Title Insurance: When the Deed is Wrong, a Lien Arises or there is Fraud

I recently had a business client who was refinancing the commercial loan on his office condo. While conducting the title search, we found a defect in the original deed which meant the client didn’t actually own the property he thought he had bought several years ago.

Instead of having a heart attack, we put in a claim for title insurance. Title insurance can pay for losses caused by a mistake in a prior deed, an outstanding ownership claim, a hidden lien or outright fraud.

Owner’s title insurance protects you against defects in the title to your property which originated prior to the policy date. Lenders often require property owners to purchase the lender’s title insurance to protect their interests, but I highly recommend that the property owner purchase a separate owner policy to protect themselves from covered losses—including court costs and attorneys’ fees—that could result from title defects.

Title insurance is a two-step process. The first step is to hire an attorney to search the real estate property records to see if there are any problems with clerical errors, omissions, ownership, easements, liens, etc. It verifies that the seller really owns the property and is free to sell it.

Then the attorney applies for a title insurance policy. In North Carolina,only an attorney can search and certify the status of title to the title insurance company.

Obtaining a title search and title insurance are good reasons to hire your own attorney in a commercial real estate transaction.