Journal of Information, Law and Technology

The Internet’s Effect on the Practice of Real Property Law:
A North American Perspective

François Brochu

Associate Professor, Faculty of Law, Laval University

The research was made possible thanks to financial support from the Fonds québécois de la recherche sur la société et la culture (FQRSC). All of the Internet sites cited were checked on May 1, 2003.

francois.brochu@fd.ulaval.ca

This is a refereed article published on: 15 December 2003

Citation: Brochu, ' The Internet’s Effect on the Practice of Real Property Law: A North American Perspective', 2003 (2) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/03-2/brochu.html>

 1. Introduction

When the transfer of real property rights is in question, two systems of land registration are often compared: the Australian Torrens System (title registration system), which is used in western provinces in Canada and some counties in the United States, and the recording, deed registry or registration of deeds system, which is used widely in the United States and eastern provinces in Canada. The registries that are at the heart of these systems provide different ways for a mortgage lender or the acquirer of an immovable to identify the owner and which rights bind the property in question. More or less everywhere in North America in recent years, the registries have been converted to computer media and have gradually become accessible from remote computers connected to the Internet. This modernization of registries has repercussions on the way real property law is practised and on the guarantees related to property titles.

Using a number of Canadian and American land title registries as examples, we will examine the ways that the Internet is changing real property law, particularly in provinces and states where, as in Quebec, there is a recording system. We are especially interested in finding out how computerization can help to improve the operation of a recording system, and to what extent the Internet can help to bridge the gap between the recording system and the Torrens System. In order to assess the advantages of using new information technologies (sections 2 and 3), we will begin with an historical review of the features and operation of the two forms of land registration in use in North America.

2.	Land registration before the Internet

It seems that it was in Massachusetts in 1627 that the first North American land title registration system was instituted by the Dutch pilgrims who founded the colony at Plymouth. While instrument and document registration quickly became popular in the American colonies, it was not until the second half of the 18th century that a land registration mechanism was created in what are now the Canadian provinces of Nova Scotia, New Brunswick and Ontario. In Quebec, the first land registry offices opened only in 1830, mainly at the request of Loyalists who had moved to the province. 

The primary function of the formality of registration was the same everywhere: to reduce fraud committed by people who, where there was no registry system, led potential purchasers and lenders to believe that they owned an immovable that actually belonged to someone else. The public records created by transcribing titles into registries kept in land registry offices could not be used to prove the validity of title. They were simply means for resolving conflicts that could arise between successors in title of a single progenitor by giving preference to the one who registered title first. In other words, registration did not give or confirm any rights but simply made unregistered instruments unenforceable.

The instrument designed to index instruments filed in land registry offices was based on names right from the beginning (grantor and grantee index), in other words, it was an index that made it possible to use the names of the people who had formalized an exchange of mutual consent in order to find the registration number of an instrument. Today, this index is still used widely in the United States and the Maritime Provinces despite its drawbacks. Widespread computerization of the index of names in the United States has, however, made it easier to use because a number of counties have recast their indexes and classified names in alphabetical order. 

In Quebec, the index of names was largely replaced by an index of immovables (a tract index) following the preparation of a systematic parcel map in 1860. Probably inspired by the Prussian legislation of 1783, the creation of the parcel map and index of immovables greatly facilitated the identification of parcels of land and the work of title searchers. The parcel map is a graphical illustration of each parcel on a map prepared by a surveyor. The lot number assigned to a parcel shown on the parcel map is sufficient to designate the immovable in any contract concerning it, which has the advantage of eliminating the need to refer to boundary markers and measurements. Instruments referring to a lot are recorded in chronological order on the lot’s folio in the index of immovables. Name searches are no longer needed since title searches are based on lot numbers. Only a third of US counties, including all of those in North Dakota, South Dakota, Nebraska, Oklahoma, Utah and Wyoming, have tract indexes. Consequently, most of the US companies offering title insurance have created their own title plants (i.e., indexes) based on data from public registries, and have adopted a filing system based on geographic parcels.

