system into law in Australia in the late 1850s.
According to a law review article that Lobel wrote for the University of Richmond in the spring of 1977, "Approximately 30 countries, including Great Britain . . .,currently use it. In fact, the American system of land recordation, although originally adopted by the colonies from the British, is uniquely American, since the British have abolished their original system in favor of the Torrens system."
While several states, including Virginia, have a Torrens system, Lobel explained in the article that it was set up as a voluntary system. "This voluntary feature was probably the main reason why Torrens failed to make a significant impact in the United States. Since title registration had to be initiated by a landowner or purchaser, the general ignorance about the law made its success unlikely. Furthermore, lawyers and title insurance companies naturally were not about to encourage its use."
David L. Scull, chairman of the Montgomery County Council thoroughly agrees with Lobel on title registration. Scull said, "The insurance companies tell their clients you never know when an Australian sheep farmer will show up and make a claim against your property." He added, "In Montgomery County there never has been a claim against bad title."
Because of so few claims, the payouts to insurance holders are very low, below 5 percent. This compares to 40 to 60 percent for casualty insurance companies.
Scull explained that while banks require that home purchasers buy title insurance before the bank will give them a mortgage, the title insurance companies often sell a second policy. The first protects the bank from claims; the second protects the home owner once the mortgage is paid off.
Scull said that in Colorado the bank now must pay the settlement costs. He said that in states where the costs are picked up by a party other than the new owner, they have been drastically reduced.
Counties of Northern Virginia now record deeds alphabetically, according to the last name of the owner. Minerva W. Andrews, a partner at Boothe, Prichard and Dudley in Fairfax, is chairman of the American Bar Association Committee on Improving and Modifying Land Records and chairman of the Real Estate Committee of the Virginia Bar Association. She said that the system of alphabetizing will be done away with shortly. "We're going to a parcel indexing system where each parcel will get a unique number."
She said once the system is implemented, "It will be a lot easier to find easements, liens, deeds of trusts." She explained that with this system the title searcher would not need to know who owned it. "You could just get the one number and look in the computer," she said.
"One thing the county would have to make sure of is once the parcel is subdivided it is given a unique number."
The legislation that permits this change in Virginia title recordation was passed by the state legislature in 1982 and Andrews hopes that it will be in effect by this coming January, or by next July at the latest.
Andrews explained that this system, unlike title registration, "won't guarantee title." So while it will be faster to search a title, it won't be guaranteed. Most likely, banks will make no changes in requiring title insurance.
Samuel Gilman, president of District-Realty Title Insurance Corp., agreed that there are ways to improve the way a title is recorded, but called title registration, "the biggest joke to hit this city in years." He admitted that title insurance companies do not pay out on many claims but "that has no real bearing," he said. "We are insuring against past risk. Ninety cents on the dollar is spent in avoiding claims." He said his insurance company paid out nothing in claims last year.
James E. Starrs, a properties professor at the National Law Center at The George Washington University, said, "We ought to do away with the entire system." Not only does he oppose various systems of recordation such as alphabetizing, but he also opposes a system that does not guarantee the owner of the property clear title. Starrs also favors a title registration system.
"It should be the same system we use for other large purchases like cars and airplanes," he said. That is, once the title is properly registered it completely belongs to the owner. No one could lay claim to the property 30 or 40 years later. Starrs added, "In the English speaking civilized world, we pretty much stand alone."