In any Minnesota commercial real estate transaction it’s important to know what type of property you’re dealing with. But how do you know if your real estate transaction involves Torrens or Abstract property?
County Recorder vs. Registrar of Titles
The Registrar of Titles is the government official in charge of accepting and filing documents for Torrens property. The County Recorder handles abstract property. A recording stamp on a document would alert you to which system your property is of by the title of the government official. It’s essential to know whether your property is Torrens or Abstract because if you’re filing a conveyance or any kind of document that’s going to affect the property, that has to be filed in the proper recording office.
If your real estate transaction involves Torrens property and you submit a deed to the County Recorder’s office, they may accept that instrument for recording but it won’t affect title to your property because it was submitted to the wrong recording office and it won’t be indexed against the property. This is an issue that is often overlooked by those unfamiliar with the system.
In most other states, you have only one property records office. But here in Minnesota we have two different recording authorities in every county. You may run into a situation where your property is both Abstract and Torrens, in which case you need to be prepared to file your documents in each office. This can make recording complicated and expensive.
We have run into recording situations before when document (say a mortgage) is supposed to affect the property but gets recorded in the wrong recording system. For example, it gets recorded in Abstract but it should have been Torrens. The Recorder will accept that document and record it in the Abstract system but that mortgage is not officially affecting title to the property because it’s not recorded in the right system. When the lender goes to foreclose that mortgage, they’ll have a problem that will delay and complicate the foreclosure proceedings. There may have even been another mortgage that’s been recorded against title in the correct Torrens recording system in the meantime and that new mortgage would have priority over the old mortgage that was filed incorrectly.
Something else that we tackle with Torrens vs. Abstract property are judgments and state tax liens. A judgment or state tax lien in the county where the land is located may be a lien against any property owned in that county by the debtor. However, that really only applies to Abstract property. If the debtor owns Torrens property, that judgment will have to be filed against the Torrens Certificate of title. If that doesn’t happen, it’s deemed not to affect the land.
Nonetheless, if we’re conducting a title search and we discover a judgment or state tax lien against the landowner, and that judgment is not listed on the Torrens Certificate of Title, we will still raise an exception on the title commitment for that judgment or tax lien, but indicating that if it is not recorded against the Certificate of Title at the time the recording for the transaction takes place, then it will not continue as an exception to coverage. There is always the potential that the judgment creditor could still file that judgment against the Torrens Certificate of Title before we get our documents recorded.