The provinces in eastern Canada, like almost all of the US, have a recording system that is devoid of evidentiary value. However, the other Canadian provinces and some of the states south of the border have a more effective mechanism: the Torrens System. It is based on a land registry that lists not instruments but rights related to an immovable. The rights recorded in the registry have the benefit of a presumption of accuracy owing to the verification carried out prior to registration. The Torrens System provides one-stop, absolutely trustworthy access to the rights related to an immovable without having to do an historical search of the instruments constituting the right. Individuals who are misled by an inaccurate entry can submit a claim to a government compensation fund. A number of authors have unsuccessfully recommended the implementation of such a system in the United States and Quebec because the primary defect of the recording system is that it provides no guarantee of the validity of entries since the government’s role is limited to keeping and filing instruments so that they can be consulted. In the absence of any guarantee, all of the instruments forming the chain of title to an immovable must be analysed before the property can be transferred.

In Quebec, as elsewhere in North America, a number of technological innovations have helped to gradually improve the system of registering real property rights. For example, over 50 years ago, the spread of the typewriter and carbon paper eliminated the need to copy enforceable contracts into registries by hand. Filing a copy of a contract, which has become even easier as photocopy machines have become commonplace, now ensures the enforceability of rights much more quickly than before. In the early 1980s, the ability to copy documents onto microfilm and to archive data in computers also simplified the procedures for registering and conserving instruments filed in two Quebec land registry offices. While British Columbia already had a computerized land title system available over the Internet, Quebec, New Brunswick and some US counties recently began to publish data on real property rights on the Web. The legal consequences of the new availability of registries and land titles over the Internet are, however, not necessarily the same everywhere. The Internet’s effect on the practice of law is felt less strongly in Quebec and the 534 US counties that publish their registries on the Web than in New Brunswick. As we will see in the following sections, Internet use in places where there is a recording system has sometimes been limited to the publication of registries that already existed in paper form (2.), and other times associated with a serious overhaul of the role of rights registration (3.).

3.	Use of the Internet to facilitate access to land title registers 

Remote consultation of land title registries is an increasingly popular way to take advantage of the Internet. It requires that registries, which were generally kept on paper, be converted to computer media. In addition to facilitating access to data, the Internet is also sometimes used to transmit documents to be entered in the land registry. The new ways of communicating with the registry offices, which would have been considered science fiction only a few decades ago, are now helping to change the way law is practised, though to a smaller extent than we might have thought or hoped.

3.1	The situation in the United States

Currently, about 15% of public registries of real property rights in the United States can be consulted over the Internet. Alaska, Georgia and West Virginia are the only states where all of the counties have registries available over the Internet. They are closely followed by Florida and, to a lesser extent, by Massachusetts, California and Ohio. Contrary to what one might think, Internet access to registries is available mainly in states where there is neither the Torrens System nor a tract index. Data on real property transfers can generally be consulted on the Websites of the counties located in these states free of charge or without prior registration. However, a number of counties reserve access to their registries for those who have obtained a code by subscribing. Search criteria vary from county to county, but the main ones are the parties’ names, the address of the property, the identification of the immovable (township, parcel number, identification number) and the page number in the real property book. In addition to providing the list of relevant titles, some Internet sites offer access to the titles themselves when the microfilms used to archive them have been digitalized. In order to limit legal proceedings, most of the sites post a release of the county’s and land title officer’s liability for any damages resulting from an error or omission in the data published on the Internet. This practice is different from that in Quebec, but consistent with that prevailing in counties where the registries are simply computerized.

It is only a question of time until the Internet makes a major breakthrough in real property rights registration in the United States. For some time, many public registries have been using computer technology to digitalize documents that used to be kept on microfilm and to improve the operation of the indexes of names and immovables. Title insurance companies have also invested considerable sums to create computerized tract indexes based on data gathered in county offices that have only indexes of names. In order to make a return on their investment, county registry offices and the title plants of title insurance companies are likely to race each other to be the first to publish their data on the Internet. Some believe that title plants’ very existence hangs on their ability to outstrip the Internet publication efforts of the officers in charge of public registry offices. A number of companies are aware of the potential of this lucrative market in the United States and abroad, and offer turnkey services for conversion and online publication of public registries and title plants. In May 2002, a new software program was launched; it was designed to provide title plants with a tool for automatically retrieving all instruments in the chain of titles to an immovable.

