FEDERAL SECURITIES LAWS AND OWNERSHIP OF NONTRADITIONAL REAL PROPERTY: Allison v. Ticor Title Insurance Co

In the Allison versus Ticor Title Insurance Co. case, the 7th Circuit firmly rejected the trial court's premise that real property sold in violation of the registration requirements of the securities law created a defect in the purchaser's title. The court indicated that the right of rescission granted to purchasers of unregistered and non-exempt securities by Section 12 of the Securities Act of 1933 was enacted to protect investors, not to invalidate the title they acquired. The court further noted that neither Section 12 nor Section 5 of the Securities Act implied that an unregistered sale does not pass good title to the buyer. The 7th Circuit finding that a securities registration defect does not create a title defect averts a potential catastrophe. The court clarified the rules that have governed the financing, development, ownership, and title protection of non-traditional real property for decades.