Title
A Word About Real Estate
Real estate has traditionally been a family's most valuable asset. It is a form of wealth that is protected by many laws. These laws have been enacted to protect one's ownership of real estate and the improvements located on the land. The owner, the owner's family, and the owner's heirs have extremely b rights or claims in and to the property that you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service, or various other individuals or corporations. The real estate may be sold to you without the knowledge of the party having a right or claim in and to the property. In addition, you may purchase the real estate without having any knowledge of these rights or claims. In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished.
The Past Can Determine Your Future
Generally, a person thinks of insurance in terms of the payment of future loss due to the occurrence of some future event. For instance, a party obtains automobile insurance in order to pay for future loss occasioned by a future "fender bender" or for the future theft of the car. Title insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., event prior to the acquisition of the property.) These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating. The following information will answer some commonly asked questions about title insurance.
Will You Get Clear Title?
It is of utmost importance that you receive clear title to the property when you purchase real estate. In order to do so, you must first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property. Title insurance provides you with this twofold protection.
How Do You Find Out What Claims Exist?
In order to determine the status of title, The Title Company conducts a diligent search of the public records for those documents associated with the property. The Title Company then examines those recorded documents in order to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction. In addition, you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction. This is the first benefit you receive from title insurance.
What About Undiscovered Claims?
The title to the property that you have purchased could be seriously threatened or lost completely by hazards which are considered "hidden risks." "Hidden Risks" are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records. Matters such as forgery, incompetency or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples of "hidden risks" which could provide a basis for a claim after you have purchased the property. In order to protect you against this possibility, The Title Company provides insurance coverage for such claims. This is the second benefit you receive from title insurance.
How Does A Title Insurance Policy Protect Against All These Claims?
If a claim is made against your insured title, The Title Insurance Company, such as Chicago Title protects you by: (1) Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.
Title Insurance Protects Your Asset
Title insurance gives you the assurance that possible clouds on title to the property you are purchasing - which can be discovered from the public records - have been called to your attention that such defects can be corrected before you buy. Additionally, it is insurance that if any undiscovered claims covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides.
Only One Premium
Unlike other forms of insurance, the original premium is your only cost as long as you or your heirs own the property. There are no annual payments to keep your Owner's Title Insurance Policy in force.
To protect possibly the most important investment you'll ever make - the investment in your home.
With a title insurance policy, you as owner, have an indemnity contract that will reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy.
How can there be a title defect if the title has been searched?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search
What title Insurance protects against
Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:
False impersonation of the true owner of the property
Forged deed, releases or wills, Instruments executed under invalid or expired power of attorney;
Undisclosed or missing heirs; Mistakes in recording legal documents
Misinterpretations of wills Deeds by persons of unsound mind
Deeds by minors and Deeds by persons supposedly single, but in fact married
Fraud
Liens for unpaid estate, inheritance, income or gift taxes
What protection does title insurance provide against defects and hidden risks?
Title insurance will pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.
What this means to you
The peace of mind in knowing that the investment you've made in your home is a safe one.
Call The Title Company
If you have any questions concerning title insurance coverage, please call The Title office, or any of their policy issuing agents. They are there to assist you.
Initial Request for Title Insurance
An order for title insurance is opened with a title officer who produces the initial response promptly within 24 to 48 hours. A preliminary report can be issued with the minimum of information; without even identifying the buyer or the terms of the sale. It shows the record title as it presently exists and is only an offer to provide insurance. To order a preliminary report contact your local Title representative or office.
On Site Searching and Examining
Your title officer performs three searches: Property, Name, and Tax searches. From that information, a preliminary report is created.
Technical Review
The skill and expertise of the title officer is the key to providing you with a useful, accurate title report. Once the report is issued the review begins by making a technical analysis of the documents of record. An interpretive view of all recorded matters is made to evaluate their impact on the title to the property. Among the questions the examiner asks are: Would any of the recorded matters prevent the buyer from using the property for its intended purpose? Can antiquated leases be eliminated from the policy per a review of the current leases?