In May 1997, Orange County, California, was the first to make it possible to file instruments over the Internet. A dozen other counties followed suit in states where legislation was favourable to dematerialized documents. Working groups have also been formed, notably in Washington State and Minnesota, to study the desirability of authorizing remote filing of instruments and establish standards for regulating the operation. The recent adoption of the Electronic Signatures in Global and National Commerce Act, which gives digital signatures status equal to that of handwritten signatures, and of the Uniform Electronic Transactions Act (UETA), which will allow registry officers to accept documents filed electronically in the states that ratify it, seems to be leading to an increase in remote registration.

The investments in adapting US counties’ recording systems to Internet technology will have no effect on the guarantees related to registered real property titles. The technical aspects of the work of jurists will certainly be facilitated by the growing number of registries accessible online, some of which will offer new search criteria to enable title chains to be tracked more quickly. However, since the entries in the registries will still not have any evidentiary force, specialists in real property law will still have to conduct legal analyses and engage their professional responsibility even when the Internet is used.

3.2	The situation in Quebec

The underlying principles of the Quebec system of land registration were analysed when the reform of the Civil Code began 40 years ago. The authors of a major report tabled in the National Assembly in 1978 considered it essential to review the guiding principles of rights registration so that ‘every person should be able to rely on the registers as they stand at any given time, in the belief that what is recorded there is true’. The legislators followed up on these recommendations when the new Quebec Civil Code was adopted in 1991. The new Code not only gave evidentiary force to registered rights, but also provided for computerization of the land registry. In practice, one of the medium-term goals of the new rules was to eliminate the utility of the title examinations that preceded each transfer of rights relating to an immovable. The replacement of a documentary registration system in which the registries referred to instruments via a rights registration system inspired by the Torrens System was therefore designed to simplify the search and title confirmation processes. However, because certain conversion problems were anticipated, the innovative provisions introduced in the Civil Code were repealed in 2001. Only the computerization plans were maintained. In other words, Quebec decided to abandon the reform of the legal effectiveness of land registration and to devote its resources to only the technological aspects announced in 1991: electronic filing and consultation.

Following a call for tenders launched by the Quebec Department of Justice in November 1996, the services of a consortium were retained in January 1997 in order to implement ‘an interactive communication system between real property rights registry offices and users’. Amendments to the Civil Code in 2001 resulted from work carried out under the partnership between the private company and the government. The implementation of a single land registry for the 73 registry divisions in Quebec began in October 2001 and is scheduled to be completed in December 2003. The fact that the mission of the new land registry, which is accessible over the Internet, is to conserve data on all of the province will not lead to closures of regional offices because they will continue to archive some documents.

The structure of the computerized land registry is described in the Regulation respecting land registration. The registry is made up of registers, most of which already existed on paper. The largest register is the index of immovables. Computerization resulted in only very minor changes to its content because the legislators wanted to transfer the raw entries of existing real property folios into the computerized land registry. The computerization program for the land registration system provides for conservation in the land registry of a digital image of all the old folios in the index of immovables. The same applies to instruments registered after January 1, 1974. This solution is different from that planned when the proposed reform began; at the time, the reform was based on purging entries using updated reports and a report on ‘subsisting rights’. Abandoning the initial version of the reform has made two parts of the property folios in the land registry available over the Internet. The first part is called the digitalized component and is made up of true digital copies of old property folios and instruments recorded on paper since 1974. The second part is called the computerized component; it is the extension of digitalized folios and includes entries made after the computerized land registry system was implemented. In other words, the computerized component of property folios includes hyperlinks so that you can click on the registration number of a contract to obtain a complete copy of its content. Examples of the registry’s structure are available at: <http://www.registrefoncier.gouv.qc.ca>; the site provides an instruction manual that can be downloaded and used to understand the new rules for how land registration works.

