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Title News - March/April, 2006

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May/June, 2006 - Volume 85 Number 3

Is the Door to Public Records Slowly Closing?

by James P. Sibley

Read the following illustrations, and see if either rings true for you. Molly Armstrong, an abstracter searching title out of an East Coast courthouse, asks the recorder if she can see the latest filings to update the title order she’s working on. The recorder, a helpful and cooperative public records custodian, replies “I’m sorry Molly; I can’t let you see those documents yet because we haven’t finished reviewing them for Social Security numbers.”
Best Title Company, a subscriber to a title plant in a midwestern county, receives notice one day from its plant maintenance vendor that it can no longer afford to maintain the title plant since the recorder increased the cost of electronic document copies from a few cents to $1 per page, the same price charged for paper copies. Since this state does not require that a geographically indexed title plant be used to search title, Best Title resorts to doing stand-up exams in the recorder’s office, although it isn’t as efficient or accurate as using a title plant. Are these illustrations far-fetched? Perhaps. Perhaps not. Some industry observers see a “perfect storm” of forces converging, threatening the title industry’s traditional access to the very records it needs to do its job. On the one hand, there is a movement underway to restrict what information can be accessed in the public records and who will be authorized to access it. On the other hand, recorders [for purposes of this article the terms recorder, county clerk, register of deeds and similar nomenclature are collectively referred to as “recorder”], the perennial stepchildren of county government, are struggling to fund their operations, faced with both exploding recording volumes and the pressure to adopt new technologies. As a result, the title industry finds itself challenged by both sides, as it seeks to preserve affordable and timely access to public land records.

ACCESS CHALLENGE #1: PRIVACY AND IDENTITY THEFT IMPLCATIONS
The growing concern over privacy and identity theft (two different issues which often get lumped together) is fueling the debate over what records information should be public and what should be exempt from disclosure. A little background: When records were only available in the recorder’s office, they enjoyed “practical obscurity.” After all, you really wanted to look at a document if you were willing to take time off from work, drive to the recorder’s office, and pay to park. With recorders’ conversion from a paper and microfilm-based world to an electronic world, and the advent of the World Wide Web, recorders began to make their records available over the Internet. A person could read his neighbor’s mortgage document in the comfort of his own home, at two in the morning, wearing his pajamas. Worse yet, someone in Uzbekistan (or Elkhart, Indiana) could see the same document and if it contained a Social Security number, use it to steal the mortgagor’s identity. Suddenly, public records were too public. This backlash over privacy and identity theft has resulted in states enacting laws to protect personally identifying numbers (which include Social Security, driver’s license, dates of birth, bank account information and credit cards) from disclosure, and to exempt from the public’s eye those records pertaining to selected classes of individuals, in order to protect them from harassment and harm.
1. Personally identifying numbers
Increasingly, a recorder is required by state law to redact or mask personally identifying numbers. While the concepts and technologies for redaction and masking are different, the end result is the same - the public cannot see the numbers. What does this mean to the title industry? The industry can probably get by without Social Security numbers (although it will make it more difficult to differentiate one John Smith from another when sorting through the results of a name search). The real danger is the potential delay before the industry can gain access to the records, while the recorder looks at every page of every document for personally identifying numbers. In the extreme, a public records custodian may deny all access to the documents under his or her control in order to comply with a state mandate to protect Social Security numbers and other personally identifying numbers from disclosure; it’s almost certain that the recorder’s Web site would be the first to go “dark.” For example, the Denver Post reported earlier this year that the chief judge for Jefferson County, Colorado’s judicial district, closed probate and divorce files to the public. Citing a Colorado supreme court directive that 23 types of information be removed from public disclosure the judge closed the records because he doesn’t have the staff to comply with the directive.
2. Protected classes of individuals
One reaction state governments have had to complaints from constituents about invasion of privacy is to pass laws that exempt from disclosure public records pertaining to selected classes of individuals. Typically included in this protected class are judges, law enforcement officers, elected officials, public school teachers, and other government employees. The theory is that a stalker (or worse) won’t be able to locate a member of the protected class if these public records are not available. Several years ago the Texas legislature was persuaded by the Combined Law Enforcement Associations of Texas to pass a bill that allowed its members to request non disclosure for their pertinent documents. After the state land title and recorders’ associations informed C.L.E.A.T. of the impact the law would have on its members’ ability to buy and sell real property, land records were removed from the exemption during a subsequent legislative session.

