August 2005
Volume 1, Number 4
Table of Contents

Outline of the Torrens Act
By Shaun Watchie Perry  

  • History of Torrens Act (Registered Land)
    • Modeled in 1858 by Sir Robert Torrens after a method for recording ownership interest in ships that Torrens encountered in his work as an Australian customs administrator.
    • Torrens is a system that was originally a ship registry system whereby each ship owner was assigned a Certificate that included certain information. When a vessel was sold, the seller surrendered the Certificate for cancellation and a new Certificate was given to the new owner.
    • Torrens system ultimately spread to many English speaking countries, including England and Canada.
    • Since late 1800’s as many as 21 states in United States had enacted Torrens legislation. 1
    • With an “abstract system” of title, an abstract is evidence of title. In the Torrens system, the Certificate of Title IS the title.
    • The Torrens system differs from traditional recording systems in that it establishes a legal procedure whereby the state guarantees the owner’s title.
      • Process begins with Court proceedings that involve Court approval of the examination of the history of title by the “Examiner of Title”.
      • Differences between “Examiner of Title” and the “Registrar of Title”: The “Examiner of Title” is an attorney, appointed by Court who reviews the title and must sign off on court orders approving transferring of title certificates. The “Registrar of Title” maintains the Torrens system property records and is responsible for registering title by filing certificates of title.
      • The Court ultimately issues a Certificate of Title to the owner that establishes legal ownership against any claims that remain undeclared or unrecorded at time of registration. 2
      • Once the property is registered in the Torrens system, subsequent voluntary (as opposed to involuntary) transfer does not require such an extensive procedure. A purchaser need only examine the Certificate of Title to verify ownership and learn of any valid claims.
      • Ease of transfer following the registration represents an important benefit because under the recording system a full title search must be done in connection with each transfer.
      • Differences between the Torrens system and the Recording system:
        • Under Recording system, a good faith purchaser bears the risk of losing his interest in the land if a claimant later appears.
        • Under the Torrens system, the owner’s certificate of title defeats any competing claims not declared at the initial proceedings.
        • Under Torrens system, the possessor of the land retains the land and the claimant retains monetary compensation, whereas under the recording system (with title insurance) the claimant gets the land and the possessor is compensated.
        • Torrens Indemnity Fund financed by registration fees ( e.g., in Washington State, upon registration owner pays to the Registrar of Titles 1/40 of 1% of the assessed value of the real estate based on the last tax assessment).
  • Torrens VS Recording

Advantages

  • Torrens system purportedly offered advantages over the Recording system because it cleared clouded titles thereby promoting land marketability and development.
  • Much of the early motivation for Torrens registration in the United States was to promote land development during periods of rapid urbanization, e.g., used extensively after the great Chicago Fire of 1871 when the public land records were destroyed.
  • Land registration has been used to clarify boundaries when early property lines became blurred or historical surveying techniques were found to be unreliable.
  • The Torrens system protects absentee owners against loss of their land to “squatters” under adverse possession statutes.
  • The Torrens system is arguably efficiency enhancing.

