Underwriting Manual: Torrens Registration System

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Underwriting Manual Subtopic

In General

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The Torrens System or Registered Title System is a certificate system. Title to land is registered by judicial process under statutory authority and the evidence of title is a Certificate of Title containing the name of the registered owner or owners, the description of the property and recitals or memorials reflecting restrictions, easements, mortgages and other encumbrances against the title.

This system is distinguished from the "recording system" wherein the evidence of title is found in the whole record of the instruments as filed or recorded.

The Torrens Registration System may be viewed as a form of government-funded title insurance system that to a certain extent competes with title insurance companies ubt offers a limited protection.

The system is similar to state registration of motor vehicles, registration of ships and registration of corporate stock certificates.

In 1857, Sir Robert Torrens, introduced the Torrens System in Australia. Illinois passed the first Torrens Act in the United States in 1895.

Of the 20 states in which registration laws have been enacted, repeal of the Act appears to have taken place in 9 states.

The system appears to be used very little in the states of Colorado, Georgia, North Carolina, Virginia and Washington. In the state of Georgia the use of the registration proceeding appears to be in lieu of an action to quiet title, but no attention is paid to the registration system after the act of registration.

In the states that substantially use the system, Hawaii, Illinois, Massachusetts, Minnesota, New York and Ohio, the most active appears to be in large centers of population. In Illinois the use of the system is confined to Cook County; in Massachusetts to Suffolk County; and in Minnesota, to Hennepin and Ramsey Counties. In many instances the Torrens system coexists with title insurance.

Underwriting Manual Subtopic

Initial Registration Into Torrens System

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The transfer of title into the Torrens Certificate system from the recording act system is accomplished by a judicial proceeding similar in character to a quiet title action. The court determines the name of the owner of the fee title and the interests, conditions, limitations, liens and rights to which the land is subject.

The proceeding is initiated by the filing of a petition, application, or complaint under the supervision of a court officer, designated in the acts as an Examiner of Titles. In the course of the proceeding, he requires that certain parties be named as defendants. The defendants are those parties his examination discloses as necessary to adjudicate the ownership of the fee title and to determine the interests, restrictions, easements, liens and rights against the property.

Service of process over the required defendants and other parties whom the petitioner's attorney may name is obtained in the same manner as in the other judicial proceeding by personal or substituted service or by publication. Pay attention to specific statutory requirements for jurisdiction over each defendant.

At the hearing on the petition, application or complaint title may be established by record evidence, by a combination of record evidence and factors like adverse possession, payment of taxes or foreclosure sales or by any other evidence which would be sufficient to establish title in any other judicial action.

The final decree sets out the description of the premises, the names of the persons or parties who are the fee owners and sets out the restrictions, easements, mortgages, liens, interests on rights to which the property is subject.

The decree is filed with the Registrar of Titles or the filing officer named in the statute, who then prepares a Certificate of Title in accordance with the terms of the decree and including such other matters as the statute requires. The original Certificate of Title is retained in the office of the Registrar of Titles and is bound with other Certificates in numerical order in books. An "Owner's Duplicate" of the Certificate of Title containing the identical information shown upon the original Certificate of Title is issued to the registered owner.

Underwriting Manual Subtopic

Effect Of Registration Into Torrens System

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The main effects of the act of registration are:

  • Judicial determination of ownership, interests, restrictions, easements, liens and encumbrances and other rights
  • Simplification, in most cases, of the examination of the title to real property
  • The transfer of the filing of instruments from the offices in the recording system to the offices under the registration system
  • Complication of filing procedures can be caused by:

    • The need to produce an Owner's Duplicate Certificate of Title in connection with a voluntary transaction.

    • The need for subsequent proceedings or for an examiner's approval when filing documents involving probate proceedings, trusts, mortgage and lien foreclosures, bankruptcy, marital terminations and subdivision of property by description

    • The need to file the same instrument in both the office established under the registration act and in the office established under the recording act, in those cases where the land described includes both registered and unregistered land.

Underwriting Manual Subtopic

Recitals And Memorials On Certificate Of Title (Torrens System)

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A recital on a Certificate of Title is a formal statement of facts relating to a restriction, easement, condition, lien, encumbrance or other right relating to the registered property. The recital is carried forward onto the Certificate of Title from the original decree of registration, or is carried forward from a deed or other instrument filed on a prior Certificate of Title.

A memorial is an entry on a Certificate of Title showing pertinent data, including document dates, document numbers and dates of filing and a resume statement of the nature of each instrument, voluntary or involuntary, filed on a Certificate of Title.

Recitals and memorials will continue to be carried forward on successive Certificates of Title unless their removal is authorized by court order or by an instrument filed for that purpose.

Recitals and memorials provide notice of the effect of the instruments shown or registered upon the Certificate of Title.

When filing voluntary instruments such as an easement, a mortgage, a declaration of restrictions or a plat, the owner surrenders the Owner's Duplicate Certificate of Title and proper memorial is entered on both the Original and Duplicate Certificates of Title.

Involuntary instrument such as a notice of lis pendens, a mechanic's lien, an attorney's lien, a certified copy of a judgment against the owner (or against another party shown on the Certificate of Title as having an interest) or a divorce decree may be filed on a Certificate without production of the Owner's Duplicate Certificate of Title. The memorial of the instrument will be shown on the Certificate (provided the instrument relates to the interest of a party in title or a party in interest as shown on the Certificate of Title, and relates to land described in the Certificate of Title).

