According to a Tulsa World reporter, Mick Hinton, "Oklahoma and Iowa are the only states in the country where abstractors are part of the process of selling land." I think there are several thousand abstractors who use Source of Title who would disagree with Mick. I know that I have been abstracting in Ohio for over 15 years... imagine my surprise to find out that I wasn't a part of the process of conveyancing land. What have my clients been doing with my title work?
My knee-jerk reaction was that this reporter didn't have a clue about abstracting... however... he may not be completely wrong. Abstractors most certainly are a very important part of the process in every state, but not like they are in Oklahoma. Abstractors play a very different role in Oklahoma than most other states and I can see why some would question the system they use.
Unlike most other states, not just anyone can become an abstractor. The requirements for entering the business are extremely restrictive. Though there are other states which require licensing, most of them merely require the payment of a fee and maybe a test. Oklahoma goes far beyond that.
In order to become licensed, an individual must be at least 18 years old, of good moral character, score at least 70% on the abstractors examination, and not have been convicted of a felony or crime of moral turpitude. The individual must also make an application to the Abstractors Board for a certificate of authority for each county in which the applicant desires to do business and provide proof that he has errors and omissions insurance or a bond for each county, and that he has access to an abstract plant available for use for each county for which abstracts will be prepared.
1 Okl. St. § 28. Independent set of abstract books or other system of indexes required
In addition to the bond required any person, firm, corporation, or other entity not engaged in the business of abstracting on January 1, 1984, desiring to enter into the business of compiling or abstracting titles to real estate in any of the counties of the State of Oklahoma from and after the passage of the Oklahoma Abstractors Act, shall have for use in such business an independent set of abstract books or other system of indexes compiled from the instruments of record affecting real estate in the office of the county clerk, and not copied from the indexes in said office, showing in a sufficiently comprehensive form all instruments affecting the title to real property on file or of record in the office of the county clerk and court clerk of the county wherein such business is conducted.
I don't imagine that the abstract companies that have title plants are very keen on the idea of sharing them with their competition. After all, if having access to a title plant is required to become an abstractor, the best way to keep competition out is to prevent them from accessing your title plant. So, what would you have to do to create your own title plant?
1 Okl. St. § 34. Development of abstract plant--Permit
Any person wishing to develop an abstract plant shall make application for a permit.
...
All permits shall expire annually. A permit holder who has not completed development of an abstract plant at the time the permit expires may apply for renewal of the permit. Applications for renewal must be made thirty (30) days prior to the scheduled expiration of the original permit and shall be accompanied by the renewal fee.
So, why not just abstract from the county records at the local courthouse? The local records are usually considered to be the "official records" from which most abstractors prefer to search. However, besides the requirement in Oklahoma that licensed abstractors have access to a title plant for the counties they work in, there is another reason not to use the county's records.
1 Okl. St. § 36 (F). Reliance on the county indexes in the preparation of an abstract of title shall not be a defense of liability for an error or omission in an abstract of title.
As the Oklahoma Land Title Association (OLTA) points out, "courthouse searches by non-abstractors do not provide the same protection from mistakes."
The barriers to entering the abstracting market in Oklahoma seem nearly insurmountable for new company. In fact, the OLTA also claims that "the majority of their office have been in existence for over 100 years protecting the consumers of the state."
One of the comments to the Tulsa World article claims that the Oklahoma system is somewhat of a "good 'ol boys" network, closed to competition. There might be something to that claim. It seems that the licensed abstractors definitely have a corner on the market. Some of the counties appear to only have one licensed abstractor and the system seem to require a certified abstract for title insurance purposes.
