My law firm examines real property title records and issues title insurance in Georgia and Florida. I am asked all the time by my clients – Do I really need to pay for a title exam and purchase title insurance? My answer is always the same, yes!
When an investor purchases any type of real property they need to understand what they are paying for and what they may do with the property. Investors need a way to minimize all of the recorded history of the property and understand all the restrictions and exceptions that apply to the real estate they are buying, and that IS DONE by ordering a TITLE SEARCH and having the results examined by a competent lawyer.
Any purchaser of any real property should always have a 30 to 50 year title review or search conducted of the official records in the County where the property is owned in order to learn if:
- the property is ENCUMBERED by any liens, (is there a mortgage on the property or a tax lien);
- to learn if there are any RESTRICTIONS on the use of the property (certain zoning restrictions or covenants that run with the property) such as the property may only be zoned for single family construction, or commercial usage, the property may be in close proximity to a school or church and there may be use restrictions or nuisance restrictions, (or no Bars or operations must cease by 11pm);
- to learn if there are any EXCEPTIONS to the conveyance such as may be memorialized in a Limited Warranty Deed. The property may have been conveyed subject to certain easements (utility, transportation or other grants of property rights given to the public or to individuals that run with the property for all time; and most importantly
- to learn if the seller that they are buying the property from actually has LEGAL MARKETABLE title to the property and if so what property rights do they own. The Buyer needs to know if “THE CHAIN OF TITLE IS CLEAR”.
Wikipedia defines the chain of title as “…the sequence of historical transfers of title to a property. … The “chain” runs from the present owner back to the original owner of the property.” If somewhere in the 30 or 50 year sequence of historical transfers that are in the public record, there is a “break in the chain” simply meaning there is a defect in the conveyance of one or more transfers then the current title holder does not have marketable title. Most (but not all) defects may be cured by a seasoned real estate attorney. A severe defect in the chain of title may necessitate a filing an action to quiet title. As defined by Wikipedia, An action to quiet title is a lawsuit brought in a court having jurisdiction over property disputes, in order to establish a party’s title to real property, or personal property having a title, of against anyone and everyone, and thus “quiet” any challenges or claims to the title.
Once all identified defects, or clouds on a title have been cleared, a title insurance policy may be purchased by either the lender and/or the party purchasing the property which will insure that a marketable title has been conveyed from the seller to the buyer of the real property.
If problems arise in the future due to a latent defect in the title that was not identified and cured prior to the conveyance of the property to the buyer, the insured party (either the lender or the buyer) can fall back on the title insurance company and have the title insurance company either fix the problem ofr pay the insured parties damages.