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Seminar 7. Don’t Just Roll the Dice Examine & Insure. Examine, or Else!!!.
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Seminar 7 Don’t Just Roll the Dice Examine & Insure
Examine, or Else!!! • A title exam is a methodical search through public records to uncover any recorded legal interests in the property. Without proper and accurate title examinations, all parties could be subjecting themselves to future liability and/or losses.
Not Just for You • Conducting a title examination is vital in order to ensure that good, clear title to the property is being conveyed. A lender of money to support the transaction will also demand that a title examination be conducted to ensure there are no liens or encumbrances on the property that are not known about.
Chains, Chains, Chains…. • Chain of Title: This is the historical sequence of all the owners to a piece of real property starting with the original owner. The chain of title concept limits the number of records imparting constructive notice and the number of records that must be examined.
Title Insurance • Title insurance is an insurance policy, usually issued by a title insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller. - Insurable title and marketable title, by definition are not the same thing.
Why All the Fuss? • Bona Fide Purchaser for Value Rule: A bona fide purchaser for value (BFPV) is a person who buys property in good faith, for valuable consideration, and without knowledge of any claims to or interest in the property. The BFPV will take the property free and clear of any claims to or interests in the property by other parties.
That Notice Thing! • Actual Notice: If the BFPV has actual notice of claims to or interests in the property, the BFPV takes his interest subject to those claims and interests. Actual notice is defined as those title matters about which the purchaser has direct knowledge or information. • Constructive Notice: There are times when the law will place on the purchaser the responsibility to learn about facts that might affect title to property. These would include those things that can be discovered from a reasonable inspection of the real property or an examination of the public property records. Recording an instrument is essential to imparting constructive notice.
Recording Statutes • The common law bona fide purchaser for value rule has been modified in many states by recording statutes. These serve three primary functions: 1) give the community notice of changes in ownership of real property; 2) protect subsequent purchasers and encumbrancers of property from the same common grantor by giving them notice of information contained in the recorded documents; and 3) determine priority among conflicting claims to real property.
Three Types of Recording Statutes Race, Notice, and Race-Notice. These are used in a situation where the grantor tries to convey the same parcel of real estate to more than one person. Who will take title to that property depends on which type of recording statute your state recognizes.
Three Types (Cont.) Race: Under the race statute, which is used by the least number of states, priority between successive grantees of the same land from a common grantor is determined by who wins the race to the recoding office, regardless of who was the prior purchaser.
Three Types (Cont.) . Notice: Under the notice statute, the grantee of a deed is not required to record the deed to obtain the priority in title over a subsequent purchaser of the property. An unrecorded instrument is valid to a subsequent purchaser when the purchaser paid value with a notice of the unrecorded statute, and is invalid if the subsequent purchaser paid value without notice of the unrecorded instrument.
Three Types (Cont.) Race-Notice: Under the race-notice statute, which is the most common type, a subsequent purchaser has priority over the holder of a prior but unrecorded instrument if the subsequent purchaser makes the purchase without notice of the prior unrecorded instrument and records the instrument before the recording of the prior instrument.
Title Exam • Ordering a Title Examination: The purchaser or lender’s attorney or legal assistant usually orders or conducts the title examination. Conducting it early and updating it before closing is an effective way to ensure good title. The minimum information required from a title examination is 1) a legal description of the property to be examined, 2) the name and current owner, and 3) copies of all deeds, surveys, or any prior title examinations or title insurance policies that affect the property. Example pg 197 Fig 7-1 Where to Search?
How Far Back? Period of Examination: A title examination searches the owner’s “chain of title” by starting at the present and working backward in time to a predetermined point. The examination establishes a source of title for each owner in the chain. Full searches usually go back fifty to sixty years in order to determine if there were any defects in title, whether recorded or unrecorded. A limited title search is for a period less than for a full search. These are usually used for loan assumptions and second mortgages.
What to Search? • When you conduct a title examination, you will search through a grantee index of the owner’s chain of title backward in time to establish a source of title for each owner in the chain. • Then, for each grantor in the chain of title, you will look through the grantor’s index from the date the grantor acquired title to the next grantor in the chain. • Finally, you will search other indices to determine whether there are any other recorded claims against the property, such as judgment, tax, or mechanics’ liens.
Grantee Index • The grantee index is an alphabetical index by last name of all people who are grantees of any property interest during a given year within the county. The index is maintained on a year-by-year basis from the beginning of time that the county maintained records. The grantee’s property interest consists of purchasers, holders of mortgages and security deeds, easement holders, tenants, holders of liens, and so on. • The grantee index enables an examiner to build a chain of title from the present to the past. The first link in the chain of title is the conveyance to the current owner of the property. To find this first link, the examiner begins in the current year’s grantee index and looks for the name of the current owner of the property. The examiner continues to search in each year’s grantee index until the examiner finds the name of the current owner
Grantor Index • A grantor index is an annual alphabetical index by last name of all people who are grantors of a real property interest within the county. Grantors of property are sellers, borrowers, mortgagors, grantors of easements, and so on. • The examiner begins with the grantor index from the past and follows it to the present. The examiner starts with the last grantee that was found in the grantee index and then examines the grantor index until this person’s name is found and there is a transfer of the property from them. (Example pg 194)
Plat Index • Index of all plats that have been recorded within the county within a given year • The index to the plats usually is based on one of the following criteria: (a) land lot and district (location designation), (b) name of owner designation, or (c) subdivision designation. Example pg 194
Our role As Paras in All This? • A legal assistant may be utilized to perform a title examination, order a title examination, and/or review the results of a title examination. Kind of sounds like everything?
Caveat Computer technology is making searching all of these records much easier than it was in past years, but the transfer of such records from paper to electronic forms calls into question the accuracy of the information contained in the electronic medium. (Garbage in, Garbage out.)
Checklist? You betcha’ -- page 203
