Friday, November 2, 2007

Top Reasons to Get Title Insurance

70 Reasons to Get Title Insurance - examples of what standard coverage owners title insurance covers - First American Title Insurance Company

You don't want problems from prior ownerships to interfere with your rights
to your property. And you don't want to pay the potentially ruinous cost
of defending your property rights in court.

A title insurance policy is your best protection against potential title
defects, which can remain hidden despite the most thorough search of public
records and the most careful escrow or closing.

For a one-time premium First American agrees to reimburse you for loss
due to defects existing prior to the issue date of your policy, up to the
policy amount. And, should it be needed, the policy also provides for the
cost of legal defense of your title.The standard coverage policy protects
you against such potential defects as:

  1. Forged deeds, mortgages, satisfactions or releases.
  2. Deed by person who is insane or mentally incompetent.
  3. Deed by minor (may be disavowed).
  4. Deed from corporation, unauthorized under corporate bylaws or given
    under falsified corporate resolution.
  5. Deed from partnership, unauthorized under partnership

  6. Deed from purported trustee, unauthorized under trust agreement.
  7. Deed to or from a "corporation" before incorporation, or
    after loss of corporate charter.
  8. Deed from a legal non-entity (styled, for example, as a

    church, charity or club).
  9. Deed by person in a foreign country, vulnerable to challenge as incompetent,
    unauthorized or defective under foreign laws.
  10. Claims resulting from use of "alias" or fictitious namestyle by a predecessor in title.

  1. Deed challenged as being given under fraud, undue influence

    or duress.
  2. Deed following non-judicial foreclosure, where required procedure was
    not followed.
  3. Deed affecting land in judicial proceedings (bankruptcy,

    receivership, probate, conservatorship, dissolution of

    marriage), unauthorized by court.
  4. Deed following judicial proceedings, subject to appeal or

    further court order.
  5. Deed following judicial proceedings, where all necessary

    parties were not joined.
  6. Lack of jurisdiction over persons or property in judicial

  7. Deed signed by mistake (grantor did not know what was

  8. Deed executed under falsified power of attorney.
  9. Deed executed under expired power or attorney (death, disability or
    insanity of principal).
  10. Deed apparently valid, but actually delivered after death of

    grantor or grantee, or without consent of grantor.
  11. Deed affecting property purported to be separate property of

    grantor, which is in fact community or jointly-owned

  12. Undisclosed divorce of one who conveys as sole heir of a

    deceased former spouse.
  13. Deed affecting property of deceased person, not joining all

  14. Deed following administration of estate of missing person,

    who later re-appears.
  15. Conveyance by heir or survivor of a joint estate, who

    murdered the decedent.
  16. Conveyances and proceedings affecting rights of service-member protected
    by the Soldiers and Sailors Civil Relief Act.
  17. Conveyance void as in violation of public policy (payment of gambling
    debt, payment for contract to commit crime, or conveyance made in restraint
    of trade).

  1. Deed to land including "wetlands" subject to public trust

    (vesting title in government to protect public interest in navigation,
    commerce, fishing and recreation).
  2. Deed from government entity, vulnerable to challenge as unauthorized
    or unlawful.
  3. Ineffective release of prior satisfied mortgage due to acquisition
    of note by bona fide purchaser (without notice of satisfaction).
  4. Ineffective release of prior satisfied mortgage due to bankruptcy of
    creditor prior to recording of release (avoiding powers in bankruptcy).
  5. Ineffective release of prior mortgage of lien, as fraudulently obtained
    by predecessor in title.
  6. Disputed release of prior mortgage or lien, as given under mistake
    or misunderstanding.
  7. Ineffective subordination agreement, causing junior interest to be
    reinstated to priority.
  8. Deed recorded, but not properly indexed so as to be locatable in the
    land records.
  9. Undisclosed but recorded federal or state tax lien.
  10. Undisclosed but recorded judgment or spousal/child support lien.
  11. Undisclosed but recorded prior mortgage.
  12. Undisclosed but recorded notice of pending lawsuit affecting land.
  13. Undisclosed but recorded environmental lien.
  14. Undisclosed but recorded option, or right of first refusal, to purchase
  15. Undisclosed but recorded covenants or restrictions, with (or without)
    rights of reverter.
  16. Undisclosed but recorded easements (for access, utilities, drainage,
    airspace, views) benefiting neighboring land.
  17. Undisclosed but recorded boundary, party wall or setback agreements.

