According to Black’s Law Dictionary, Eighth Edition, title is defined as “legal evidence of a person’s ownership rights in property” which is usually evidenced by an instrument, or document, such as a deed.
Frequently Asked Questions
Title is the legal ownership rights to a property. A deed is a physical document that transfers the ownership rights from the grantor (seller) to the grantee (buyer).
Yes. Problems were found in over 35 percent of all residential real estate transactions in 2005. These issues can range from unpaid parking tickets against sellers, which can mature into liens against property, to forged documents. Unlike other insurance policies that protect you from incidents in the future, title insurance protects you from past events that predate your ownership–you are protected from all unknown defects from the past that may arise at a future date. That protection continues throughout your ownership of the premises, even decades after you purchased the property. This is particularly helpful when you consider the difficulty in knowing what happened prior to your ownership, and near impossibility of defending claims from many years ago.
Let’s say someone claims they are the son of a prior owner whose siblings sold the property without telling him after their parent died. Without having any knowledge of the identities of the prior owners of your home, you would have to ascertain whether that person has a valid claim and hire an attorney to defend your interest. With an owner’s policy you would simply contact the insurer and their attorneys would defend your interest for free. Additionally, your title company would have searched the history of the title of your property and raised any potential issues similar to this, and assisted in resolving any such issues prior to closing. Perhaps there are easements, rights of way, or covenants and restrictions that affect your interest in some manner, but these agreements are misindexed (incorrectly recorded against another property) or not found in the record because they are so old (many of these agreements are from the nineteenth century). A title company will perform a diligent search to find these documents and insure against any failures to locate them.
What if there is an error in the description of your property on the deed? An owner’s policy insures against typographical errors (known as scrivener’s errors). Hiring a title company also provides several recording experts to proofread and review your description to make your deed describes the entire area your purchasing. The list of potential pitfalls and problems could go on for pages.
An article by Professors Robin Paul Malloy and Mark Kaplow, entitled “Attorney Malpractice for Failure to Require Fee Owner’s Tile insurance in a Residential Real Estate Transaction” makes a very persuasive argument for the necessity of obtaining title insurance. In this academic article, the professors conclude “it is our contention that a lawyer commits malpractice in representing a home buyer if that attorney fails to require a fee owner’s commitment and policy of title insurance as part of the transaction.”*
Simply, there is no easier or more effective way to protect your home ownership than by paying a one time fee, that gives you access to the full compliment of examiners, readers, attorneys and recorders of a title company, such as Cornerstone Land Abstract. Our title professionals guarantee to act on your behalf to insure you purchase the real property in a proper and efficient manner and will continue to protect your interest as long as you and your heirs own the property.
*75 St. John’s Law Review, 407, (Spring 2000, Number 2).
There are many defects that may arise and cause issues with your title. Examples of some of the defects that a title insurance policy protect against are numerous. First are issues with deeds and other recordable documents. These include forged deeds, typographical and informational errors in deeds, and mistakes in filing or recording documents. There are additional concerns with respect to persons executing documents, including grantors singing deeds who lack capacity to do so, missing or undisclosed heirs with an interest in the premises, deeds from person of unsound mind, or from persons whose interests in properties are being challenged, such as in the case of contested wills.
Additionally, an owner of a title policy is protected from final loss caused by judgments against the individual selling the premises. These judgments can be from both private creditors and governmental entities such as the United States, the Parking Violations Bureau, and Sanitation Department. A title company will also identify liens against premises imposed by taxing authorities, such as the Department of Finance, the town and New York State. Sometimes violations exist against properties that can affect title. These violations can be issues by the NYC Building Department, the NYC Department of Housing, Preservation and Development or the town, village or municipality having jurisdiction over the premises. Also, private entities, such as subcontractors, could place mechanics’ liens on premises. One search were numerous claims arise is on unsatisfied prior mortgages. A title search will search and identify all prior mortgages against a premises and determine whether they have been properly satisfied.
A title search is an examination of the history of ownership, sometimes called the “chain of title,” of the property along with a search of outstanding liens, judgments and mortgages against the property and the owners. Title companies conduct the search to establish the seller’s ownership interest in the property, and confirm that no other persons have an ownership interest in said property. The specific question is whether the seller has the capacity to sell the property. The chain of title examination is conducted to be sure that, going back at least 40 years which is the industry minimum, and as much as 100 years (or as far back as records are kept) the chain of ownership are connected. One missing link in the chain raises a question as to the continuity of the ownership interests. So, if “Mr. Smith and Mrs. Smith, his wife” purchased the premises in 1925 and Mrs. Smith deeds out the premises pursuant to a deed in 1960, a question is raised (we call it a “title exception”) with respect to the open interest of Mr. Smith. A title report is issued and the title exception is raised in the title report—in this scenario, we would ask for proof of death and marital status at the time of death of Mr. Smith. Without resolving the issue of Mr. Smith, there is a potential claim for compensation from Mr. Smith or his heirs. This is the type of claim that title insurance protects against, and allows the holder of a title policy to utilize the legal services of a title underwriter, and receive a reimbursement in the event the actual heirs of Mr. Smith succeed in litigation against the insured premises.
