Wednesday, May 17, 2006
How sure are you that the Seller is the true owner ... and not an impostor?
Throughout the annals of history, defrauding one’s fellow human being has been a social event that has been going on since the day after Adam and Eve decided to snack on the infamous apple against God’s will, and were thereafter kicked out - quite unceremoniously one might even add - from the Garden of Eden.
At Common Law, title to land evidencing “ownership” was proven by producing all the relevant deeds and other documents affecting a particular piece of real property. Land owners needed to prove their ownership of a particular piece of land all the way back to the earliest grant of land by the Crown to its first owner. The documents relating to transactions with the land were collectively known as the "title deeds" or the "chain of title". The Crown's grant could have occurred hundreds of years before, and could have been intervened by dozens of changes in the land ownership. Ownership over land could also be challenged, potentially causing great legal expense to land owners and hindering development. Each new purchaser had to ensure that the chain of title was valid, and could not be struck down in any of the transactions previously occurred. Clearly, this system meant that fraud could arise or, at the very least, mistake. It was also easier for documents to be lost, destroyed or mislaid.
In a number of common law jurisdictions, therefore, a system of deed registration was introduced in an attempt to solve the problems in the old system. Under the registration system, deeds had to be registered in a local record office. This, however, was still just a record keeping system. Title to land still depended upon whether the deeds themselves were valid. A void deed remained void even though it was registered.
One way to remove the problems in deed registration was to adopt a system under which the actual title to land was registered and not just the documents affecting the title. Such a system was first introduced in South Australia in 1858, following the approach of Sir Robert Richard Torrens (1814 – 1884). Torrens was an Australian politician and one of the earliest Premiers of South Australia. He had been a customs officer, and believed that the same system of registration that had been successfully applied to the ownership of vessels could, in fact, be applied to the ownership of land.
The main objective of the Torrens System of Title Registration was to provide security in the holding of interests in real property, and to remove the need for looking back, sometimes for hundreds of years, through the old title documents. This objective is achieved by “guaranteeing” the registered title of innocent purchasers who pay for the property. The title of these purchasers cannot be attacked by persons claiming to hold a competing interest. This guarantee of title integrity forms the basis of title “Indefeasibility”, a principle followed nowadays by all Torrens jurisdictions as well as the non-Torrens, such as the one prevailing in the United States.
Indefeasibility, therefore, is a legal principle providing that the Register of Titles is conclusive evidence that the person named on title as holding the interest in the land is, in fact, rightfully entitled to that interest and, furthermore, that his holding is not subject to any condition or encumbrances other than those shown on the title Register. It follows, therefore, that a purchaser can rely completely on what it is shown in the Register of Titles, since ‘what you see is what you get’. This means, moreover, that a Purchaser’s title can be valid even if there are defects in the Seller’s registered deed. To this extent, Indefeasibility reverses the Doctrine of the Void Deed.
The Doctrine of the Void Deed stipulates that a deed is void and incapable of transfering any title in land, if one of the following circumstances comes into effect:
[ ] the deed is forged;
[ ] the deed is given in exchange for an illegal act or thing;
[ ] the deed is signed in circumstances where the granting party can plead non est factum (Latin for ‘that is not my act’). A plea of non est factum is available where the deed is signed by a person who is unaware of what he signed.
But under the Principle of Indefeasibility the title of an innocent Purchaser cannot be set aside, even by the claims of a previous rightful owner. This is so, because the Register of Titles is conclusive evidence of the Purchaser’s rightful ownership of the land. The only exception to this rule is if the registered title holder himself committed fraud at the expenses of the previous title holder, in which case his title can be attacked.
Hence, Indefeasibility is the principle that assures that the Seller, as the registered title holder, is conclusively the true owner of the interest in the land being bought and sold.
Real Estate Chronicle