Inspection Analysis
In anticipation of ALTA coverage, a site inspection is ordered. From the inspection report, the initial title product is supplemented to show any encroachments or other off-record matters which would ultimately impact the title.
Co-Insurance, Re-Insurance, Other Details
If co-insurance or re-insurance is needed for a transaction, we expedite the confirmation of approval. You, the customer, are never bogged down or delayed by the action on the part of our title unit. To the contrary, as a resource and as a facilitator of the transaction, we assume the responsibility for as many details as possible and are able to direct you to other resources where necessary (such as for a lost instrument bond).
Documents in the Title Process
- Preliminary Report
- Commitment - Shows the condition of title in the way the Title Company are willing to issue it.
- Pro Forma - Specimen of what the requested policy, as requested, will look like. Underwriting issues not completed. Not binding upon the company.
- Policy - Final product. Contract of indemnity between named insureds and the company.
How You Take Title - Advantages & Limitations:
Title to real property in California may be held by individuals, either in Sole Ownership or in Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference seven of the more common examples of Sole Ownership and Co-Ownership.
- A man or woman who is not married.
Example: John Doe, a single man.
- An Unmarried Man/Woman:
A man or woman, who having been married, is legally divorced.
Example: John Doe, an unmarried man.
- A Married Man/Woman, as His/Her Sole and Separate Property:
When a married man or woman wishes to acquire title as their sole and separate property, the spouse must consent and relinquish all right, title and interest in the property by deed or other written agreement.
Example: John Doe, a married man, as his sole and separate property.
Co-Ownership
- Community Property:
Property acquired by husband and wife, or either during marriage, other than by gift,
bequest, devise, descent or as the separate property of either is presumed community property.
Example: John Doe and Mary Doe, husband and wife, as community property.
Example: John Doe and Mary Doe, husband and wife.
Example: John Doe, a married man
- Joint Tenancy:
Joint and equal interests in land owned by two or more individuals created under a single instrument with right of survivorship.
Example: John Doe and Mary Doe, husband and wife, as joint tenants.
- Tenancy in Common:
Under tenancy in common, the co-owners own undivided interests; but unlike joint tenancy, these interests need not be equal in quantity and may arise at different times. There is no right of survivorship; each tenant owns an interest, which on his or her death vests in his or her heirs or devisee.
Example: John Doe, a single man, as to an undivided ¾ ths interest, and George Smith, a single man as to an undivided 1/4th interest, as tenants in common.
- Trust:
Title to real property in California may be held in trust. The trustee of the trust holds title pursuant to the terms of the trust for the benefit of the trustor/beneficiary.
The preceding summaries are a few of the more common ways to take title to real property in California and are provided for informational purposes only.
There are significant tax and legal consequences on how you hold title. We suggest contacting an attorney and/or CPA for specific advice on how you should actually vest your title.