Oklahoma Administrative Code provides:
365:20-3-2. Statutory requirements
No title insurer shall issue, permit or cause to be issued, either directly or by an agent, a binder, commitment or policy of title insurance until either the title insurance company or its authorized agent shall have obtained an opinion of title by an attorney licensed to practice law in the State of Oklahoma based upon an examination of a duly certified abstract of title prepared by a bonded and licensed abstractor. For purposes of this section, a duly certified abstract means an abstract certified by a licensed and bonded abstractor with a Certificate date of not more than one-hundred eighty (180) days prior to the effective date of the title insurance policy. The above statutory requirements will not be satisfied by an examination or certification merely of copies of documents found in a search of the title record, or of the records of the Court Clerk or County Clerk.
Could the lack of competition and the necessity of the abstract have something to do with the fees? One abstract company listed their fees for a new abstract of platted property as $750 and unplatted property as $850. An extension of less than one year is $275 to $350, an an extension from one to five years is $450 to $550, and they continue to get more expensive from there. An update after closing from less than 180 days from the previous certification date is $150.
The Tulsa World article also points out critics' claims that "having abstractors as part of the process is running up the cost of selling a house," and describes the process as "an archaic, cumbersome system that prolongs the amount of time to complete a transaction, sometimes causing a deal to fall through." There may be a legitimate concern there as well. The abstractor statutes require the abstract to be provided without unnecessary delay. What constitutes unnecessary delay is also defined by statute.
1 Okl. Stat. § 32 Abstracts and other documents to be provided without delay--Valid order therefor--Failure to furnish--Penalties--Exclusions
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B. Failure of an abstractor to furnish an abstract, abstract extension, supplemental abstract or final title report within the following time periods shall constitute unnecessary delay:
1. For furnishing new abstracts:
a. unplatted: twenty (20) business days, and
b. platted: fifteen (15) business days; and
2. For furnishing an abstract extension, supplemental abstract or final title report:
a. unplatted: seventeen (17) business days, and
b. platted: twelve (12) business days.
If you aren't abstracting in Oklahoma, could you imagine how that first phone call from a client may go?
CLIENT: How much do you charge for a search and how long will it take?
ABSTRACTOR: That will be $750 and our turn-around time will be a couple of weeks.
CLIENT: Wow... we can only pay $125 and we need it in two days or I will have to find someone else.
ABSTRACTOR: Well, you are welcome to shop around, but we are the only licensed abstractor in this county with a certificate of authority. Are you issuing a policy?
CLIENT: Yes, we are issuing a policy.
ABSTRACTOR: Then, that will be $750 and our turn-around time will be a couple of weeks.
In all fairness to the Oklahoma abstractors, it does appear that they are doing much more than we do in the vast majority of states. They appear to be preparing "full and true abstracts of title" - something the rest of the world abandoned years ago. Most of us do title searches, which are commonly referred to as abstracts - there are differences. And, Oklahoma abstractors must not only have access to an independent title plant, the plant must be kept current within 15 days of the countys' records.
While I think that the Tulsa World article should have been written a little more clearly, it doesn't appear to as far off-base as I originally thought. For that, I owe the author an apology for my rash comment on their site. The use of the term "abstractor" apparently has a very different meaning in Oklahoma. They would consider the rest of us to be non-abstractors. When he questions the necessity of abstractors, I don't think he is advocating abandoning the searching of title, just the very burdensome system of the heavily regulated abstracting regime in Oklahoma. What I believe the article suggests is opening the industry to searching titles, perhaps from the counties' records, like we do in the majority of the rest of the country.
One person commented about the distinctions, Bud Wyandotte, and his was absolutely correct.
I think there needs to be some clarification of terms here. Oklahoma and Iowa are known as "abstracting" states. The others are known as "title theory" states. Knowing the difference between the two, and the process for assuring clear title, may help one understand the issues raised in the article.
I am often amazed by the differences among the various states in their processes. I should not have been so quick to judge the article... Oklahoma IS different! While I maintain that abstractors play an important role in the conveyancing of interests in real property in every state, some states define "abstractors" differently. I consider myself to be an abstractor in Ohio... but I could not be an abstractor in Oklahoma.
Robert A. Franco
SOURCE OF TITLE