What is Title Insurance?

After you have legal title of the property, you’re considered the owner. But what happens if the title came to you with a lien against it? What if the liens against the property total thousands of dollars? That’s where title insurance comes into play.

Title insurance insures you against such things as liens, undiscovered liens, improper recording of deeds, and other things that could negatively affect the title. The protection period of the title insurance extends backwards, which means that it insures you against losses from the past ownerships of the property. And the insurance is in effect as long as you own the property.

If the person you’re buying the property from already has title insurance, you can’t have the current owner transfer his title insurance to you, even if it’s brand new. You have to buy new title insurance yourself. Who pays for the cost of title insurance?

Some lenders give you a choice of whether to buy title insurance. We recommend that you buy title insurance even if you’re sure there’s nothing wrong with the title. Some title problems can be so bad that they can cause the title to be deemed unmarketable. This kind of situation is exactly what title insurance protects you against. Some people think that if they paid cash for the property, they don’t need title insurance. Just because you have a grant deed with your name on it doesn’t mean that you have clear title.

Fee Policy vs. Loan Policy

A Fee policy insures the Owner that the property being purchased is free and clear of liens, etc.

A Loan policy insures the Lender that there are no prior liens on the property, and that their mortgage is in first position

Premiums

Title insurance premiums are state mandated and not negotiable by title insurance companies.

A reduced rate of Loan title insurance premium is applicable in cases where the owner of the land has been previously insured in an owners policy by the insurer within ten (10) years.

Endorsements are additions or modifications of the policy which expands or changes the coverage, fulfilling specific requirements usually made by the lender, and are usually $25 per endorsement. There are 4 standard endorsements:

Environmental Protection: Insures the priority of the lien of a mortgaged property over recorded environmental protection liens not excepted in the policy or under state statutes not specifically excluded from coverage. Premium is $25.00
Waiver of Arbitration: Deletes the provision of the policy enabling either the Company or the Insured to elect arbitration when the amount of insurance is $2,000,000.00 or less. Under the policy without this endorsement, arbitration must be agreed to by the Company and the Insured when the amount of insurance exceeds $2,000,000.00. Premium is $25.00
Residential Mortgage: Affords assurances in connection with recorded Covenants & Restrictions, Easements, and rights of way. Premium is $25.00
Standard New York: Affords coverage against unfilled mechanics liens and against liens and encumbrances filed or recorded after the date of policy and prior to the recording of instruments (“gap” coverage). Provided free of charge.

Title Commitment

The title commitment will describe the various conditions, exclusions and exceptions that will apply to that particular policy. The commitment primarily consists of five parts: Schedule A; Schedule A-Legal Description; Schedule B-Section I Requirements; Schedule B- Section 1 Mortgage Schedule; and Schedule B-Section II Exceptions

Schedule A of the commitment shows basic information of the property, the effective date (the date to which the real estate records have been searched), the owners of the property, the fee and mortgage policy amounts, the name of the insured mortgage, the proposed purchasers of the property, as well as the property address.

Schedule A-Legal Description of the commitment shows the legal description of the property that will be insured. The legal description may be as complex as a full metes and bounds description of the perimeter of the property, or as simple as a reference to a previously recorded land development plan.

Schedule B-Section I, REQUIREMENTS of the commitment lists the conditions that need to be addressed by the parties involved in the transaction or waived by the title insurance company before the title policy can be issued. These requirements, such as judgments, liens, or others adverse title matters, as well as other specific requirements, will need to be satisfied in order to issue a policy.

Schedule B-Section I, Mortgage Schedule of the commitment lists the mortgages that are open with the current or prior owner that need to be addressed.

Schedule B-Section II, EXCEPTIONS of the commitment list the risks that the underwriter proposes to exclude from coverage, i.e…easements, right of ways, covenants and restrictions. It also includes a survey reading if available, along with the copy of the survey following the reading.

Municipals:

Information gathered together at the town (or village if incorporated) in which the property is located. Municipal searches are given to the client for Information Only. The municipals may include Tax Search, Certificate of Occupancy Search, Fire, Sewer, Street, Housing and Building, and Emergency Repairs

Certificate of Occupancy Search provides the client with the building department records reporting all Certificate of Occupancy, Certificate of Compliance and all open building permits. Copies of the certificate are included

Tax Search is a printout indicating current tax information without water charge

Street Report (NYC ONLY) is used to document the current street width and report on any applications for street widening on file at the highway department

Street Maintenance is used to document the party responsible for street maintenance

Sewer Report (Nassau County) to determine if a property conforms to the Dept of Public Works; (Suffolk County) to determine whether or not the property is located within a Municipal Sewer District.

Housing and Building Violation Search (NYC) search for and document all pending violations of the local building code

Fire Violation Search used for searching and report on any violations of record with the fire department local and or central files

Emergency Repair Violations search for and document any repairs or services provided to said property of an emergency nature where property owner was negligent in responding, shown in the municipal records of the appropriate municipality

Miscellaneous:

Patriot Search reports whether an individual or business is included on the Specially Designated Nationals & Block Person list issued by the President

Bankruptcy Search reports whether a person or corporation has filed for Bankruptcy with the courts

Copies of Covenants and Restrictions if available

Copies of Judgments and/or liens, that are on the property or the persons involved in the transactions

Copy of the last deed of record

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