ACCESS CHALLENGE #2: HIGHER COST
Technology, which can be both friend and foe, has placed recorders between the proverbial rock and a hard place: While they are under the gun to modernize their offices, the adoption of new technologies has led in many cases to diminished copy-fee income. In a paper-based world many recorders were able to make a little money selling copies, as most states set the fee at $1 per page for noncertified paper copies. With the transition to electronic documents, and in those states where the open-records laws dictate cost-of-reproduction as the price for electronic copies, the revenue from paper copy sales has plummeted. Now someone can purchase a CD containing 5,000 pages of electronic documents for $25 which, in a paper-based world, might have yielded the recorder $5,000 [although it should be noted that the title industry purchased less expensive microfilm or made their own copies in the courthouse whenever possible]. To make matters worse, the purchaser may make the documents available to the public from a Web site, thereby cutting off all, or nearly all, of the noncertified copy revenue the recorder previously enjoyed. As a result, recorders are trying to recover this lost revenue through various means, with the encouragement of their county’s board of supervisors or commissioners court (it frees up money for more roads and bridges and not many local voters purchase copies in bulk). Coincidental with recorders’ desire to boost their copy-fee income is a growing sentiment among county governments that the land records are a major asset owned by the county. One national observer was quoted as saying that these records are a county’s “single greatest asset.” Such thinking represents a major philosophical shift away from the concept that public land records exist in order to impart constructive notice and that the recorder is merely the custodian (but not the owner) of such a repository. It follows, therefore, that recorders have begun to use these revenue-enhancement models:
1. Pricing electronic copies the same as paper copies
This is the easiest route to take - convince the state legislature to pass a bill setting the same price for copies of a recorder’s records, regardless of the medium. Recently the Ohio legislature considered a bill that would have done exactly that. Electronic copies of a recorder’s records would cost the same as a paper copy — $2 per page. One can readily see that the $25 CD referenced above would cost the title industry $10,000 if this bill had passed [it didn’t]. In a county which averages 1,000 real property filings a day, this would have increased the title plant maintainer’s costs by more than one million dollars a year.
2. Including a portion of the creation or maintenance cost in the price
This is a pricing model that falls between cost-of-reproduction pricing and paper-equivalent pricing. The recorder adds an amount equal to the proportionate cost to create the record, maintain it, or both. Opponents suggest that the recording fee is intended to cover this cost, while recorders would point out that this fee is not sufficient to maintain those permanent records forever.
3. Commercial-use pricing
This pricing model distinguishes between class of purchasers, with purchasers using the recorder’s electronic data and documents for commercial purposes paying a higher price. While most members of the title industry are not national data aggregators, using the recorder’s data and document copies simply to produce title insurance or maintain a title plant, the title industry is a commercial user.
4. Third-party portals
As technology becomes more and more complex for recorders to implement, they are increasingly turning to vendors for turnkey solutions. Such solutions often include the vendor storing (“warehousing”) the recorder’s records in the vendor’s computer system. This may result in another means to achieve a higher price for the sale of electronic copies in bulk, particularly in states where the open- records laws dictate cost-of-reproduction, the vendor may be able to charge a higher price for copies of public records than the recorder is permitted to charge. In return, the recorder may receive a percentage of gross sales or enjoy a deeper discount on the purchase of the vendor’s recording system (with the vendor hoping to make up the difference, and then some, on future public record sales). A large vendor of recording technology recently announced that its technology “provides a self-funding revenue system [that] positions a county’s documents for data warehousing and web-based revenue opportunities.”