Underwriting Manual Subtopic

Conclusiveness Of The Certificate Of Title (Torrens System)

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Under the terms of the statutes, the Certificate of Title is conclusive evidence of all matters and things contained in the certificate, and persons dealing with the land may rely upon the Certificate. The Certificate of Title in itself is the evidence of title.

The original Certificate of Title is retained in the Office of the Registrar. A copy of the certificate, in the same form as the original but endorsed with the words "Owner's Duplicate," is issued and is delivered to the owner or his agent. For an additional fee, a Mortgagee's or Lessee's Duplicate Certificate of Title may be issued for the benefit of a mortgagee or lessee.

All instruments to be filed relating to voluntary transaction involving a transfer or encumbrance of registered land must be accompanied by the outstanding Owner's Duplicate Certificate of Title. Likewise, voluntary instruments relating to mortgages for which a Mortgagee's Duplicate has been issued or leases for which a Lessee's Duplicate has been issued must be accompanied by the respective duplicate certificate for entry of all proper memorials thereon.

The statutes provide for procedures of varying degrees of complexity in the event that the Duplicate Owner's, Mortgagee's or Lessee's Certificate has been lost or destroyed or is not produced for surrender to the Registrar prior to the filing of a voluntary instrument.

Underwriting Manual Subtopic

Exceptions To The Conclusiveness Of The Torrens Certificate Of Title

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The main exceptions to the conclusiveness of a Torrens Certificate of Title are:

  • The Certificate is not binding on persons who were not made parties to the proceeding to register title but who should have been.

  • Within the time allowed by law, an appeal of the court's decree of registration may be filed and the appeals court may direct that changes be made in the Certificate of Title or that it be canceled.

  • Persons who were notified of registration proceeding by publication of notice and not by personal service may file a petition to modify or cancel the Certificate of Title. As a result of this action, the Certificate may be modified or canceled.

  • Even though not mentioned in the Certificate, general taxes for the calendar year in which the Certificate of Title is issued and special taxes or assessments will affect the registered land.

  • A Certificate is not conclusive if title was procured by fraud.

  • Overlapping Certificates.--In the case of complicated legal descriptions, the description in one deed may overlap upon adjoining land. If title is registered according to the description in the deeds, one of the Certificates must give way to the other. According to some authorities, the earliest Certificate prevails.

  • A certificate may describe more land or different land from that mentioned in the application.

  • Errors in Memorials.--All entries on the Certificate of Title, such as mortgages, judgments, etc., are called ?memorials.? The Certificate of Title does not constitute conclusive proof that all memorials are correct.

  • Incompleteness of Memorials.--Memorials shown on a Torrens Certificate are only brief summaries of the instruments in question. For the full details, it is necessary to examine the said instrument in full.

  • Validity of Instruments Entered as Memorials.--Merely because a lien or encumbrance appears as a memorial on the Certificate of Title does not mean that it is a valid lien on the property.

  • Rights of the United States and the State. For lands under the recording system, certain rights of the public, the state, and the United States may exist without being recorded in the recorder's office.

  • Land may be in possession of a lessee or his assigns under an unrecorded lease.

Underwriting Manual Subtopic

Assurance Fund (Torrens System)

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Most of the Registration Acts provide for an "Assurance Fund." In Illinois it is referred to as an "Indemnity Fund" and in Hawaii the statute make provisions for recourse against the "General Fund." These funds were established to compensate persons having an interest in or claim against registered property whose rights may have been cut off, without their fault, through the operation of the statute or by reason of error or by an official's error. The funds are increased on the basis of a statutory formula. The funds can be reached only by statutory procedures or action against the fund.

These funds are not a substitute for title insurance. In most jurisdictions they are not adequately funded and a single loss, such as the accidental or erroneous omission of a recital of a mortgage, may well wipe out the assets of the fund. The statutes may impose severe limitations on the extent of any recovery and may limit recovery to the value of the land alone and not of the improvements. The procedure for recovery is cumbersome and may be contingent upon failure to recover from other sources. For instance, recovery cannot be had on account of losses occasioned by federal tax liens, other tax liens, mechanic's liens which may have become a lien on the property before the filing of the statement.

Underwriting Manual Subtopic

Main Advantages Of The Torrens System

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The principal advantages of the system are:

  • The acceptance of the title in those jurisdiction where there has been adequate and proper supervision of the original procedures for transfer and encumbrance

  • A Certificate of Title is ordinarily easier to examine than an abstract

  • Registration precludes the acquisition of a title by adverse possession against a registered owner

Underwriting Manual Subtopic

Main Disadvantages Of The Torrens Systems

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The principal disadvantages of the system are:

  • A general lack of acceptance of the system in most jurisdictions
  • High initial expense in bringing the land under the registration act
  • Cumbersome methods and procedures for filing instruments
    • Several days may elapse before the memorial of an instrument actually appears on a certificate of title
    • Special statutory or judicial procedures may be required for the filing of instruments such as those involved in a probate transfer
  • Loss or destruction of an owner's or mortgagee's duplicate certificate and the resulting additional expense and delay

  • If the land involved is part registered and part unregistered, the additional expense, delay and possibility of mistake resulting from documents having to be filed in two different offices

  • Erroneous recitals and memorials resulting from untrained, inexperienced or incompetent personnel administering the system

  • Possibility of omission of the filing of an instrument on a certificate of title or registration an instrument on the wrong certificate of title

  • Exceptions from the coverage are numerous under the Torrens System: Federal Tax Liens, bankruptcies, taxes, public highways and rights of parties in possession

  • If the registration process has been conducted without proper notice to an interested party, there may exist a fundamental lack of due process and the act of registration may not be binding on that party

  • It does not afford the coverage and protection that a title insurance policy provides