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Title Insurance
Misunderstandings Associated with Title Insurance
One of the most common misconceptions of title insurance derives from the issuance of the preliminary report. For many years this had been called a Preliminary Title Report. The use of this name caused many to believe that this report represented an accurate description of the current title to the property at issue. However, this has never been the case.
The preliminary report is an "offer" by the title insurance company to issue an insurance policy subject to the specific exclusions and exceptions set forth in the report. There are no representations as to the actual condition of the title of the property but merely the conditions on which the insurer will issue a policy. If the "offer" is "accepted," then a policy of title insurance will be issued. A contractual relation between the title insurer and the policy holder is thereby created.
Another misconception is the scope of the insurance coverage. People generally think of insurance as protecting against things that may happen in the future such as an earthquake or a fire. Title insurance, with rare exceptions, covers only past events. Moreover, title insurance deals only with matters which affect title to land or improvements; it does not cover leaky roofs, clogged drains, or pest infestations.
What Title Insurance Does
Title Insurance provides indemnity coverage for damages suffered by the policyholder caused by a matter which existed at the time the policy was issued, which affects the title to the property, and which is not otherwise excluded or excepted from the terms of the policy. This means that the validity of the owner's title; the priority, enforceability and validity of lenders' mortgages and deeds of trust; and the priority, enforceability and validity of easements, and CCRs all have coverage. Additional coverage can be purchased for matters such as zoning, access, options, leases, and special conditions and circumstances. The standard polices have specific exclusions from coverage. Among the matters excluded are: governmental powers; laws, ordinances and police powers; rights of eminent domain; fraudulent conveyances; matters known to the insured but undisclosed to insurer; and mechanic's liens. These exclusions are common to all standard policies of title insurance.
In addition to the exclusions, each policy of title insurance has a schedule of exceptions which are, in part, individually tailored to each policy. However, there are several standard exceptions: taxes, assessments and proceeding not shown in the public records; facts, interests and claims not shown in the public records which could be ascertained by an inspection; easements and liens not shown in the public records; matters which a survey would disclose; and mining and water rights. The individualized exceptions usually consist of a listing of recorded easements, CCR's, deeds of trust, recorded tax liens, recorded leases and other encumbrances.
When the limitations of title insurance and the various exceptions and exclusions are considered, such policies cover only a very narrow range of possible claims. The question most people ask is "Is title insurance necessary?"
The Need For Title Insurance
In any real estate transaction where an institutional lender is involved, a policy of title insurance is necessary to insure the lender's priority. For owner's coverage, an additional policy fee is required. But does it make sense to purchase owner's coverage?
For a one-time payment of the policy fee the new owner purchases insurance coverage for as long as he or she has any interest in the property. As the price of a policy is based on a small percentage the purchase price (less than one-half of one percent for a median priced home), it may be a bargain when the alternatives are considered.
Serving clients throughout Northern California, including Redding, Sacramento, Nevada City, Oroville, Fairfield, Marysville. Eureka, Chico, and Roseville, and surrounding areas in Shasta County, Butte County, Nevada County, Sacramento County, Solano County, and Yuba County
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