ACCESS CHALLENGE #3: RESTRICTIONS
The intent of recorder-imposed restrictions is to limit the bulk purchaser’s ability to fully use and/or resell a copy of the recorder’s electronic records. Such restrictions may seek to protect sensitive information or force someone to purchase a copy directly from the recorder, not a third party, thereby helping preserve the recorder’s revenue stream.
1. Restrictions on the use of the electronic copy
Some recorders assert a copyright claim over their records, while others require the purchaser to sign a license agreement, whereby the purchaser agrees to honor the restrictions the recorder wishes to place upon the downstream use of the recorder’s records. Perhaps the highest profile case in recent years is the situation in Michigan, where four national title insurers sued five registers of deeds in federal court, seeking to force the ROD’s to sell electronic copies of their records in bulk, at cost-of-reproduction, and without strings [these ROD’s had agreed to deeply discount the sale of such electronic copies, from the $1 per page charged for paper copies, if the title insurers agreed in writing not to resell the information]. The title insurers lost at the trial court level, and the case is now on appeal.
2. Private redaction
Another common restriction is a covenant that the purchaser will not disclose any personally identifying numbers to a third party. In Sedgwick County, Kansas, the register of deeds agreed to sell, in bulk and at cost, electronic copies of the land records he maintains if the purchaser agreed to either remove personally identifying information (Social Security numbers, mother’s maiden name, and dates of birth) before making the information available to the public or, in the alternative, pay the ROD a higher price for redacted records (to cover the ROD’s cost of redaction). The purchaser sued the ROD, claiming that it should be able to purchase copies at cost-of-reproduction without having to incur the cost to remove personally identifying information; the ROD prevailed at both the trial court and appellate court levels.
3. E-Recording
While not a restriction per se, e-recording can still affect the title industry’s access to a recorder’s documents. When paper documents are submitted for recording, a document is often immediately available for inspection and/or copying (some title companies and title plant maintainers have their own copying and scanning equipment in the recorder’s office). With e-recording the document may not be available to the public until it has been merged with the electronic copies (of paper recordings) made by the recorder.

THE ROAD STARTS WITH COMMUNICATION
So, back to our original illustrations. How are we to keep Molly Armstrong and Best Title Company happy? What can the title industry do to help keep the door to public records as widely open as possible? The road starts with communication. First, communicate with your recorder - get to know him or her, discuss what problems the recorder is having and how the title industry might be able to help. After you’ve established a working relationship, and you are listening to each other, educate: Explain why you need to purchase copies in bulk and what you plan to do with them. It’s a safe bet that your recorder doesn’t really know much about title insurance or title plants (if you’re in a state that uses them), let alone ever walked through a title production office or plant posting facility. Invite your recorder to tour your office to see why the title industry is so dependent upon timely and affordable access to the recorder’s records. Explain to your recorder how title insurance fits into the real estate transaction and the role the title industry plays in the world’s most vibrant and liquid real estate market. Next, encourage your state land title association to maintain a dialog with your state’s recorders’ association - work together whenever possible. Additionally, become intimately familiar with your state’s open-records laws. Monitor and advocate, for or against, open-records legislation that impacts upon your ability to access and use public records.
While there has been a fair amount of litigation filed by the title industry against recorders in recent years, the goal should be to avoid such adversarial actions if at all possible. It’s taken the title industry decades to build working relationships with recorders, relationships which can be destroyed overnight when a recorder becomes a named defendant. Hopefully, with a little common sense and a lot of willingness to work together, the title industry and the recording industry will be jointly heard to exclaim, “Molly, may we hold the door open for you?”


James P. Sibley is president of Title Data, Inc., in Houston, TX. He is also chair of ALTA®’s Improvement of Land Title Records Committee. He can be reached at jsibley@titledata.com.



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