This morning I heard an interview with Michael Brissenden – the ABC US correspondent. He was talking about the foreclosure crisis in the US. At one stage he mentioned something called title insurance. I was quite taken aback by this because I thought that property rights would be secure in the US. But apparently not.
Title insurance exists in the U.S. in great part because of a comparative deficiency in the U.S. land records laws. Most of the industrialized world uses land registration systems for the transfer of land titles or interests in them. Under these systems, the government makes the determination of title ownership and encumbrances on the title based on the registration of the instruments transferring or otherwise affecting the title in the applicable government office. With only a few exceptions, the government’s determination is conclusive. Governmental errors lead to monetary compensation to the person damaged by the error but that aggrieved party usually cannot recover the property. The Torrens Title system is the basis for land registration systems in many countries.
Over at The Drum Brissenden argues that title uncertainty is undermining property values and property sales in the US. Hardly surprising. It seems lemons are now dominating the US property market and no wonder prices are collapsing.