8 Title Defects that Could Delay Your Closing
There are few commercial real estate transactions that are finalized without the purchase of title insurance. In exchange for the premium payment, a title company insures the buyer’s title to the property. Typically, the insurance amount is up to the purchase price of the property. The reason most commercial purchasers, and a number of residential buyers, choose to pay the one-time premium for title insurance is simple – title problems are costly.
As part of the title insurance process, the title company will run a title search. This search uncovers the history of a piece of property and reveals the title issues that could prevent or effect closing. While most title searches are thorough, not all are accurate or comprehensive, which necessitates the continued need for title insurance. However, these eight defects are regularly discovered through the title search, and are those most likely to delay your closing.
#1: Forgotten Heirs in Prior Transfers
The death of a property owner triggers a number of events. Depending on the owner’s estate planning, the property will pass through probate, a trust or to a joint owner. However, at the time of death the appropriate heir may not be known or contacted. Children or other people may live on, manage, or operate the property for years without resolving probate and estate planning questions.
Most of the time a title search will reveal missing or forgotten heirs to the property, but in certain instances, these issues may arise even after the transfer is completed. Inadequate attention to probate is a reason you need title insurance.
#2: Problems in the Public Records
While many property filings and recording is now done electronically in Long Island, this wasn’t always the case. Public records regarding property were kept in physical files. While clerks were trained to be meticulous, errors have occurred. In the future, other errors in clerical work are going to be uncovered. If those errors affected your property, the consequences can be distressing. These problems are reflected on a property deed or survey and can require substantial financial resources to fix. A buyer should always require these errors resolved before closing.
#3: Fake Documents and Forgeries
We would like to believe that every document in the Long Island public records is legitimate, but over time dishonest individuals have fabricated and falsified a number of agreements and documents. These fake documents make ownership of certain property ambiguous and uncertain. If fake documents come to light, it could affect your ownership and title to the property.
#4: Liens Undisclosed to or by the Seller
Not every property owner is careful about paying and documenting liens. Sometimes, ignoring a mortgage or other financing from a lender is willful, but at times it is purely forgetfulness. Unfortunately, if you purchased the property with no knowledge of the lien and even if the seller didn’t know about the lien, it sill applies to the property. These liens can pass from owner to owner without discovery, unless or until a bank asserts its rights as a creditor.
As a buyer doesn’t want to take title to property in Long Island with an old lien attached. trying to cure these unknown liens can take an extensive amount of time that would delay the closing by days, weeks, or even months.
#5: Problems with the Legal Description
Writing or copying a legal description requires close attention to detail. Descriptions must be read more than once and perfected. However, not all drafters of deeds and other documents have this skill or diligence. A problem with the legal description of a property requires research and digging to resolve. But without clarity regarding the exact delineations of a property, it is impossible to define what you do and don’t own.
#6: Easements Unknown to Seller
It is essential that you know what easements cross a piece of property before purchasing. If there is a utility easement or right of way, it could prevent you from using a certain part of your property or prohibit the use you desire. These property rights often attach to the land, not the owner, which means the sale does not destroy or cancel the easement. Even if the seller is unaware the easement exists, an agreement in the property’s history can prove otherwise.
An earlier post discussed the two different easements found in New York, and how both interact with property transfers.
#7: Illegal Deeds in the Chain of Transfers
At first glance the history of your property might appear entirely valid and uncomplicated. However, it is possible that a previous owner illegal transferred or sold the property. These issues can take years to discover, at which point the property may be bought and sold a number of times. A deed is invalid if executed by illegal immigrants, individuals under 18, by individual lacking mental capacity, or only one half of a joint tenancy.
#8: Disputes Over the Property Boundary
In additional to a title search, buyers should require a survey of the property. The more recent the better, and often for large commercial properties a new survey is commissioned for every sale or transfer. The survey provides substantial information on easements, right of ways, and most important boundary lines. However, different surveys of the same property can show differing property lines.
In these instances, another individual may claim a portion of your property. This can lead to a dispute with neighbors at the time of purchase or down the road.
Solve Title Issues with Legal Assistance
When it comes to review of a title search, survey, or title commitment from an insurance provider, it can be extremely helpful to engage a real property lawyer. When it comes to Long Island title insurance and these reviews, no one is more qualified than a local lawyer. The Law Offices of Sami Perez in Long Island offers the best in title review and helping you prepare for closing.
Arrange a free consultation with a real property lawyer by calling (631)-594-3077.
The information in this blog post (“Post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this Post should be construed as legal advice from The Law Office of Samilde Perez or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter.