When you buy a property, you expect the title to be clear of any liens or encumbrances. Title insurance guarantees clear title and protects your ownership rights.
Title insurance works differently then other kinds of insurance because you only pay the premium once up front, and the insurance will protect you and heirs for as long as you own the property. There are no renewals or expiration date. It is customary for the seller in Los Angeles to pay for the buyers title insurance. If the buyer is making the purchase with a loan, the lender requires that the buyer pay for the lender’s title insurance. Lender title insurance is a different insurance than Title insurance and is customarily paid for by the buyer.
Title insurance companies record the grant deed at the County Recorders office, which is the legal device that transfers title. Have you ever wondered how deeds are recorded? It is done in a very old fashion way. Each weekday, Title Insurance Company send their field reps to line up at the Courthouse and record the grant deed. On recording day, you can ask your escrow officer what number you are in line (its kind of like grabbing a ticket at the deli counter of your local supermarket). The title insurance coverage begins the moment the deed is recorded.
While you are in escrow, the title insurance company will produce a preliminary title report (prelim) as part of the necessary disclosures that will tell you if the property has clear title or if there are any issues that need to be resolved before close of escrow. Pay extra attention to the list of “exclusions”, if there are any, on the Prelim – as these items will not be covered. Find out what needs to be done to remove exclusions. Any problems or defects the title company finds on their title search are known as “clouds” on title.
Title companies review all of the documents in the public records and in their database which is known as their title “plant”. What the title company wants to see is a complete chain of title of ownership rights passing from one owner to the next with no gaps or missing periods. Title insurance protects you from unexpected clouds of on title.
If you are buying a condo in a large condo complex with deeded parking, make sure to find out if your title insurance covers parking spaces. Sometimes with deeded parking spaces in condo buildings there is confusion about who owns what parking spaces. Some title companies exclude covering parking spaces which can be a real issue if there are two condos that are deeded the same parking spaces, or the spaces the owner has been using do not actually belong to the unit. Verifying the parking spaces are deeded and which spaces they are are some assurance, but that is no guarantee that another unit was deeded the same spaces. Just be careful with bigger condo buildings.
If there is ever a claim on your title insurance, the title company will pay legal fees upfront (if they lose they have to pay a claim, so they want to win). If there is any loss to you arising from a valid claim they pay the loss.
Title Insurance Covers
1. Someone else owns an interest in your title.
2. A document is not properly signed.
3. Forgery, Fraud, Duress, incompetency.
4. Defective recording of a document
5. Unmarketability of title
6. Restrictive Covenants
7. Lack of a right to access of land
8. Mechanics lien
9. Forced removal of structure- encroachments
10. Forced removal of structure restrictions
11. Forced removal of structure zoning
12. Cannot use land for SFR due to zoning or restrictions
13. Unrecorded liens by Home Owners Association
14. Unrecorded easements
15. Others have rights arising out of leases, contracts or options
16. Pays rent for substitute housing
17. Plain Language
18. Building Permit Violations
19. Subdivision Map Act violations
20. Boundary wall or fence encroachment
21. Post-Policy defect in title
22. Post-Policy contract or lease rights
23. Post-Policy forgery
24. Post-Policy easement
25. Post-Policy limitation on use of land
26. Post Policy encroachment by neighbor other than wall or fence
27. Enhanced access vehicular or pedestrian
28. Damage to structure from use of easement
29 Street address is correct
30 Map shows correct location of the land
31 Exercise of mineral rights
32 Sal falls due to neighbors encroachments
33 Living trust coverage
34 Coverage for spouse acquiring through divorce
35 Automatic policy increase up to 150%
36 Forced removal due to building setbacks
37 Discriminatory covenants
38 Taxing authority assesses supplemental taxes not previously against the land for any period BEFORE the policy date.