Title Assurance

The law of real estate titles has developed over many centuries, going back to medieval England. The word “title” as used in the law is roughly equivalent to “ownership” in lay terms.

In the United States, the title to a particular parcel of real estate (land) traces back to a “patent” issued to the original owner by the government. From that point forward, the public records of real estate transactions should disclose an unbroken chain of ownership transfers up to the present owner of land. If there are any gaps in the chain of title, legal questions can arise about ownership of the land. Also, recorded documents can disclose that some persons other than the purported current owner may have some ownership interest in the land.

Missouri and other states have recording statutes which require the public recording of deeds and other legal documents affecting title to real estate. The most common reason for a gap in the chain of title is that someone failed to publicly record a deed or other document affecting title.

In years past, the real estate title assurance function was most often performed by attorneys working in conjunction with a title company. The title company would search the public records concerning a particular parcel of real estate and prepare an “abstract of title” containing copies of all recorded documents affecting the title to that parcel. Over the years, it became common for abstracts of title to contain 100 or more documents, and some were even larger. After the abstract was assembled, an attorney would review it and issue a legal opinion as to whether the abstract showed clear title in the current owner and whether the land was subject to any liens, easements, restrictions or other interests of third parties.

In recent years, although abstract reviews by attorneys are still occasionally used, the title assurance function has mostly been taken over by the issuance of title insurance through title companies. As in the past, the title company still searches the public records to confirm whether the present owner has clear title to the real estate and also checks to see whether the property is subject to any recorded liens, restrictions or other interests of third parties. If the title company is satisfied there are no significant problems, it will issue title insurance, not only to the buyer of the land but also to the buyer’s lender.

Premiums for title insurance are based on the purchase price paid by the buyer or the amount loaned by the lender. The face amount of title insurance is usually limited to the purchase price or amount loaned. If any person comes forward with an adverse claim to the land, the title insurance company will hire an attorney to defend the landowner’s and lender’s interests. If the adverse claim is successful, the title insurance company will compensate the owner and lender for their losses, up to their respective policy limits.

The title insurance process usually ends up being somewhat less expensive than the old process of preparing an abstract and having it reviewed by an attorney. In addition, the purchaser of land and the lender have the protection of the insurance if an adverse claim is asserted.

Even when title assurance in a particular real estate transaction is by way of title insurance, an attorney can be of valuable assistance to buyers by reviewing the preliminary title report (title insurance commitment) and advising the prospective buyer of any potential problems. Examples of such problems are easements or restrictive covenants that may interfere with the buyer’s intended use of the property. Attorneys also often prepare the deeds used in real estate transactions or review deeds prepared by title companies to make sure they are in proper form.

Scott Law Firm handles review of title issues on an hourly basis and has a schedule of flat fees for preparation of deeds.

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