Real Estate Law- Ch. 9

What are risks covered by an ALTA owner's policy?

1) Insurance that title to the estate or interest described in Schedule A is vested in the insured 2) Insurance against any defect, lien, or encumbrance on such title 3) Insurance that the title is a marketable title 4) Insurance that the property has access to a public road 5) The lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable, but unpaid 6) Ay encroachment, encumbrance, violation, or adverse circumstance affecting the title that would be disclosed by an accurate and complete land survey of the Land. The term encroachment includes encroachments of existing improvements located on the Land (the property being insured), onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land

What is a fraudulent conveyance or fraudulent transfer? Is it an "insured risk" in a title insurance policy?

A fraudulent conveyance or transfer is a transfer made by a property owner to prevent the property from being attached or seized by the owner's creditors. There is no valuable considerable received by the owner for the transfer. Title insurance does not insure that the transfer (deed or mortgage) creating title in the insured is not a fraudulent conveyance.

What is a preferential transfer and is it an "insured risk" in a title insurance policy?

A preferential transfer is a transfer of property by the owner within 90 days prior to the owner filing bankruptcy. The transfer prefers one creditor to another. Title insurance does not insure that the transfer (deed or mortgage) creating title in the insured is not a preferential transfer.

What is a title commitment, and why is it important in a real estate transaction?

A title commitment is the agreement by a title insurance company to use a title insurance policy once certain conditions have been met. Title insurance is essentially a post closing matter; that is, you cannot ensure that a person owns a property until he or she in fact does own property, nor that a lender has a mortgage on the property until in fact the loan has been made and the mortgage recorded. A title commitment, however, is a precluding item that illustrates to the legal assistant and attorney exactly how the title insurance policy will appear once the closing has taken place.

Why does a title insurance policy make an exception for any rights or claims of parties in possession not shown by public records?

A title insurance policy generally makes an exception for rights or claims of parties in possession because a title insurance company does not make an inspection of the property.

You are involved in a real estate transaction. The sale took place on December 26, but the deed was not recorded until January 5. When you receive the owner's title insurance policy, you note that the effective date of the policy is December 26. Is the the correct effective date?

An effective date of December 26 on an owner's policy when when the deed was not recorded until January 5 is an incorrect effective date. The correct effective date should be January 5.

How are exclusions from coverage on a title insurance policy different from exceptions to title?

Exclusions from coverage on a title insurance policy are standard and will be the same from policy to policy. The exclusions from coverage are not not waiveable by the title insurance company. Exceptions to coverage vary from policy to policy, depending on each title that is being insured. The exceptions to coverage can, in some situations, be waived by the title insurance company.

T/F: A title examination can protect a purchaser against forged signatures on deeds.

False

T/F: An ideal effective date for an owner's title policy is the date of the signing of the deed.

False

T/F: An owner's title insurance policy insures marketability of title, which means it ensures that the owner can sell the property.

False

T/F: The amount of insurance in a title insurance policy appears on Schedule B.

False

T/F: A loan policy of title insurance is not transferable.

False, owner's policies are not transferable

What information is generally found on a Schedule B to an ALTA owner's insurance policy?

Information generally contained on Schedule B to an ALTA owner's title insurance is the list of exceptions to coverage.

Kim buyer is purchasing a home. The purchase price of the home is $125,000. Kim is obtaining a loan from Acme Loan Company for $105,000. What is the amount of title insurance that Kim can purchase? What is the amount of title insurance that Acme Loan Company can purchase?

Kim Buyer may purchase an owner's policy in the amount of $125,000. Acme Loan Company may purchase a loan policy in the amount of $105,000.

T. Sawyer has purchased a home. T. Sawyer obtained an owner's title insurance policy that insured the home to be free and clear of any liens and encumbrances. T. Sawyer after purchasing the home, sells the home to B. Thatcher. B. Thatcher does not buy title insurance. Later it is discovered that there is a mortgage on the property held by H. Finn that dates before the effective date of T. Sawyers title insurance policy. Does B. Thatcher have any claim against the title insurance purchased by T. Sawyer? Will the result be different if B. Thatcher had inherited the property from T. Sawyer on T. Sawyer's death?

Owner's policies are not transferable; therefore, B. Thatcher has no claim against the title insurance purchased by T. Sawyer. The situation would be different if B. Thatcher has inherited the property from T. Sawyer on T. Sawyer's death because heirs of an insured care deemed to have a continued coverage under an owner's policy of title insurance.

What information is generally found on a Schedule A to an ALTA owner's title insurance policy?

Schedule A to an ALTA owner's title insurance policy generally sets forth the following information: a) date of the policy b) amount of the insurance c) identity of the insured d) descriptions of the property being insured e) estate or interest insured

Why is a review of Schedule B to a title policy so important?

Schedule B contains a list of title matters that are not insured against in the title policy. The title insurance company provides no insurance for matters shown on Schedule B. It is important to review Schedule B to make sure that a client is willing to purchase or take a loan on the property with the Schedule B exceptions.

What is generally found on Schedule B, Section 1, to a title commitment?

Schedule B, Section 1, of a title commitment sets forth the requirements that must be met before the transaction closes in order for the title insurance to be issued.

Explain the importance of the new "gap" risk coverage provided by the 2006 ALTA Owner's and Loan Policy forms.

The "gap" risk coverage provided by the 2006 ALTA owner's and loan policy forms insures the recording gap for the insured deed or mortgage. The insured, under these policies, will be protected against any intervening matters between the date of the policy and the date that the insured instruments, including the deed and/or mortgage, are actually recorded.

You are reviewing a title commitment that contains a standard exception for parties in possession. Your client does not want the standard exception to be included in the title insurance policy. What steps can you take to have the title insurance company delete the parties in possession exception?

The parties in possession exception may be deleted by providing the title insurance company with one or both of the following: a) survey of the property showing no parties in possession b) an affidavit from the owner that there are no parties in possession other than the owner

What are the standard title exceptions found on a Schedule B to an owner's policy?

The standard title exceptions found on Schedule B are: 1) rights or claims of parties in possession not shown by public record 2) encroachments, overlaps, boundary line disputes, and any other matters that would be disclosed by an accurate survey and inspection of the premises 3) easements or claim of easements not shown by public records 4) any lien or tight to lien for services, labor, or materials furnished 5) taxes or special assessments not shown as existing liens by the public records

Identify and discuss the three safeguards that ensure good title.

The three safeguards that assure good title are: 1) general warranty deed of conveyance 2) title examination before conveyance 3) title insurance

What is the effective date of a title insurance policy, and why is it important?

Title insurance only insures title as of an effective date (i.e., the effective date of the policy). It is important that the effective date for an owner's policy be the date of the recordation of the deed into the owner and that for a loan policy the effective date be the date of the recordation of the mortgage.

T/F: A title insurance commitment is a contract to issue insurance once the transaction had been closed.

True

T/F: A title insurance policy does not insure against matters not of public record and not known to the title company.

True

T/F: An owner's policy of title insurance insures access to and from the land.

True

T/F: An owner's title insurance policy is not transferable to a purchaser of the property.

True

T/F: Schedule B of a title policy contains a list of exceptions to coverage.

True