This past week, I had the chance to attend the NS3 conference for the first time. While the clamor on topics like bitcoin and cryptocurrencies seems to have hushed a bit, the excitement around mergers and acquisitions, eClosings, and cybersecurity remained strong. There was one topic; however, that has recently captured my attention: redaction laws.
While it may not be as exciting as international hackers targeting consumers, financial institutions, and settlement agents and flaunting their stolen fortunes on social media and in the streets of Russia, excessive redaction laws present a threat to homebuyers and homeowners too.
Well-intentioned laws present new risks for title rights
During his session entitled “Responding to Redactions,” Alan Fields, Senior Vice President, Director of Underwriting at WFG National Title Insurance, said, “We don’t live in Mayberry anymore.”
Police officers, district attorneys, judges, and other public servants have good reason to fear retribution from the hardened criminals they arrest, prosecute, and sentence to prison terms. State redaction laws hope to address their concerns, but title underwriting experts like Alan worry about the potential clouds these measures may create on the title of properties owned by the protected individuals. When requested, county recorders must redact any information on publicly recorded documents that reveal personal information like home addresses, names, and even legal descriptions.
In July of 2020, Roy Den Hollander rang the doorbell of New Jersey Judge Esther Salas. Her son, Daniel, answered and was shot and killed. Salas’ husband, Mark, was also wounded. Hollander, however, wasn’t a hardened criminal but a lawyer known for filing lawsuits against ladies’ night promotions at bars and nightclubs and suing Columbia University for offering women’s studies. In 2015, his lawsuit challenging the constitutionality of an all-male military draft went before Judge Salas, who allowed the case to proceed but sided against some of Hollander’s arguments.
After the shooting, Hollander was found dead in a rental car from an apparent self-inflicted gunshot wound. Investigations revealed that Hollander also shot and killed lawyer Marc Angelucci eight days before the shooting at the Judge’s home. He had also gathered information on other potential targets, including Supreme Court Justice Sonia Sotomayor and New York Chief Judge Janet DiFiore.
In response to the tragedy, Judge Salas has become vocal about protecting the private information of public servants. Daniel’s Law was passed in November of 2020 to prohibit the disclosure of certain personal data of judicial officers, prosecutors, and law enforcement officers, and their family members.
New issues caused by Redaction Laws
The simplest solution isn’t always the best one, especially when it comes to complex transactions involving real estate. While removing sensitive information from the public record seems like an elegantly simple solution to prevent more tragedies, the negative ripple effect on insuring title rights is profound.
Recently, Florida passed new rules to address the pitfalls of the redaction laws previously passed. Initially, the law allowed indiscriminate redaction of information, including street addresses, Property ID numbers, and even legal descriptions.
Redacted, missing, and incorrect legal descriptions are of particular concern to title professionals since this unique property information is what matters most when transferring property from one party to another.
While there is no one clear answer to stop violence against public servants, hopefully, the new approach from Florida will guide other states to create laws that protect vulnerable individuals while maintaining the integrity of the public land record system. Here are some of the major risks involved in deleting this information and other solutions.
Redaction Laws threaten the “Source of Truth”
The public land record system was created to act as the “source of truth” for real property ownership. This core concept guides the work of title professionals and is codified in law by the Recording Act. This system tracks critical chain of title documents, like deeds, mortgages, mortgage reassignments, and other liens to show who has ownership or interest in a property. Title professionals regularly use this database and others to search for title defects on a property before issuing a title insurance policy.
“If you have an interest in a property and haven’t recorded it, a buyer without notice or a mortgage holder without notice takes [title] free and clear of that,” Alan explains.
However, if important information on the deed or mortgage document is removed, it presents new questions for homebuyers, lenders, and title agents like:
- Does a redacted deed protect the buyer if the seller sells or mortgages against it again?
- If the prior owner gets a judgment against him/her, does it attach to the protected party’s home?
