I have written many posts about various aspects related to real estate: life estates, titling real estate, and transfer on death deeds, to name a few. What each of these topics has in common, besides having to do with real estate, is that how the real estate is classified will dictate how, by whom and where the title to the property will be reviewed. In a handful of states, including Minnesota, there are two types of ways real estate may be classified.
The Torrens title system is a system of transferring title to land which was introduced by Sir Robert Torrens in South Australia in 1858. This system was originally based upon the system used to register title to ships.
To have property registered as Torrens, a court orders issuance of a certificate of title. Thereafter, any conveyance, lien, instrument, or proceeding that would affect the title to the registered Torrens property must be filed and registered with the registrar of titles in the county where the property is located in order to affect the title to the Torrens property. This means that any purchaser of Torrens property may, subject to limited exceptions, determine the status of title by inspecting the certificate of title because anything affecting title to the property will have been registered.
Torrens Acts were adopted in twenty states and territories between 1895 and 1917, but only a few states now have Torrens registration statutes in effect. The Torrens system is not as popular as it once was because of the time and expense involved to register everything. In Minnesota, the Registration Act was first adopted in 1901. The states with a limited implementation of Torrens title include:
- New York
- North Carolina
Land which has not been registered as Torrens is commonly called “Abstract Land” because the evidence of the ownership of such land is typically contained in a document called an “abstract.”
Under the abstract system, transactions that affect real property are recorded with the county recorder in the county where the property is located. The documents recording the transactions become public records and are a source for prospective purchasers to ascertain the status of title. These documents are typically summarized in a single document, called an abstract of title, so that prospective purchasers, mortgagors, mortgagees, and others may have a source to research the status of the title.
Unlike Torrens property, under the abstract system, a title may be affected by factors not reflected in the recorded documents. These factors could be liens, mortgages, and other interests. Therefore, a prospective purchaser or mortgagee must carefully investigate a property’s history and condition in order to ascertain marketability of the title to that property. More work has to be done to ascertain title, whereas with Torrens property all interests are determined and established by a court.
If you have questions about how your real estate is classified, contact an attorney in your area.