  1. Errors in tax records (mailing tax bill to wrong party resulting in
    tax sale, or crediting payment to wrong property).
  2. Erroneous release of tax or assessment liens, which are later reinstated
    to the tax rolls.
  3. Erroneous reports furnished by tax officials (not binding local government).
  4. Special assessments which become liens upon passage of a law or ordinance,
    but before recorded notice or commencement of improvements for which assessment
    is made.
  5. Adverse claim of vendor's lien.
  6. Adverse claim of equitable lien.
  7. Ambiguous covenants or restrictions in ancient documents.
  8. Misinterpretation of wills, deeds and other instruments.
  9. Discovery of will of supposed intestate individual, after probate.
  10. Discovery of later will after probate of first will.
  11. Erroneous or inadequate legal descriptions.
  12. Deed to land without a right of access to a public street or road.
  13. Deed to land with legal access subject to undisclosed but recorded
    conditions or restrictions.
  14. Right of access wiped out by foreclosure on neighboring land.
  15. Patent defects in recorded instruments (for example, failure to attach
    notarial acknowledgment or a legal description).
  16. Defective acknowledgment due to lack of authority of notary (acknowledgment
    taken before commission or after expiration of commission).
  17. Forged notarization or witness acknowledgment.
  18. Deed not properly recorded (wrong county, missing pages or other contents,
    or without required payment).
  19. Deed from grantor who is claimed to have acquired title through fraud
    upon creditors of a prior owner.

An extended coverage policy may be requested to protect against such
additional defects as:

  1. Deed to a purchaser from one who has previously sold or leased the
    same land to a third party under an unrecorded contract, where the third
    party is in possession of the premises.
  2. Claimed prescriptive rights, not of record and not disclosed by survey.

  3. Physical location of easement (underground pipe or sewer line) which
    does not conform with easement of record.
  4. Deed to land with improvements encroaching upon land of another.
  5. Incorrect survey (misstating location, dimensions, area, easements
    or improvements upon land).
  6. "Mechanics' lien" claims (securing payment of contractors
    and material suppliers for improvements) which may attach without recorded
  7. Federal estate or state inheritance tax liens (may attach without recorded
  8. Pre-existing violation of subdivision mapping laws.
  9. Pre-existing violation of zoning ordinances.
  10. Pre-existing violation of conditions, covenants and restrictions affecting
    the land.

The EAGLE Policy is our newest and most comprehensive coverage. Subject
to availability in your area, the Eagle Policy covers all of the risks listed
above, plus these:

  1. Post-policy forgery against the insured interest.
  2. Forced removal of residential improvements due to lack of an appropriate
    building permit (subject to deductible).
  3. Post-policy construction of improvements by a neighbor onto insured
  4. Damage to residential structures from use of the surface of insured
    land for extraction or development of minerals.

We're First American: Financially strong and reputation-proud. Let us help you avoid title problems.

(For some true "horror stories," taken from actual First American claim files, visit the "Claims Chronicles" reference section of our website.)

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Title Insurance FAQ

Q: What is title insurance?

A: An insurance policy--protecting against loss should the condition of title to land be other than as insured.

Q: Why do I need title insurance?

A: When you buy a home, or any property for
that matter, you expect to enjoy certain benefits from ownership. For example,
you expect to be able to occupy and use the property as you wish, to be
free from debts or obligations not created or agreed to by you, and to be
able to freely sell or pledge your property as security for a loan. Title
insurance is designed to cover these rights you bargain for.

Q: What if I have a problem?
Do I
have to lose my property to make a claim?

A: Not at all. At the mere hint of a claim
adverse to your title, you should contact your title insurer or the agent
who issued your policy. Title insurance includes coverage for legal expenses
which may be necessary to investigate, litigate or settle an adverse claim.

Q: What does this cost?

A: The cost varies, depending mainly on the
value of your property. The important thing to remember is that you only
pay once, then the coverage continues in effect for so long as you have
an interest in covered property. If you should die, the coverage automatically
continues for the benefit of your heirs. If you sell your property, giving
warranties of title to your buyer, your coverage continues. Likewise, if
a buyer gives you a mortgage to finance a purchase of covered property from
you, your coverage continues to protect your security interest in the property.

Q: If my lender gets title insurance for its mortgage,
why do I need a separate policy for myself?