Comparison Chart
| |
COMMUNITY PROPERTY |
JOINT TENANCY |
TENANCY IN COMMON |
TENANCY IN PARTNERSHIP |
TITLE HOLDING TRUST |
| PARTIES |
Only husband and wife |
Any number of persons (can be husband and wife) |
Any number of persons (can be husband and wife) |
Only partners (any number) |
Individuals, groups of persons, partnerships or corporations, a living trust |
| DIVISION |
Ownership and managerial interests are equal except control of business is solely with managing spouse |
Ownership interests must be equal |
Ownership can be divided into any number of interests equal or unequal |
Ownership interest is in relation to interest in partnership |
Ownership is a personal property interest and can be divided into any number of interests |
| TITLE |
Title is in the "community." Each interest is separate but management is unified |
Sale by joint tenant severs joint tenancy |
Each co-owner has a separate legal title to his/her undivided interest |
Title is in the "partnership" |
Legal and equitable title is held by the trustee |
| POSSESSION |
Both co-owners have equal management and control |
Equal right of possession |
Equal right of possession |
Equal right of possession, but only for partnership purposes |
Right of possession as specified in the trust provisions |
| CONVEYANCE |
Personal property (except "necessaries") may be conveyed for valuable consideration without consent of other spouse; real property requires written consent of other spouse, and separate interest cannot be conveyed except upon death |
Conveyance by one co-owner without the others breaks the joint tenancy |
Each co-owner’s interest may be conveyed separately by its owner |
Any authorized partner may convey whole partnership property for partnership purposes |
Designated parties within the trust agreement authorize the trustee to convey property. Also, a beneficiary’s interest in the trust may be transferred. |
| PURCHASER'S STATUS |
Purchaser can only acquire whole title of community; cannot acquire a part of it |
Purchaser will become a tenant in common with the other co-owners in the property |
Purchaser will become a tenant in common with the other co-owners in the property |
Purchaser can only acquire the whole title |
A purchaser may obtain a beneficiaries interest by assignment or may obtain legal and equitable title from the trust |
| DEATH |
Purchaser can only acquire whole title of community; cannot acquire a part of it |
On co-owner’s death his/her interest ends and cannot be disposed of by will. Survivor owns the property by survivorship |
On co-owner’s death his/her interest passes by will to devisee or heirs. No survivorship rights. |
On partner's death, his/her partnership interest passes to the surviving partner pending liquidation of the partnership. Share of deceased partner then goes to his/her estate |
Successor beneficiaries may be named in the trust agreement, eliminating the need for probate. |
| SUCCESSOR'S STATUS |
If passing by will, tenancy in common between devisee and survivor results. |
Last survivor owns property |
Devisee or heirs become tenants in common |
Heirs or devisee have rights in partnership interest but not specific property |
Defined by the trust agreement, generally the successor becomes the beneficiary and the trust continues |
| CREDITOR'S RIGHTS |
Property of community is liable for debts of either spouse, which are made before or after marriage. Whole property may be sold on execution sale to satisfy creditor |
Co-owner’s interest may be sold on execution sale to satisfy creditor. Joint tenancy is broken. Creditor becomes a tenant in common |
Co-owner’s interest may be sold on execution sale to satisfy his/her creditor. Creditor becomes a tenant in common |
Partner's interest cannot be seized or sold separately by his/her personal creditor but his/her share of profits may be obtained by a personal creditor. Whole property may be sold on execution sale to satisfy partnership creditor |
Creditor may seek an order for execution sale of the beneficial interest or may seek an order that the trust estate be liquidated and the proceeds distributed |
| PRESUMPTION |
Strong presumption that property acquired by husband and wife is community |
Must be expressly stated |
Favored in doubtful cases except husband and wife case |
Arise only by virtue of partnership status in property placed in partnership |
A trust is expressly created by an executed trust agreement |
Buying Property Is A Numbers Game
- A fire destroys only the house and improvements. The ground is left. A defective title may take away not the only the house but also the land on which it stands. Title insurance protects you (as specified in the policy) against such loss.
2. A deed or mortgage in the chain of title may be a forgery.
3. A deed or a mortgage may have been signed by a person under age.
4. A deed or a mortgage may have been made by an insane person or one otherwise incompetent.
5. A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore, be void.
6. A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner.
7. The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
8. A deed or mortgage may have been procured by fraud or duress.
9. Title transferred by an heir may be subject to a federal estate tax lien.
10. An heir or other person presumed dead may appear and recover the property or an interest therein.
11. A judgement or levy upon which the title is dependent may be void or voidable on
account of some defect in the proceeding.
12. Title insurance covers attorneys’ fees and court costs.
13. Title insurance helps speed negotiations when you’re ready to sell or obtain a loan.
14. By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else.
15. Title insurance reimburses you for the amount of your covered losses.
16. A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy.
17. Each title insurance policy we write is paid up, in full, by the first premium
for as long as you or your heirs own the property.
18. There may be a defect in the recording of a document upon which your title is dependent.
19. Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced "wives" or "husbands."
20. Many lawyers, in giving an opinion on a title, protect their clients as well as themselves, by procuring title insurance.
21. Over the last 24 years, claims have risen dramatically.