Customarily, the purchaser’s attorney orders a title search from a company that he or she has worked with in the past. This familiarity allows for a working relationship between the buyer’s attorney and his office and the title attorneys, clearance officers and other staff. This is done after the purchaser has entered into contract with a seller and deposited a down payment with the seller’s attorney. Usually the loan application process and title search take place simultaneously. Occasionally, the realtor may have a relationship with a title company and secure the title. On rare occasions, the home buyers themselves will order title insurance. This last method has become more popular recently. So many people today begin any endeavor by searching for advice on the internet. Title company websites can be excellent sources of information for potential home buyers and you should not hesitate to contact a title company, such as Cornerstone Land Abstract, with any questions you have about specific properties or the process in general.
Once a closing is complete the work of a title company is not over. In fact, from the perspective of avoiding potential problems going forward, the post-closing work of a title company is crucial. One of the most important protections a title insurance policy provides is gap coverage. The gap is the period of time from the end of the closing until the recording of the deed, mortgage and other closing documents. In New York, it is impossible to record a document immediately after closing. Even if the funds were wired to the title company or checks were cut directly at closing to the Department of Finance, there is still a lag time for the city to actually record the relevant documents. After a closing, documents must be returned to the title company, files must be broken down, checks must be deposited, recording documents must be reviewed and approved and cover sheets must be prepared before a title company can submit documents for recording. (For more on this click “the recording process.”)
What can go wrong during the gap period? Judgments, liens and mortgages can be filed or recorded in between the date of closing (and execution of the deed and/or deed mortgage ) and the date closing documents are recorded. Superior liens appearing on the record result in a problem of priority. That means either a judgment creditor or alternate lender has a superior lien, judgment or mortgage on the premises that would be able to perfect their interest against the premises prior to your interest. Thereby, the prior owner of the premises would have a judgment creditor with a lien against your home. Sometimes this is an innocent coincidence, other times a seller has committed fraud by taking out a mortgage on a property after selling the home. There have been cases where owners have fraudulently sold their homes a few times over the course of a day. Although title companies run searches up to and including the date of closing, an unscrupulous seller could perpetuate this fraud by coordinating multiple closings in a twenty four hour period. Similarly, an owner can execute a number of refinances with several banks in one day. Based on the potential for judgments and liens to be filed by creditors, the potential for unscrupulous individuals to scam unsuspecting banks and buyers, and the delay that takes place in recordings, the gap period is a perilous time.
What can be done to prevent problems and financial loss during the gap? Fortunately, provided you purchase title insurance in New York State, your are automatically protected against all of these claims, judgments, liens, mortgages and other problems arising during the gap. Gap protection may be the single most important reason to purchase title insurance.
Insurable title often has some type of minor defect in the chain of title. Even with these defects a title company is willing to write a policy against it. “Insurable title” Is generally considered lower quality than “marketable title” Marketable title guarantees the chain of title is free and clear from any defects. “Marketable title is considered higher quality than “Insurable title” and is the standard in most real-estate transactions. Generally, a buyer should look for “marketable title” when buying a home, however “insurable title” is often sufficient.
A mortgage is a publicly filed document giving the creditor a claim on the property in the event the borrower defaults. The mortgage contains the principal amount of the loan, and specifics regarding loan default. The note payable is a private agreement between the lender and the borrower that outlines the specifics of the loan (principal amount, interest rate, payment schedule, etc.) (https://www.quickenloans.com/blog/whats-difference-promissory-note-mortgage).
A real estate purchase contract is a legally binding document signed by both the buyer and seller outlining the basics of the property sale, including sale price, definitions, and contingencies. In New York it is common for the buyer to make an initial down payment or earnest money (usually 10%) to the seller’s attorney upon signing the contract. (https://www.nolo.com/legal-encyclopedia/new-york-home-buyers-what-does-it-mean-be-in-contract-what-happens-your-downpayment.html).
The one-time premium is based on the purchase price of the property. The rates for title insurance vary from state to state. In New York the rate and all applicable premiums and discounts are set by the New York State Department of Insurance. Other charges such as search fees are not regulated and are set by the company.
If you are the Purchaser:
- Copy of Contract
- Certified checks for all payments
- Personal checks for misc. expenses
- Proof of home owner’s insurance
- State issued picture identification
If you are the Seller:
- Copy of Contract
- Invoices for unpaid taxes, utilities
- Up to date meter readings
- Receipts of payments (utilities, mortgage and taxes)
- Bill of sale for additional personal items included in contract