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Torrens System.doc

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Business Law
B LAW402
Elaine Geddes

TORRENS SYSTEM The Torrens system of land registration is used in Alberta to register all titles to land and all charges against the land. Unlike the older Registry system in use in England and in older parts of Canada, the Torrens system guarantees the title to land as it appears on the face of the document. It avoids the problem in the Registry system of having to search back (usually 40 years) to assure a potential buyer that he is aware of all possible claims against the title. In the Torrens, or Land Titles system, claims against the title must be registered in order to be recognized and unregistered interests are not recognized at law. This vastly simplifies all land transactions. All titles in Alberta are recorded on a Certificate of Title. In addition, a microfilm record of all documents and transactions at the Land Titles Office is made daily and is held in a vault. One copy is kept physically separate from the originals in case of fire or destruction of the originals. All of Alberta is divided in a grid system which identifies land anywhere in the Province. This grid system is integrated with that of Saskatchewan as the two systems were created together when the two provinces were still part of the Northwest Territories. Land within incorporated municipalities is divided into plans. Individual plots of land within the plans are identified with individual block and lot numbers, and survey documents exist to substantiate the exact physical boundaries. All land has a legal description to indicate its location. All titles have registration numbers commencing with the year in which they were created. Reference numbers on the title refer to the previous title. All documents contain registration numbers as well so that copies of those documents can be obtained if a searcher wishes. All documents and titles in the Land Titles Office are public documents and may be examined by anyone. The main principles of the Torrens system are three: Facility of transfer, security of title and indefeasibility. The register is everything and provides at any time a true picture of the legal status of the land. The state guarantees the title and provides an assurance fund to compensate landowners if the system fails. Transfer of any interest in land is simple and uncomplicated. Titles are easy to read and understand. Title to land cannot be lost because of improper transactions some time in the past. Proper registration of a title is its conclusive establishment. The estate possessed by a registered owner is a statutory creation with the complete legal and beneficial ownership of the common law but affirmed by the state by statute. The title is indefeasible which is to say it cannot be defeated by other interests or claims. A person who acquires a registered title obtains an indefeasible title which represents the totality of ownership. There are a few statutory exceptions to this totality, but aside from them, no other interests or estates can exist. The title is deemed conclusive proof against all the world that the named owner is the absolute owner of the property. The only grounds for overturning a title are fraud in which the owner has colluded in some way, misdescription of the land or its boundaries, or claims under a previous certificate of title or under some previous legal right. The statutory exceptions to indefeasibility are found mostly in the Land Titles Act. Several sections of the Act allow for the registration of certain types of claims against land. All of these claims do not act to actually transfer ownership or any portion of ownership as they may do in a Registry system. Under the Land Titles Acts, these 1 claims act as charges against the land. The land acts as security for the repayment of some debt or liability. Pre-eminent among these is the mortgage. Claims such as mortgages have to be actually registered in order to act as a charge upon the land and be enforceable against the land. The following are all charges that may be registered against land under the Land Titles Act: -mortgages -leases -power of attorney -certain writs -unpaid vendor's lien Other charges against land may appear in other acts such as builders' liens under the Builders' Lien Act. Some charges do not have to be registered in order to be enforceable and will not appear on the title. These are all located in s. 65(1) of the Land Titles Act and they include: -reservations in the initial Crown patent -un-paid taxes -public highways -leases of less than three years where there is actual occupancy -easements -filed executions and liens -expropriation -foreclosures -exceptions under other statute law Most charges against the land fall into the categories mentioned specifically by the Land Titles Act. Those which don't may be protected by way of a caveat. The caveat acts as a warning notice to anyone who might be interested in the land that there is someone else who claims a prior interest. The caveat's primary use is in protecting those interests that cannot be themselves registered. It is also used as a safeguard to protect amendments to other documents, or to protect equitable interests in lands. The importance of registering and thus protecting interests in land that fall short of ownership cannot be overstressed. The Land Titles system does not allow the enforcement of any remedy against the land unless the interest was first registered. The registered owner is the owner against all the world and subject only to those charges that appear on the title. Therefore if a charge does not appear on the title it cannot be enforced against the land owner by way of an action in rem, that is to say, against the land. Usually (but not always) it can be enforced by an action in personam, that is to say against the person. But the action against the land is usually more valuable, and the person who owns the land and the person who is liable on the contract may not always be the same person. Interests in land follow and are attached to the land when they are registered. For example, a mortgage taken by one person will attach to the land when it is registered. When the land is sold to a new owner, the mortgage will automatically follow the land unless it has been discharged (or paid off) prior to the title changing hands. The new 2 owner will be automatically liable for the payments whether or not he knew the mortgage was in existence. It is easy to discover the mortgage however by a simple viewing of the title. The mortgage must be clearly shown on the title so that any prospective purchaser will be aware of it. If the new owner refuses to pay, the mortgage company has the right to take its remedies against the land and the new owner even though the mortgage contract was never signed by or with him. He may never have received any money. But he is the owner of the land and so is liable. The mortgage company may ultimately obtain possession of the property. Another example occurs when a person agrees to sell their property to another. Contracts for the sale of land must be evidenced in writing to be enforceable at common law. But they must be registered against the property to make them enforceable against the land in a Torrens system. The Land Titles Act does not provide specifically for the registration of agreements to purchase land. But such agreements (if complete) may be protected by way of caveat. If so protected, the seller who wishes to back out of the agreement may not only be sued for breach of contract, but will in effect be prevented from selling the property to anyone else. Few new buyers would want to run the risk of purchasing a property with a caveat on it protecting a previous claimant. If that claimant wins the breach of contract case, they win the property as well. The new buyer would lose the property as their title would also contain the caveat as a first charge against the land. If the agreement is not protected by caveat however, the only recourse for the hopeful buyer is the breach of contract action. The seller can easily sell the property to another purchaser who would be unaware that there was interest from another party. One additional note: if the agreement is not in writing, it cannot be enforced at all against the reluctant seller. It cannot be protected by caveat, because an oral agreement cannot be caveated, only a written one. Registration is important in and of itself. But priority of registration is also important. Charges against the land are ranked in priority according to their date of registration. If a title contained both a mortgage and a caveat protecting an agreement to purchase, the new purchaser would be subject to the mortgage if the mortgage was registered first. The new purchaser would be free of the mortgage if the mortgage was second. If a property was subject to two mortgages which were together worth more than the total value of the property, in the event of foreclosure, the first mortgagee is paid first and the second has to content himself with whatever is left over, if anything.
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