In addition to providing remote consultation, the computerized land registry provides digital copies of instruments registered over the last 30 years and an index of immovables, which used to exist on paper. The computerized land registry also provides direct access to the graphical illustration of immovables as they appear on the overall parcel maps. The map is updated daily. However, older maps filed before the changes to the parcel map will not be digitalized. They will remain archived at the land registry office in the registry division in which the immovables in question are located. 

Contrary to the current situation in almost all US counties, registry applications can be sent to the land registry electronically. The transfer conditions are provided for in the Regulation respecting land registration. In order to transmit documents electronically, software designed for completely secure communication with the land title registry has to be acquired and keys, signature certification and encoding issued by the Chambre des notaires du Québec (which provides the certification services) must be used. The registration process has several stages. First, the legal counsel prepares the deed of sale and mortgage using a wordprocessing program (Microsoft Word). The clients sign the paper version of the document, which is then kept in the counsel’s records. Next, the copy of the contract created in Word is converted into XML format using a software program (which needs to be made more user-friendly). In addition to making it possible to send texts to the land registry, the software helps the counsel insert computerized tags in documents before they are sent. The tags then make it possible to enter the instrument in the land registry automatically because they code the information that must appear (date, parties’ names, lot number, etc.). However, it remains possible to request that instruments be registered on paper. They simply have to be filed in the land registry office in the registry division where the immovable is located. The instruments are then digitalized by office staff and sent to an operations centre, where they are processed manually and entered in the land registry. No matter which option is chosen, a certified statement is issued to the applicant once the registration process is completed so as to confirm that the operation has indeed been carried out. In the medium term, it should not take more than four hours from the time an instrument is sent to the land registry until a certified statement of registry is issued.

From a strictly legal point of view, in Quebec, publishing the land registry over the Internet is clearly a ‘solution in search of a problem’. It is true that the Internet makes it possible to consult and transmit documents from a distance and reduces the space needed to archive documents that used to exist only on paper. It is also true that designing a registry compatible with the Internet creates jobs and has the advantage of promoting the development of cutting-edge, easily exported expertise. However, the use made of the technology does not meet the expectations long expressed by those who practice law. Quebec jurists do not complain about the time they have to spend travelling to registry offices, but about the time they have to dedicate to searching for and analysing old titles because the legislator has not required the government to guarantee property rights. Such research is often long and difficult because folios in the index of immovables frequently contain references to instruments involving a number of separate parts of a single lot, which means that jurists have to disentangle intertwined title chains before being able to analyse the relevant rights. 

The legislator’s decision to digitalize thousands of pages of the index of immovables and millions of pages of contracts has determined not only the form of the land registry but also the effects of land registration. The legislator gives the entries in the land registry no evidentiary force. In order to assess the validity of rights pertaining to an immovable, it remains necessary to first do a search to find the title chain and then find all the instruments making up that chain. By abandoning the reform of legal aspects of the land registry system, Quebec has settled for a purely technological reform with disappointing results. The possibility of being able to consult and transmit instruments by the Internet does not add great value, but implementing a rights registry system to replace our documentary registration system would. Instead of aiming at quantity by relying on new technology’s extraordinary capacity for storing data, would it not have been preferable to target another quality that we expect of the cyberworld, i.e., speed? By maintaining verification mechanisms that are very costly in terms of time, as is the case of 19th-century style title searches, we are hanging on to a very inefficient system. The way we are using the Internet is both inappropriate and contrary to the concept of space-time that we dream of in the digital age. In the end, title insurance policies offered by private companies or professional associations will probably make up for the drawbacks of the land registry, which technology has not made more reliable.

It is not unusual to read that the modernization of land registries, in other words, their computerization, followed by publication on the Internet, is easier to achieve in places using a Torrens System than where registries give no evidentiary force to registered rights. Quebec’s example shows that it is nevertheless possible under a recording system. Of course, Quebec’s index of immovables and parcel map helped to facilitate the implementation of new technologies in that Canadian province, as was the case in the United States in Salt Lake County and in counties with a tract index. However, while the value added by computerizing registries and publishing them on the Internet is appreciable, it has not really revolutionized the practice of law in Quebec, contrary to what is happening in New Brunswick. 

