Paul Sanchez
Title insurance is an important aspect of real estate transactions, providing protection against financial loss due to defects in the title. While it covers various risks, the specific inclusions and exclusions vary across policies. One common concern is the impact of expired liens on title insurance. A lien is a legal claim or right against a property by a creditor, and it can create a cloud over the title, making it challenging to sell or refinance the property. Even after a lien expires, it may still cause issues for the owner if it remains in the public record. Obtaining a release or proof of expiration is crucial to demonstrate that the property is no longer encumbered by the lien. Title companies play a vital role in uncovering and resolving such issues, but it's important to understand the limitations and exclusions of your specific title insurance policy to ensure comprehensive protection.
| Characteristics | Values |
|---|---|
| Liens | Usually have a time limit on how long they can remain valid and enforceable without the lien claimant initiating a lawsuit to foreclose on it. |
| Become public record once filed and attach to the property title. | |
| Can be removed by requesting a Release-of-Lien Form after paying off the balance of the debt in full. | |
| Can be removed by waiting for the Statute of Limitations to expire. | |
| Can be removed by negotiating with the creditor. | |
| Title insurance | Insures against financial loss caused by defects in title to real estate. |
| Defends against lawsuits attacking the title. | |
| Reimburses the insured up to the policy limit in the case of a covered loss. | |
| Does not cover defects that do not cause loss or damage. | |
| Does not cover future events. |
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What You'll Learn
- Title insurance covers financial loss due to defects in the title to real estate
- Title insurance companies defend against lawsuits attacking the title
- Title insurance does not cover defects that arise after the policy is issued
- Title insurance does not cover defects created by the insured
- Title insurance does not cover municipal issues like zoning or city permitting requirements
Title insurance covers financial loss due to defects in the title to real estate
It is important to note that title insurance does not cover all types of risks. For example, it does not protect against boundary disputes with neighbours unless additional coverage is purchased. Additionally, title insurance does not cover defects that arise after the policy is issued, defects created by the policyholder, or issues resulting from the policyholder's failure to comply with applicable laws or covenants.
While title insurance provides financial protection, it does not guarantee the ability to sell or borrow money against the property. It is also distinct from homeowner's insurance, which covers losses due to fire, lightning, theft, vandalism, and personal liability claims. Homeowner's insurance does not provide the same level of protection against title defects and associated financial losses.
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Title insurance companies defend against lawsuits attacking the title
If an insurance company fails to deliver the promised performance, the owner may need to resort to a lawsuit against the title company. They may claim breach of contract, insurance bad faith, or breach of the duty of good faith. If the facts support it, a person may also claim fraud and seek money damages for their full losses. It is important to consult an experienced real estate lawyer to understand the specific laws and options in the state where the property is located.
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Title insurance does not cover defects that arise after the policy is issued
When purchasing a property, it is common for buyers to seek title insurance to safeguard themselves against potential issues with the title. This type of insurance is designed to protect against losses stemming from defects, liens, or other similar matters that existed before the purchase of the property. It also offers coverage for certain problems that may arise after the purchase, but only if they are explicitly mentioned in the policy.
While title insurance can provide peace of mind, it is essential to recognise that not all future events will be covered. For instance, if a new lien is placed on the property after the policy is issued, the insurance will not cover it. This includes situations where a previous owner failed to pay property taxes, resulting in a lien being placed on the property after the purchase.
To ensure comprehensive protection, buyers must carefully review their title insurance policies, including the covered risks, exceptions, and exclusions. Understanding these aspects will help buyers make informed decisions and avoid unexpected issues with their property titles in the future. It is also worth noting that title insurance policies may have geographic variations, with standard exceptions differing from state to state.
In summary, while title insurance provides valuable protection against title defects, it is essential to understand its limitations. Buyers should be aware that title insurance does not cover defects that arise after the policy is issued, including new liens or other future events. Therefore, due diligence and a thorough understanding of the policy are crucial to making an informed decision when purchasing a property.
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Title insurance does not cover defects created by the insured
An expired lien can still create problems for a property owner. This is because, even after expiration, a lien remains recorded in the chain of title and can be found in searches by title companies. This may cause potential buyers or lenders to be scared off by the appearance of a lien. Title insurance is a contractual obligation that protects against losses that occur when the title to a property is not free and clear of defects. While title insurance covers losses due to defects in title, it does not cover defects created by the insured.
To remove an expired lien, a property owner should demand the lienor to remove the now-invalid lien, a process known as a "lien removal", "lien cancellation", or "release of lien". This can be done by obtaining a release-of-lien form from the creditor after paying off the balance of the debt in full. The form will act as evidence that the debt has been paid and will formally release the lien from the property. Alternatively, in some states, an owner can commence a lawsuit to "quiet title" and have the court declare that the lien no longer burdens the property. It is important to be aware of the specific lien laws and procedures in your state to effectively remove an expired lien.
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Title insurance does not cover municipal issues like zoning or city permitting requirements
A lien is a legal right or claim against a property by a creditor. A mechanics lien becomes public record and attaches to the property title. It is recorded in the real estate records of the county. Once a lien is recorded, the lien claimant must commence a lawsuit to foreclose the lien within a certain period, after which the lien becomes unenforceable. However, the record remains, and title companies may or may not understand that they have expired.
While title insurance can provide financial protection in the case of unforeseen issues with the property's title, it is important to understand that it does not cover all potential issues that may arise. Municipal issues, such as zoning regulations and city permitting requirements, fall outside the scope of title insurance coverage. These types of issues are typically the responsibility of the property owner to navigate and comply with.
It is important for property owners to be aware of the zoning regulations and permitting requirements that apply to their property. Zoning regulations dictate how a property can be used and developed, while permitting requirements ensure that any construction or renovations comply with local building codes and standards. While title insurance can provide financial protection in the case of unforeseen issues with the property title, zoning and permitting issues are typically considered separate matters that require proactive attention and compliance by the property owner.
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Frequently asked questions
Title insurance insures against financial loss caused by defects in the title to a real estate property. It also defends against lawsuits attacking the title and, in the case of a covered loss, reimburses the insured up to the policy limit.
Title insurance protects the insured (i.e. the buyer or lender) against loss due to title defects, liens, or other similar matters. It also protects the buyer from claims of ownership by other parties and offers coverage and assistance post-closing if covered issues arise.
An expired lien can still cause issues for a property owner, even if it is unenforceable. Title companies may or may not understand that a lien has expired and may require information from an owner's lawyers, leading to unanticipated legal fees. To show that the property is no longer encumbered by the lien, an owner needs a release or other documents showing that the lien has expired.
The process to obtain a release for an expired lien varies by state. In Oregon, the owner can send a written notice to the lien claimant that the lien has expired, and if the claimant does not object within 15 days, a release may be recorded with the county. In California, the owner can send a written demand for a release, and if the claimant ignores the demand, the owner can petition a court to release the property from the lien. In Washington, the owner can seek "deliverance" of a lien release or cancellation of a lien.
