May 7, 2023
Understanding the different types of property titles can be essential when buying or selling a property. Two of Minnesota’s most common types of property titles are Torrens and abstract titles. In this post, we’ll explain each type of title, how they differ, and what you need to know about each one.
What is an Abstract Title?
An abstract title is a historical summary of all the recorded documents related to a property, including deeds, mortgages, liens, and other legal documents. It compiles all the information recorded about a property over time. An abstract company or title company typically prepares the abstract. It is used to verify ownership and ensure no outstanding liens or other encumbrances on the property.
One of the critical features of an abstract title is that it is based on the principle of “buyer beware.” This means that the burden of verifying the accuracy of the title falls on the buyer of the property. While an abstract title can provide a comprehensive record of the property’s history, it does not offer any guarantees or assurances of ownership.
What is a Torrens Title?
A Torrens title, also known as a registered title, is a system of land registration in which the state guarantees the accuracy of the title. Under the Torrens system, the government maintains a register of all land titles, and the ownership of the property is established by a certificate of title issued by the government.
One of the key benefits of a Torrens title is that it provides a higher level of certainty and protection than an abstract title. Because the government guarantees the accuracy of the title, the risk of ownership disputes is significantly reduced. Additionally, if there are any errors or defects in the title, the government is responsible for compensating any losses suffered.
How Do Abstract and Torrens Titles Differ?
The primary difference between abstract and Torrens titles is the level of protection they provide. While an abstract title offers a comprehensive property history, it does not guarantee ownership or protection against title defects. In contrast, a Torrens title provides a higher level of certainty and protection, as the government guarantees the accuracy of the title and provides compensation for any losses suffered due to title defects.
Another key difference between abstract and Torrens titles is the legal process for transferring ownership. With an abstract title, ownership is typically transmitted through a traditional closing process, in which the buyer and seller exchange funds and legal documents. With a Torrens title, ownership is transferred through a more streamlined approach in which the government issues a new certificate of title reflecting the new ownership.
Can You Convert an Abstract Title to a Torrens Title?
Suppose you own a property registered under the abstract system and wish to convert it to the Torrens system. In that case, it may be possible, but the process can be complex and costly. Therefore, deciding to convert to a Torrens title should be carefully considered and weighed against the potential costs and benefits. In some cases, it may be more cost-effective or practical to address any title issues or concerns through other means, such as obtaining title insurance or working with an attorney to resolve any disputes.
Why Title Insurance is Important
Obtaining title insurance is generally recommended if your property is registered under the abstract or Torrens system. Title insurance can protect against various potential title issues and defects, including errors or omissions in public records, undisclosed liens or encumbrances on the property, fraud or forgery, and other title defects.
In Summary
Understanding the differences between abstract and Torrens titles can be essential when buying or selling a property. While an abstract title provides a comprehensive record of a property’s history, it does not give any guarantees or assurances of ownership. A Torrens title, on the other hand, provides a higher level of certainty and protection, as the government guarantees the accuracy of the title and includes compensation for any losses suffered due to title defects.
If you are considering buying or selling a property, it is crucial to work with a qualified real estate agent or attorney who can help you understand the title issues related to the property. Additionally, obtaining title insurance is generally recommended, as it can protect against various potential title issues and defects.
At TWINCITIES.REALESTATE, we understand the importance of clearly and accurately understanding property titles. Our experienced team of real estate professionals can help guide you through the complex process of buying or selling a property and ensure that your interests are protected. Contact Us today to learn more about our services and how we can help you with your real estate needs.
Jerry Arguello
612-250-6287
