Title Insurance May Not Insure Against Unsatisfied Mortgages


       One would think, looking at the first page of a title policy, that the title insurer would have an immediate requirement to clean up any title defects to the property.  If the property is subject to unsatisfied mortgages (mortgages that, show as in place, encumbering the property), real property attorneys would consider that title unmarketable.  If you had one on your house, a buyer may refuse to close, refusing to take the risk of having to deal with this in the future.  Some title companies take the position that, although such defects in the title may exist, they do not have to take steps to correct them until and unless another party (such as the lender) asserts its interest against the property.

    In other words, you’re not covered as well by the title insurance as you might think.

     It is matters like this that should prompt purchasers to retain council before signing a contract.  It is probably a good idea to designate the buyer’s attorney as the closing agent because the attorney would have the absolute obligation to disclose such matters in writing to their client even though they could write a title policy with no mention of it.

     Therefore you should retain an attorney.  You should also ask your attorney if he has checked the title and if title is marketable, as well as insurable.  If the answer to either of these questions is “No,” you should ask your attorney to check the title and get back to you with his opinion.

      Be careful out there.  The days of worry-free transactions are over.

 March 15, 2012