[tareqak]

I don’t know if the following is related, but I find it very strange that title insurance is necessary. I would assume that both municipal and state governments would know exactly who owns what piece of property/natural resource rights/air rights/other property-related right at the click of a button.

[aidenn0]

> I don’t know if the following is related, but I find it very strange that title insurance is necessary. I would assume that both municipal and state governments would know exactly who owns what piece of property/natural resource rights/air rights/other property-related right at the click of a button.

They only need to know well enough to send a tax bill. If someone is paying property taxes, that's good enough for the municipality. It's not good enough when people start suing each other, at which point the municipality very much does not want to own the liability for any mistakes.

Consider the simple situation in which Alice sells property to Bob, without revealing (intentionally or mistakenly) that Carol has a lien against the property. If Carol comes to collect and Alice cannot pay, then Carol now also has a claim to the property.

Things get even more complicated with fraud. Lets say that Eve manages to fraudulently record a transfer from Alice to Eve, and then sells the property to Bob. Bob has not committed fraud, but Alice also should own it. In systems in which the government registry is indefeasible, then Bob owns it; Alice may recover money (see above why municipalities don't want to be liable), but not the property (had Eve been caught before selling the property then the fraud would have invalidated her claim, but Bob hasn't committed any fraud).

[crotchfire]

Of course they know. They also wisely refuse to accept responsibility for the reprecussions of being wrong.

This is the whole point of title insurance. You aren't paying for the answer. You're paying somebody to accept massive liability if the answer is wrong.

There is something called the "Torrens Title System" where the government does accept some part of this liability, subject to a huge raft of weird terms and conditions that the legislature can change unilaterally after the fact. It has only been successful in countries lacking constitutional limits on eminent domain, since in those places landowners are already subject to legislative whims anyways:

https://en.wikipedia.org/wiki/Torrens_title

It has been a flop in every US jurisdiction that has tried it.

When given a choice between transferring responsibility to somebody who can be sued (states can't) and gives you a contract, vs someone who can't and won't, it turns out people prefer the former.