A title company is engaged in the business of guaranteeing and insuring the ownership of real estate. This involves preparing and then making available various types of title evidences. These title evidences make possible the safe transfer of real estate and enable lenders to lend money safely on property.
Since real estate has such great value and is such a basic part of our economy, many special laws have been enacted for its protection, laws so strict and far-reaching that real estate is safeguarded more strongly than any other form of tangible property. The law provides that anyone with a rightful interest in the real estate must have that interest satisfied.
Consequently, the buying and selling of real estate concerns the parties with questions not necessary to consider in the sale of items such as a car, appliances, stocks and bonds, etc. In real estate, for example, one must know whether the former owner is married, single, or divorced, if any liens exist and if the taxes have been paid, as well as many other factors.
At the time of the sale of the property we need to know:
- Who is the owner of the property.
- What liens and encumbrances affect the property.
- What are the limitations on the use of the property.
The public records or documents are the principal source for ascertaining this information. The law prescribed recordation (the filing for record) as the chief way in which notice of ownership is given to others. Everyone is presumed to be notified of all that has been recorded. Therefore, a search or examination of public records is necessary to determine ownership and the condition of that ownership.
The word “title,” as we use it in the title industry-as in “the title to a piece of property”-means having the right to possess the property. “Ownership” can be defined as the exclusive right to possess, enjoy and dispose of title to property that one has title to. A deed is the written instrument by which title to property is passed from owner to owner. In Ohio, the Warranty Deed and the Quit-Claim Deed are the major deed forms used. However, while a deed transfers the right of ownership, it does not extinguish the rights of others in the property or prove ownership.
Ownership is determined by a study of the record of all transactions which affect the property. These transactions form a “chain” of sorts. This “Chain of Title” runs from the first owner down to the current owner. All the links of the chain must be strong, and all rightful interest in the property must be provided for throughout the chain in order to establish the identity of the owner and the quality of the owner’s title.
What major considerations do we look for in the chain of title? •The quality of the deed and other documents.•Marriages and divorces.•Death of a former owner.•Age or mental competence of an owner.•Encumbrances or limitations imposed on the property.A defect in the title of a previous owner can affect a new owner’s title. Defects, depending on the degree of seriousness, need to be corrected or removed in order to make the safe transfer of title possible.The major types of encumbrances that may be found are:•Mortgages.•Real Estate Taxes and Special Assessments.•Mechanic’s Liens.•Judgment Liens.•Leases (encumbrance).Possible limitations which must be considered are:•Zoning ordinances.•Deed restrictions.•Easements.The title examination provides necessary information regarding ownership and identifies the conditions of that ownership. The examining process is done to determine that an owner will possess clear title and full rights of ownership and to make certain that previous rights or claims of others have been cleared away. “Clouds” on a title must be removed or excluded from coverage before the company can issue title evidences to protect the parties. If a “cloud” cannot be removed, the company must make an underwriting decision relating to risk and then accept or reject the opportunity to issue title evidence. Types of coverages issued:•Title Commitments: Preview of what is currently on the title.•Owner’s Policy: Only the owner may be insured. Guarantees matters of record and matters not necessarily of record.•Loan Policy: Only the lender may be insured. Guarantees the lender has first and best lien on the property.Once a Purchase Agreement has been reached, the following information is required to initiate a title examination, and after the information has been compiled, a title commitment will be issued. Name(s) of Present Owner(s)/Seller(s) Name(s) of New Owner(s)/Buyer(s) Address of premises to be examined. Realtors (if any). Lender. Expected closing date.Prior to the closing of the transaction, the lender will require a “location survey” be issued by a surveyor. This will show the dimensions of the property and the location of any improvements on the property