The Gazette 1993

GAZETTE

JAN/FEB 1993 '

decision to obtain title insurance. Most lawyers would have little difficulty concluding that the drafting of conveyancing documents constitutes the practice of law. However, some courts, while making a distinction between simple and complex documents, have permitted title insurance companies to engage in this practice as incidental to the business of the companies. Courts in other states have decried this practice and so the debate continues. One commentator sees the attempt to restrict such services " to be nothing more than efforts to preserve a field of law practice for the benefit of the bar." 20 But the bar has not made a sufficiently valiant effort to preserve the traditional position of lawyers as conveyancers. According to another commentator, for the bar to succeed in this regard there must be an overhaul of the present system: "The whole case for a lawyer monopoly of conveyancing must be built on radical reform of the land law and the methods by which titles are proved. Juxtaposed to this is the fact that the title companies have a vested interest in the deficiencies of the existing system." 21 The recording system for unregistered land in the United States, like its near equivalent, the Registry of Deeds, is by no means perfect. For instance, many interests affect title to land without being recorded in the public records. Prescriptive easements and adverse possession, for example, can gain priority without recording by operation of law. Moreover, forgery, fraud or lack of capacity are not reflected in the public records. In addition, it can be difficult or impossible to discover instruments which may affect a particular piece of property even after a careful and meticulous search in all relevant locations. The problems inherent in the recording system are actually compounded, it is argued, by the title insurance industry which exploits the weaknesses in the system and encourages a "continued lack of IV. Cracks in the System

title security, inefficiency, and unnecessary consumer costs." 22 Proponents of title insurance, on the other hand, argue that the risk coverage features are superior in quality and quantity to Torrens certificates protecting registered land and that even title registration does not eliminate the need for a title search. 23 Meanwhile, where available, the Torrens system of land title registration has been severely undermined in several ways. The conclusiveness of registration certificates has been limited by statute as well as by court decision. Appeals challenging registration decrees may be made within statutory periods after initial registration and many judicial and statutory exceptions (including claims and interests based on federal law, short term leases, public easements and real property tax liens and assessments) have been carved out which affect registered title without registration. 24 Further, the expense, time and effort of initial registration coupled with the fact that there is no immediate benefit or financial motivation for an owner to voluntarily register property, has resulted in widespread public disinterest. The efforts of those vehemently opposed to title registration, including the bar and not least the title insurance industry, has significantly contributed to the decline in land registration in the United States. Extensive political and public lobbying by title insurance companies in support of the recording system and against reform or expansion of title registration systems has had a dramatic adverse impact on the latter. While the title insurers have been very adept at self- promotion, attaining high public visibility and confidence as a result, there has been very little governmental promotion, even at the local Registrar level, of title registration as a viable alternative. In states with Torrens legislation, it has not been uncommon for purchasers to be unaware of the availability and operation of title registration. Where purchasers are aware, their choice is often nullified by their lender's

"It is important to remember that title insurance does not guarantee the title of a particular piece of real property and likewise cannot be equated with evidence of title." Title insurance companies generally do not assume known risks. Risks are eliminated by diligently searching the title which is in the interests of both the insurer as well as the insured. One observer notes that it is difficult, particularly in some urban areas, to obtain an abstract of title or to conduct a reasonably reliable and up to date search of the public records, and, while it is understood that a title policy cannot be deemed to be evidence of title, it might sometimes be the "best evidence" that can be obtained. 19 e) The unauthorised practice of law controversy. There is an ongoing legal debate as to whether a title insurer, in conducting a title search, examining title documents or even issuing a title policy, engages in the unauthorised practice of law. Title insurance companies insist that, as insurers, they are entitled to examine the risk which they are assuming. Even if this results in the exercise of legal judgement, title insurers contend that they are merely representing themselves and self- representation ought to be permitted. Many courts have decided in favour of title insurers when this issue has been brought to their attention by concluding that the activities in question are allowed if they are incidental to the business of title insurance companies. However, courts in some states have more routinely restricted the conduct of title insurers often by finding that the suspect activities are tantamount to the giving of legal advice. There has also been judicial scrutiny of the ancillary services offered by title insurance companies. Many title insurers offer escrow and closing services^and will often prepare closing documents, activities which are not related to a customer's

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