Searches and Insurance

Searches and Insurance

During the time I have been licensed to practice law, the way in which title is searched has changed dramatically.  Computers and technology have made massive changes to the way information is archived.  The offices in each county or parish in each state are responsible for keeping track of the ownership, transfers and conveyances of the real estate in their county.  Often, these records can go back a couple hundred years.

Just the other day, while in Jamaica, I had the opportunity to visit the Barrett sugar plantation.  I spent some time examining the very large and lengthy deed that was signed and sealed with wax seals at the bottom of the pages in the 37th year of King George III.  This would have been in the late 1700s.  From that point in time, title to that huge plantation can be traced as to who owned it and how it has changed hands.

In modern America, we do title searches back approximately 60 years, although that may vary by county and state.  We want to see who has owned the property during that period of time and what they have done with it while they owned it.  At many seminars, I’ve heard some rather unkind things said about the quality of the work being done by the people who do title research.  They are not lawyers, but they are specialists who have been trained in a limited way to pay attention to certain types of documents such as deeds, mortgages and other types of liens.  Because of this, they may, on occasion, fail to note a recorded Notice of Option, Notice of Contract, or Affidavit of Contract.

The idea behind a title search is to see what has happened with the property, and then, based upon that information, make a determination as to whether the property is insurable (will one of the large title insurance companies collect a premium and issue a policy saying that if for some reason, someone makes a claim regarding the quality of the ownership of that land, they will defend and indemnify).  During my career as a lawyer, I’ve heard all sorts of explanations as to why you need title insurance, but I think the following is the best and most practical, particularly in this era of identification theft.

Suppose you are buying a piece of property from someone who appears to be a motivated seller.  They are telling you they are having domestic issues and just want to hurry up and get the property sold.  A man and a woman show up to a tabletop closing which they insisted upon, and they sign over a deed and collect a check from you.  At the closing, they present some sort of photo identification, and a notary public whom they arranged to be there notarizes their signatures on the deed.  Months, or even years, later, you discover that one of the two people there was not the spouse, but the sibling of the seller.  The real spouse was never notified of the sale.  Now they want to know what happened to their property.  This would be an instance in which if you did not have title insurance (and in that type of closing, you wouldn’t), you would be in a world of hurt.

Let’s assume that the same thing happens again with better forged identity documents in the office of a title company.  Yes, the picture on the ID matches the person in the room, no other means of verification is undertaken, and the title company goes ahead and issues a policy.  Lo and behold, they find out several months later that one of the two individuals was not who they pretended to be, and, therefore, only half of the property was actually transferred.  That would be an instance in which title insurance would have to step in and make the matter right.

There are two types of title insurance, one that protects the owner of the property and insures their quality of ownership, and a type of policy referred to as a lender’s policy that provides coverage to a lender.  It insures that a lender’s lien was timely and accurately recorded in accordance with the instructions, and it has the correct position in the chain of title as far as a lien against that land.            

I hope this information gives you a better understanding of the importance of title insurance protection. e protection.