4. Using the Internet to transform land registries

The province of New Brunswick has undertaken a reform of its land registry that seems to be succeeding where Quebec and, to a certain extent, counties in the United States have failed. Instead of using the Internet to simply facilitate communication with the land registry, New Brunswick has redefined the role of land registration, which used to be similar to the Quebec recording system, while giving new information technologies a large role to play. The new title registration system contains provisions specifying that the province will issue ‘certificates of registered ownership’ (CROs) following a conversion procedure designed to both eliminate the need for subsequent historical searches and enable the government to guarantee titles. Nova Scotia is following in New Brunswick’s footsteps. In these provinces, as in Quebec, title insurance companies are not as present as in Ontario or the United States. The small market share of title insurers in New Brunswick probably made it easier to reform the land registration system and implement a Torrens System because title insurance companies usually resist changes designed to give registered rights evidentiary force.

Following an earlier attempt, which had been discontinued, a project pilot designed to introduce the Torrens System in New Brunswick was launched in Albert County on January 1, 1984. The Land Title Act, which was in force in the rest of the province, stipulated that the purpose of registration was to adjudicate between the successors of a single progenitor, as is still the case in Quebec and most counties in the United States. The lack of a parcel map combined with a land registration system without any evidentiary force required legal practitioners to conduct title searches in order to obtain a level of security much weaker than that of New Brunswick’s recording system. After nearly three years of evaluation, the Land Title Act, on which the pilot project was based, was maintained and its provisions, some of which were amended, began to be implemented in Gloucester County on October 23, 2000. The Act’s application gradually spread to other counties until its jurisdiction covered the whole province on March 19, 2001. By implementing the Land Title Act in stages, the government was able to gradually establish a computerized land registry for immovables newly converted to a title registration system. The computerized registry, which can be consulted over the Internet and in which lawyers can themselves enter data from their own computers, coexists with the old registries provided for under the old Registration Act. Registries that used to be kept on paper will remain in force until all immovables have been converted to the land registry system. In the blink of an eye and with a guarantee of accuracy provided by the province, the computerized registry now lets you know the names of the ‘holders of an interest in a parcel’. It also makes it possible to consult parcel maps and documents concerning an immovable.

Usually, it is when an owner sells or mortgages property that the conversion to the new Torrens-type system occurs. The conversion is, however, optional and requires that an Application for First Registration of Title form be signed by the owner or the owner’s representative. In order to complete the application for first registration, the lawyer with the mandate to prepare the deed of sale or mortgage must undertake a final title examination, through which he or she identifies the charges on the property, and sign a Certificate of Title form. The examination must cover a minimum of 40 years and comply with the Standards for the Practice of Real Property Law of the Council of the Law Society of New Brunswick. The Application for First Registration of Title, along with the Certificate of Title and a sworn statement by the owner, is then submitted to the registrar. It results in the issuance of a Certificate of Registered Ownership, the accuracy of which is guaranteed by the province and on which lawyers can rely in all subsequent transfers. Thus, the changes to the land registry in New Brunswick are centered on the conversion procedure. Without conversion, the Internet would not be able to provide those practising real property law with a list of charges on an immovable and would not put an end to retrospective title examinations.

If we judge the success of a reform involving the Internet by the stability of computer programs, deadlines met and strict control over expenditures, then the changes to the New Brunswick and Quebec land registry systems are both exemplary. However, if the purpose of the reform is to meet real needs and simplify procedures that are unnecessarily long and costly, then it is clear that Quebec’s system does not measure up to New Brunswick’s.

Conclusion

We have enormous expectations of the Internet and new information technologies. Computerization of land use planning data is often presented, and perceived, as a panacea. In reality, having access to technology is not as vital as is the political will to make the changes needed to provide citizens with a land registry system that guarantees reliability and accuracy. The Internet will help to make deep changes to the practice of real property law only if it is not used as it is in Quebec, to simply apply a coat of varnish to a recording system that is over a hundred years old and has been criticized for its lack of evidentiary force by generations of legal practitioners.