Disadvantages

  • Despite the above referenced advantages, Torrens has been put to fairly limited use in our country. This lack of success suggests that the system disadvantages outweigh the advantages in most jurisdictions.
  • The principal disadvantage is the cost of registering a parcel which involves filing a summons and petition in court and paying an application fee as well as court filing fees. 3 Additionally, there are the additional attorney’s fees and court cost involved with involuntary transfers.
  • Even though there is an insurance fund, it is extremely under-funded and most purchasers of registered land (and their lenders) still require title insurance which is an additional cost.
  • Process is antiquated and very cumbersome particularly with involuntary transfers (described below).
  • Owners of registered land buy private insurance and lenders often require it because certification of ownership under Torrens system admits several exceptions that pose threats of loss. 4
  • There is resistance to the Torrens system by parties, especially lawyers and private title insurers.
  • Involuntary Transfers 5
    • Under the Torrens system, the owners of registered land may voluntarily convey, mortgage, lease, charge or otherwise encumber the property as if it had not been registered. In this regard, owners may use forms of deeds, trust deeds, mortgages and leases or other voluntary instruments. However, no voluntary instrument of conveyance shall take effect as a conveyance unless it is so registered.
    • The exceptions to this are various involuntary transfers, described below:
      • Probate transfers
        • Probate under non-intervention Will
        • Probate without non-intervention Will
        • Trust transfers
        • Intestate transfers
      • Transfer by community property agreement (in community property states such as Washington)
      • Award in lieu of homestead
      • Mortgage foreclosure
      • Deed of Trust foreclosure
      • Real Estate contract forfeitures
      • County tax foreclosure
      • Transfers from guardianship estates
      • Quiet title actions
      • Where new title is claimed by heir-ship but no probate occurred
  • Torrens system in Seattle, Washington and surrounding neighborhoods:
    • There are 3,500 registered parcels in King County.
    • There have been no new registrations.
    • There are clusters of registered parcels in Maple Leaf, White Center, Burien, Des Moines, Sand Point, Mercer Island and Medina.
    • Registrar of Title maintains ownership records of a specific parcel of land, much like a title company.
    • All documents related to a parcel of land registered under the Torrens system are maintained in a special index that provides chain of title.
    • Unlike the general index (where all documents are indexed by name and date), the Torrens Track Index list documents by parcel.
  • Pitfalls to Watch For
    • If preliminary title report indicates land is registered, contact an attorney immediately because of time and effort needed to clear title.

Examples:

  • Lender is ready to fund but can’t because title can’t be passed without opening probate (with will or intestate) and petitioning court for transfer of title. Here are the mechanics in transferring the title in such a situation 6 :
    • Filing Summons and Petition
    • Review of title documents by Examiner of Title
    • Role of Examiner of Title (must approve form of Order before Judge will sign)
    • Attaching various other court documents to Petition
    • Court Appearance/Ex Parte
    • Taxes must be current (major issue if closing proceeds will pay taxes).
    • Order of Solvency
    • Role of Registrar (must approve recording of new certificate of title)
    • Substantial attorney fees and costs (particularly if filing a probate is involved)
  • Seller is subject to Breach of Contract for failure to timely close
    • Forfeiture of earnest money
    • Professional liability of broker
    • Reduction of commission
  • Inconvenience and expense of opening probates years after death
  • Caveat: Encourage client to also file Application for Withdrawal from Registered Land if opportunity presents itself. This is also encouraged by the King County, Washington Examiner of Title.  

CREDITS:

I would like to credit and thank the following who provided me with information that I used in this Outline:

  • Richard R. Beresford, Attorney at Law and Examiner of Title in King County, Washington.
  • Thomas J. Miceli and C.F. Sirmans, “Torrens vs. Title Insurance: An Economic Analysis of Land Title Systems”, Illinois Real Estate Letter, Published by the Office of Real Estate Research University of Illinois at Urbana-Champaign, Fall, 1997.
  • Leroy Chadwick, Records Specialist, King County Recorder’s Office, Seattle, WA.

This system has been used extensively in only a few jurisdictions, including Illinois, (primarily in Cook County; although the state repealed it’s Torrens Act in 1992), Massachusetts and Minnesota. As of 1991, there were only a few states that allowed land to be registered under the Torrens Act: Colorado, Georgia, Hawaii, Massachusetts, Minnesota, New York, North Carolina, Ohio, Virginia, and Washington.

Any claims that are known or discovered, such as current mortgage or deed of trust are recorded on the Certificate of Title.

The obtaining a decree of registration and receiving a Certificate of Title is deemed an agreement running with the land and is binding upon the applicant and all successors in title unless withdrawn from registration.

Examples include tax and mechanics liens, claims from bankruptcy proceedings, and claims from Native American tribes. In addition, the public indemnity funds, which potentially compensate victims of these losses, can go bankrupt as a result of under funding.

These examples are considered involuntary transfers under the Washington Torrens Act, RCW 65.12, et seq, and the author believes that these examples would be considered “involuntary transfers” in other Torrens jurisdictions requiring court action to transfer title.

These steps must happen with any involuntary transfer of Registered Land under the Torrens Act.

 

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