Title insurance is a critical component of real estate transactions, offering protection to buyers and lenders against potential issues with the property's title. Ensuring a clear title is essential to secure ownership rights and prevent costly legal battles in the future. The process of acquiring title insurance involves a thorough examination of the property's history to identify any defects that may pose risks to the transaction.
One of the significant risks that title insurance helps to mitigate is the presence of forged deeds, mortgages, satisfactions, or releases. These documents can be falsified to transfer ownership unlawfully or encumber the property with fraudulent liens. By investigating the authenticity of these critical documents, title insurers aim to safeguard the buyer or lender from falling victim to fraudulent activities.
Another common risk is acquiring a deed from an unauthorized entity, such as a person who is mentally incompetent, a minor, or a corporation that lacks the proper authorization. Title insurance professionals carefully review the legal capacity of the grantors to ensure that the transfer of title is valid and complies with all requirements. Any discrepancies in the authorization process can lead to disputes over ownership rights, making title insurance invaluable in these situations.
Moreover, judicial proceedings and errors in the execution of legal documents can also create title defects that may affect the property's ownership. Issues like lack of jurisdiction, improper documentation, or undisclosed information related to court cases can result in clouded titles and legal uncertainties. Title insurance serves as a shield against these unforeseen circumstances by providing financial protection and legal assistance to resolve any disputes that may arise.
Furthermore, mistakes in tax assessments, ambiguous covenants, boundary disputes, and misinterpretation of wills are among the various risks covered by title insurance. These potential defects to the title highlight the complexities involved in real estate transactions and the importance of conducting a thorough investigation to safeguard the parties involved.
In conclusion, acquiring title insurance is an essential step in any real estate transaction to protect the investment and secure ownership rights. By identifying and addressing potential risks related to the property's title, buyers and lenders can proceed with confidence, knowing that their interests are safeguarded against unforeseen circumstances. The process of examining title defects is crucial for ensuring a smooth and secure transfer of property ownership, highlighting the critical role that title insurance plays in the real estate industry.
The following list of potential risks to the title. This list is by no means exhaustive, but it gives you a general idea of the number of potential risks to property title.
Forged deeds, Mortgages, Satisfactions, or Releases
Deed from:
A person who is insane or mentally incompetent
Minor
Corporation, authorized under corporate bylaws
Corporation, given under falsified corporate resolution
Partnership, unauthorized under the partnership agreement
Purported trustee, unauthorized under the trust agreement
Corporation before formation or after the loss of corporate charter
Legal non-entity, Church, Charity, Club
Predecessor in title using an alias or fictitious name
Deed challenged due to:
Execution under fraud, undue influence, or duress
Procedures not followed in a non-judicial foreclosure
Judicial proceedings {Bankruptcy, Receivership, Conservatorship, Divorce}
Unauthorized by Court
Judicial proceeding, subject to appeal or further court order
Judicial proceedings, where all necessary parties were not joined
Lack of jurisdiction over persons or property in judicial proceedings
Execution by mistake {grantor did not know what was signed}
Execution under falsified power of attorney
Execution under expired power of attorney {death, disability or insanity of principal}
Ineffective release of: A. Prior satisfied mortgage due to actuation go note by bona fide purchaser {without notice of satisfaction} B. Prior satisfied mortgage due to bankruptcy of creditor prior to the recording of release {avoiding powers in bankruptcy} C. Prior mortgage of lien, fraudulently obtained by predecessor in title
Disputed release or prior mortgage or lien, as given under mistake or misunderstanding
Ineffective subordination agreement, causing junior lien interest to be reinstated to priority
Deed recorded but not properly indexed so as to be locatable in land records
Undisclosed but recorded:
Federal or state tax lien
Judgment or spouse, Child support lien
Prior mortgage
Notice of pending lawsuit affecting land
Environmental lien
Option or right of first refusal to purchase property
Covenants or restrictions {with or without right to reverter}
Easements {access, utility, drainage, airspace, view} of benefit to neighboring land
Boundary, party wall, or setback agreements
Errors in reading taxes and assessments:
Error is tax records {mailing tax bill to the wrong party resulting in a tax sale or crediting a payment to the wrong patty}
Erroneous release of tax or assessment liens, reinstated later to the tax rolls
Erroneous reports furnished by tax officials
Special assessments, which become liens upon passage of tax law or ordinance, but before recorded notice or commencement of improvements for which assessments are made
Adverse claim of vendor’s liens or equitable lien
Ambiguous covenants or restrictions in ancient documents
Misinterpretation of wills, does, and other instruments
Discovery of will of supposed intestate individual after probate
Discovery of later will after probate of the first will
Claims relating to access or boundaries:
Erroneous or inadequate legal descriptions
Land without right of access to a public street or road
Land with legal access is subject to undisclosed but recorded conditions or restrictions
Right of access wiped out by foreclosure on neighboring land
Readily apparent defects in recorded instruments
Improper execution
Lack of witnesses
Incomplete or missing notarial acknowledgment
Defective acknowledgement due to lack of authority
Forged notarization or witness acknowledgment
The deed was not properly recorded
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