You probably have several forms of insurance already. And you undoubtedly are familiar with insurance coverage on cars, your life and medical bills. But title insurance?
When you buy a condominium, a home, any other type of building or even vacant land, you must have a complete investigation made on every aspect of the property. Or, you may discover that the property you bought and paid for is not actually yours at all!
And even after the investigation, you will need protection in the event that some point has been missed in the public records or someone makes a claim on the title to your property. That protection is a title insurance policy. Back to top
Real Estate has such great value and is so basic a form of wealth that many special laws have been enacted for its protection – laws so strict and far-reaching that real estate is more strongly safe-guarded than any other form of property.
As a result, the owner of land has exceedingly strong rights…and so do the family and heirs of the owner.
But others may have "rights" in the property, as well. There are mortgages and leaseholder rights…liens due to unpaid taxes…lien claims to those whom the owner owes money…mining, oil or air rights…and many others. Anyone who has such a claim is, in a limited way, a part-owner. He or she cannot ordinarily be deprived of their interest except by having the claim settled or release. The property may be sold -- even without their knowledge – but the claim is still good until satisfied. As a new owner you may know nothing about these risks, but you are still vulnerable to such claims on your property. That’s why you need a title insurance policy. Back to top
Not at all. A "deed" is merely an instrument whereby a seller transfers his or her right of ownership, whatever it may be, to you. It is not proof that the person described as the seller is actually the owner. It does not do away with claims or rights others may have in the property. From the deed, you cannot determine what rights, liens or claims may be outstanding against your title. Back to top
You will probably buy property that has had a number of different owners over the years. The continuous record of all those transactions is called the "Chain of Title," and like any other chain, it is no stronger than its weakest link. Anything wrong with the title of the previous owner may very well affect your title, too. Back to top
If the former owner had a new sink installed and failed to pay the bill, the plumber may file a Mechanic’s Lien claim. This stands as a claim on the property for which you, as the new owner, may have to pay in order to clear your title. Similarly, there may be suits pending affecting the property or judgments rendered against the former owner, foreclosures or bankruptcy actions, or any number of claims or legal involvements which may definitely cloud the title until they are properly settled or removed. Back to top
If a person is sued and a judgment is rendered against that person, any real estate he or she owns may become security for the debt. This means that he or she cannot sell that real estate and deliver a clear title until the judgment is paid, released or otherwise satisfactorily disposed of. Further, other suits filed against the owner of real estate – even though not yet decided – may result in a cloud on the title and prevent the sale of the property. Back to top
Unpaid real estate taxes are a first lien on any real property. If there has been a tax sale or forfeiture or any other objection or protest, it means that there are complications standing in the way of a clear title. Back to top
A good many such things are possible – the right-of-way for a road or power line, an easement for a driveway, air rights, sub-surface rights and various others – any of which may have been sold or granted to someone else by a former owner. If so, there may be restrictions on your use of the land. Back to top
You may buy a piece of property in good faith from a corporation, only to have the validity of the sale challenged by a stockholder who claims it was not properly authorized by the Board of Directors – or that the company was not empowered under its charter or by-laws to sell the land at all. There are further complications possible if the company is in receivership, or if the firm is being dissolved. Back to top
An abstract, which is used in some parts of the country, is a history of the title to property as revealed by the public records. Deeds, mortgages, other instruments and legal proceedings which have affected property through the years are all included in the abstract.
If something is revealed in the abstract which might stand in the way of a clear title, it is up to the owner and the owner’s attorney to clear it away. If they cannot do this, it must be accepted as a limitation on your right of ownership. Also, it is not infrequent for matters which seriously affect the title to be omitted in an abstract, because they are not shown in the public records. Back to top
It may not…simply because the public records, from which an abstract is made, may not show everything which affects the title. For example: Statements in the record may be incorrect or may fail to give important facts. There may be fraudulent or improperly executed documents on the record. And, there may even be ordinary clerical mistakes which could seriously endanger the title.
In fact, a title would appear to be clear, after the examination of the abstract, only:
Even after all these possible hazards are eliminated, there still remain some of the most serious sources of risk…hazards which by their very nature simply cannot be uncovered. Back to top
Some of the most serious risks which are not revealed by the records or by an examination of the abstract but covered by a title insurance policy are:
Yes, with a title insurance policy. Under the terms of a title insurance policy, you are protected against risks and insured against loss. If your title as insured is ever attacked, the title insurance company stands ready to defend it in two ways:
Any person or financial institution that lends money on real estate wants that investment protected. The title insurance company provides mortgage title insurance policies to assure the lender that the mortgage is a valid first lien protected against hidden as well as known defects in the title as insured. Such a policy affords the only way a lender can be certain about the title which may be acquired in the event of a foreclosure.
Unfortunately, this does not benefit the owner in the event of a claim, for a mortgage title insurance policy protects only the lender’s interest in the property, not the current owner. That’s why the title insurance company provides owners title insurance policies to protect the owner’s interest in a piece of property. Purchasing your owners title insurance policy at the same time that the lender orders the mortgage title insurance policy can result in cost savings to you. Back to top
The cost of title insurance on any piece of property you may decide to buy is very small when compared with the benefit and security it gives. And, unlike other forms of insurance, there are no annual payments to keep the policy in force – you pay only one premium. The original premium is your only cost as long as you or your heirs own the property! Back to top