The title insurance industry’s mission is to ensure that clear title resides with the purchaser of property. If there are shadows on the ownership rights to property, the title insurance company will either cure those defects, accept the risk of the defects, or refuse to insure the title to the property.
In order to conduct its business and accomplish its mission, the title insurance company researches the documents recorded on the subject property as well as other documents which may affect property but may not call out the property specifically in the document (e.g. judgement documents).
The bulk of the documents required for property research are maintained by each county’s recorder, and available via a publicly accessible index. United States law requires that constructive notice of transactions affecting property be given to the public, usually by the county recording offices. The indices are searchable by the names of the parties to the transactions (e.g. buyer/seller; plaintiff/defendant; etc.).
Although the name-indexed documents are available at the county recorder’s office, many states have mandated that title companies maintain or have access to a title plant which indexes documents by property, not just names like the counties.
In many states where a title plant is not required by law, title companies choose to build and maintain geographically indexed title plants; often back to patents when the area was first established.
Why go to the trouble and expense of building and maintaining a title plant when the information is available for almost no charge at the county recorder’s offices?
There are two reasons.
Our experience in working with county recorder information shows that the recorder’s indices can be incorrect. We have seen: missed names, missed documents, parties being incorrectly indexed, and parties being indexed differently from era to era – sometimes from day to day depending on who is doing the indexing. For the title insurance industry, whose livelihood depends on accurate information, incorrect indexing is devastating. Imagine the loss to the title company if a multi-million dollar mechanic’s lien was not indexed by the recorder’s office (or was indexed incorrectly and missed a single owner in a large condominium project) and the title insurance company insured the property based on that search.
A well-organized title plant serves as a check against the recorder’s index to the documents, and reduces the risk.
The second reason is the scarcity of trained examiners, whose skills are essential for the most important tasks in the research prior to insuring property. A title plant reduces the time spent in researching and examining the title. In larger communities, there are often “common names”; dozens of John Smith’s, all of whom may own property. A title examiner would have to examine the documents related to all the names in order to find the documents that applied to the specific John Smith and thereby the subject property. It may take two to three times as long to complete the research this way, compared to using a geographically indexed title plant. Examiners are scarce resources, and it takes years to train a person to be a competent and efficient examiner. Companies find it far more efficient to maintain geographically indexed title plants.
Title plants have been found useful for decades. The benefit of a double check to the county index and the efficiency of a geographically indexed plant have been apparent to title companies for decades. Given the importance of clear title to owners, many states have mandated the use of title plants as way to enhance consumer protection.