A: The lender's policy covers only the amount
of its loan, which is usually not the full property value. In the event
of an adverse claim, the lender would ordinarily not be concerned unless
its loan became non-performing and the claim threatened the lender's ability
to foreclose and recover its principal and interest. And, in the event
of a claim there is no provision for payment of legal expenses for an uninsured
party. When a loan policy is being issued, the small additional expense
of an owner's policy is a bargain.

Q: Can you be a little more specific about the types of claims,
or risks, covered by title insurance?

A: Sure. First understand there are basically
three different levels of coverage: Standard coverage, extended coverage,
and our most comprehensive "EAGLE Policy" coverage.

Standard coverage handles such risks as:

  • Forgery and impersonation;
  • Lack of competency, capacity or legal authority of a party;
  • Deed not joined in by a necessary party (co-owner, heir, spouse, corporate
    officer, or business partner);
  • Undisclosed (but recorded) prior mortgage or lien;
  • Undisclosed (but recorded) easement or use restriction;
  • Erroneous or inadequate legal descriptions;
  • Lack of a right of access; and
  • Deed not properly recorded.

An extended coverage policy may be requested to protect against such
additional defects as:

  • Off-record matters, such as claims for adverse possession or prescriptive
  • Deed to land with buildings encroaching on land of another;
  • Incorrect survey;
  • Silent (off-record) liens (such as mechanics' or estate tax liens);
  • Pre-existing violations of subdivision laws, zoning ordinances or CC&R's.

Subject to availability in your locale, First American's EAGLE Policy
covers all of the risks listed above, plus:

  • Post-policy forgery;
  • Forced removal of improvements due to lack of building permit (subject
    to deductible);
  • Post-policy construction of improvements by a neighbor onto insured
    land; and
  • Location and dimensions of insured land (survey not required).

For a more detailed list of covered risks, visit "70-Something Ways to Lose Your Property" elsewhere on this website. And for some true "horror stories," from actual First American claim files, check out "Claims Chronicles."

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What is Title Insurance

When you enter into an Agreement of Purchase and Sale to purchase a property, you will retain the services of a lawyer to handle the paper work on your behalf. The lawyer will review the Agreement of Purchase and Sale and, in order to ensure that you are obtaining good, clear and marketable title to the property (that you will own the property without any prior encumbrances, liens, work orders, debts, etc. from a prior owner), he or she will perform a number of searches on your behalf. These searches could include:

1. title search;

2. corporate status search;

3. execution search;

4. compliance with subdivision agreements;

5. tax arrears search;

6. unregistered hydro easement search;

7. building work order search;

8. zoning compliance search;

9. water well record search;

10. septic use permit search;

11. conservation authority search;

12. status of restrictive covenants;

13. gas arrears search;

14. hydro arrears search;

15. water arrears search; and/or

16. fire work order search.

You, as the purchaser, have the choice of either:

a. relying on your lawyer's title opinion of the property; or

b. obtaining a title insurance policy.

There are a number of companies that offer title insurance policies. Your lawyer will advise you of your options and what items each policy covers. If you choose to rely on your lawyer's title opinion of the property and, after closing, a problem with the title arises, your lawyer must correct it. If the lawyer cannot correct the problem, you can sue the lawyer for negligence and the lawyer may make a claim under his or her law firm's mandatory insurance for errors and omissions. If, on the other hand, you choose to obtain a title insurance policy and a problem arises after closing, the title insurance company will correct the problem.

If you choose to obtain a title insurance policy, your lawyer may not have to perform some of the usual above-noted searches, as the policy assumes the risk for problems that would be uncovered through the search process. Not having to send some of the required search letters may save you some disbursement costs, as most of these searches require a fee to be paid before the information will be released. Although the title insurance policy does have a cost associated with it, it may offset the costs you will save by not having to pay some of the above-noted searches.

No matter which policy you choose, if you choose that route, the following searches will not have to be done by your lawyer (the title insurer will assume the risk for problems that would have been found during these searches):

1. compliance with subdivision agreements;

2. corporate status search; and

3. execution search against previous owners.

Depending on the policy you choose, some of the following may not have to be completed by your lawyer:

1. tax arrears search;

2. status of restrictive covenants;

3. unregistered hydro easement search;

4. water arrears search;

5. hydro arrears search;

6. gas arrears search;

7. building work order search;

8. conservation authority search; and

9. zoning compliance search.

Some of these searches, however may still have to be completed. Be sure to speak with your lawyer about the best option for you depending on the property you are purchasing.

Barb Asselin is a college professor, author and owner of Asselin Group, an online publishing company. For more articles relating to real estate, visit

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