- Does a redacted mortgage survive in bankruptcy?
- Does a redacted deed or mortgage cloud every other property owned by that grantor? And how can you fix it without the involvement of the protected party?
- What does a redacted notice of commencement do to construction lien rights?
- If the protected party gets a judgment against him/her, how does the judgment creditor know to collect?
Identifying who and what is eligible for redactions
How municipalities handle redaction requests is another cause for alarm. There is no database of individuals who qualify to make an Open Public Records Act request in New Jersey, so recording offices have no way to confirm the legitimacy of these requests. Some are processed online, giving even more anonymity to requesters. One New Jersey lawyer recommends clerks contact their municipal attorneys for guidance before granting blanket requests.
During his presentation, Alan presented several examples of redacted instruments found in the public record. What information is removed runs the gambit from a few names to almost an entire document covered in black. One example is a warranty deed from a large Central Florida homebuilder, Meritage Homes. “Does this document compromise or cloud the title of every home they build?” he asks the audience.
Increased fraud risks
Some criminals use deed fraud to transfer the title of a property into their name and then attempt to sell it to an unsuspecting buyer in a quick cash transaction. These forgers have mastered the techniques to create and record convincing documents in the public record. Complete redaction provides them with one more tool to successfully manufacture counterfeit deeds, releases of mortgages, and reconveyances by photoshopping their names into blanked-out documents.
Fixing redactions won’t be easy
“Once you go into the record system and start deleting certain data points, I’ve deleted all the pertinent information that allows me to provide constructive notice. The average person can’t figure out who that deed was [conveyed] to because it shows to blank from blank at blank address,” Alan explains.
Depending on recording offices’ nomenclature and indexing processes, cleaning up redactions is a costly and time-consuming effort. You may be able to find the instruments by typing in “confidential” or “redacted” for the party name, but in some cases, the field is left blank.
If title professionals find a document that’s been redacted or has restricted access, Alan suggests reaching out to an underwriter. The potential property rights issues will have to be dealt with on a case-by-case scenario and may need to be tested in court.
Other solutions to protect privacy
Redaction isn’t the only approach to stopping attacks on public servants. There are other legislative models and legal vehicles to shield this sensitive information from the public.
Three legislative models of protection
The Property Records Industry Association (PRIA) has identified three categories of protecting sensitive information from public viewing.
- Redaction – complete removal of personal information like addresses, names, and legal descriptions from public records
- Confidential Recorded Instrument Shielding (CRIS) – prohibits the viewing of protected records instead of outright removal and requires individuals requesting access to meet certain credentials.
- Address Confidentiality (ADCON) – includes “Safe at Home” laws designed to protect domestic violence, abuse, and crime victims and creates little impact for title professionals since addresses don’t affect the fundamentals of title transfers.
Most states have adopted a combination of these models or are proposing redaction laws to protect various individuals vulnerable to violence. The American Land Title Association supports shielding (CRIS) instead of redaction to provide the needed protection without compromising the integrity of public land records and impairing the protected parties’ ability to buy and sell a property or use the equity in their homes for loans.
The “Trust Model”
Alan proposes a different route altogether with the “trust model.” A trust is a common tool used in estate planning to avoid a probate proceeding. The title company would hold the trust and, unlike a traditional trust, wouldn’t use any naming conventions that might reveal the identity of the owners, their family, or location.
Title agents are known as the guardians of real estate transactions. They move hefty sums of money successfully despite the constant threat of wire fraud and protect the non-public private information of consumers.
The trust model provides the professionals who need this information the control of the records and releases municipal workers of the burden.
Unfortunately, when redaction laws are proposed in most states, any opposition or criticism of them is painted as anti-cop.
Alan challenges title professionals to explain the new problems created when completely removing vital data points from the public record. “We need to be prepared for these laws as they come up and be willing to get in front of them and explain the issues, the unintended consequences, and collateral damage,” Alan says.