Title insurance is a one time purchase which provides an added level of protection for real estate investors. Losses in real estate value may occur from title errors by lawyers, surveyors or other professionals, because of filing errors in the clerk's office, or fraud such as forged signatures. The title insurance company, for a one-time payment, provides a written guarantee against loss up to the amount of the policy or fair market value if such coverage is purchased and defends the insured in all legal actions or proceedings alleging the title to be other than that which is reflected in the policy.

Why Purchase Title Insurance?

When you buy most personal property you do not need to know the legal history of the former owner. You may buy stocks or bonds without caring whether the seller has a tax bill due. You may buy a car without worrying about whether there are any judgments against the owner. But when you buy real estate, all of these things and many others can cause you untold loss.

• Without title insurance, you become a self-insurer. You may have recourse against others, but collection often proves difficult.
• Although title insurance cannot eliminate title defects any more than fire insurance can eliminate fire, should your title fail, you will be reimbursed for your losses up to the face amount of the policy plus legal costs.
• Title insurance is as important as fire insurance. Losses from title defects can be greater than fire losses. If a house burns, the land is still there to rebuild. If title to the property fails, you may have nothing.

The most thorough and competent title examination cannot protect against loss from hidden title defects. See is our non exhaustive list of title defects of the type not appearing of Record but insured against by a Title Insurance Policy, to the extent not otherwise indicated in the policy.

Possible Title Defects

There are a large number of possible title defects. A representative list of title defects appears below:

1. False impersonation of the true owner of the land or of his consort.
2. Forged deeds, releases of mortgages and other instruments.
3. Instruments executed under fabricated or expired powers of attorney (Death or insanity of principal).
4. Deeds apparently valid but actually delivered after death or Grantor or Garantee, or without consent of Grantor.
5. Deeds to or from corporations before incorporation or after surrender or forfeiture of charter.
6. Undisclosed heirs.
7. Misinterpretation of Will, Deed or other instrument.
8. Deeds by persons of unsound mind.
9. Deeds by minors.
10. Deeds by aliens.
11. Deeds by persons apparently single but actually married.
12. Birth or adoption of children after date of Will.
13. Children living at date of Will but not mentioned therein.
14. Mistakes in recording legal documents (Incorrect indexing, errors and omissions in transcribing and failure to spread of record or preserve original instruments).
15. Want of jurisdiction of persons in judicial proceedings.
16. Discovery of will of an apparent intestate.
17. Discovery of later Will after probate of first Will.
18. Capacity of foreign personal representatives and trustees to act.
19. Failure to include necessary parties in judicial proceedings.
20. Claims of creditors against property conveyed by heirs and devises within proscribed time after owner's death.
21. Deeds absolute on their faces but which are held to be equitable mortgages.
22. Deeds in lieu of foreclosure set aside as being given under duress.
23. Ultra vires deed given under falsified corporate resolution.
24. Outstanding prescriptive rights not of record and not disclosed by survey.
25. Deed of property recited to be separate property of Grantor which is in fact community property.
26. Errors in tax records (For example, listing payment against wrong property).
27. Deed from bigamous couple - prior existing marriage in another jurisdiction.
28. Deed from convicted felon.
29. Conveyance by heir, devisee or survivor of a joint estate who murdered the decedent.
30. Defective acknowledgment due to lack of authority of notary (Acknowledgment taken before commission or after expiration of commission).
31. Federal condemnation without filing of notice (Federal law does not require filing of notice of taking in local recording office).
32. Rights under Financing Statements filed under Uniform Commercial Code in the name of the debtor who may not be the owner of the property.
33. Record easement, but erroneous ancient location of pipe or sewer line which does not follow route of granted easement.
34. Demolition liens where city demolishes building under statutory authority which are not recorded or are not recorded against the true owner.
35. Descriptions apparently but not actually adequate.
36. Fraudulent changes in existing records by persons other than recording officials. Changes in record by recording official without authority upon oral request or upon being presented with instrument changes after execution and recordation.
37. Ineffective waiver of tax liens by tax or other governing authorities repudiated later of successors.
38. Corporation franchise taxes as lien on all corporate assets, notice of which does not have to be recorded in the local recording office.
39. Wills revoked by marriage after execution when marriage not contemplated by terms of Will.
40. Special assessments where they become lien upon passage of resolution and before recordation of commencement of improvements for which assessed.
41. Interests arising by Deeds to fictitious characters to conceal illegal activities on the premises.
42. Erroneous reports furnished by tax officials, but not binding on municipality.
43. Administration of estates and probate of Wills of persons absent but not deceased.
44. Undisclosed divorce of spouse who conveys as sole heir of deceased consort.
45. Marital rights of spouse, purportedly but not legally divorced.
46. Tax homestead exceptions set aside as fraudulently claimed.
47. Break in the chain of title beyond period of examination of public records where running of adverse possession statute has been suspended (True owner is incompetent, absent or incarcerated or title is held by the sovereign).
48. Deed from Trustee of purported business trust which is in fact a Partnership of joint stock association.
49. Deed or executor under non-intervention Will when order of solvency has been fraudulently procured or entered.
50. Deed from record owner of land where he has sold property to another purchaser on unrecorded land contract and the purchaser had taken possession of the premises.
51. Void conveyances in violation of public policy: (Payment of gambling debt, payment for contract to commit crime or conveyance made in restraint of trade).
52. Duress in execution of instruments.

December 10, 2010 at 6:59 AM Posted by Mo Choumil