A Bundle of Rights Needs a Bundle of Good Institutions

January 10, 2020   Robert Gmeiner

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The NBC station in Charlotte, North Carolina, WCNC, recently reported a crime in which someone forged a signature on a quitclaim deed to fraudulently sell another person’s house.  The house in question is lawfully owned by Rahim Rupani, who lives in Atlanta but maintains it as a second home in Charlotte.  The home is worth $300,000, but was fraudulently sold for $9,000.  Rupani learned of it when neighbors in Charlotte tipped him off.  The squatters changed locks and were doing the same thing to some other properties.  The issue is still working its way through the legal system, where there is sadly not an easy remedy.  WSOC Channel 9 reported on a similar case in Davidson, near Charlotte, in which the squatters moved into the local mayor’s inherited state, but had since been arrested and booked and released on bond.

The NBC station did not stop with reporting one news story; it has continued to investigate the issue.  One of its findings is that the Mecklenburg County Register of Deeds (where Charlotte is located) does not verify the identification of persons making real estate transactions because it is prohibited by law from doing so.  It relies instead on the notaries public who verify the paperwork.  This finding has drawn the attention of the county commissioners.

Property rights are thought of in American law as a bundle of rights, an idea that has become well accepted in the legal profession.  This bundle of rights needs a bundle of good institutions to protect the rights.  Some safeguards, such as effective policing, reform of civil asset forfeiture, and protection from abuse of eminent domain, are in place to varying degrees throughout the United States.  Some localities are better than others, but in general the situation of property owners throughout the United States is better than in much of the world.

Real property may be secure from theft by government (reform of civil asset forfeiture and eminent domain) and it may be safe from crime (good policing), but if it can be stolen through forged deeds, institutional reform is needed.  In the United States, questions of property ownership are ultimately determined by courts, not recorded deeds.  Judicial processes can be time consuming and, fortunately, they are not often needed as property ownership disputes are rare.  If property transactions were handled in a more reliable way, such as with multiple steps of identification, perhaps with both notary public and the county recorder, courts would be needed even less.  Were this the case, these issues in Charlotte would not have arisen.  Additional steps of verification would unburden the courts and prevent fraud.  They would not burden legitimate home buyers who already must provide photo identification at many steps of the home buying process, beginning with applying for a mortgage and concluding at closing with a notary public.