Real Estate Chain of Title Is
Like Grandmother’s Pearl Necklace
Chain of Title is the history on your home and a legal record of a
property. The chain of title is provided by a title company when a buyer contracts to purchase a property. This document is in the preliminary title
report and most lenders was a twenty-four-month chain to show any recent recordings
as well as liens, deed, documents, covenants, restrictions, agreements, easements
and more. The chain of title for any property is found in the relevant county
recorder’s office. Some California cities provide these records visible online
free, some ask for per page nominal fees, some require you visit their office
in person.
Recorded documents show
the history in a chain of title. The recent dated filing runs back
to the original land that affects the real estate. Many types of documents can
be recorded. There is not a regulating authority who stops a person from filing,
filling out forms and paying the recorder to file a document thus fraud can
come into the history of a property.
A number of documents
that can be recorded. A skilled lender or title officer can interpret the needs
of the following documents on the chain of title.
Transfer documents (deeds)
document the transfer of ownership. The deed conveys the property from the
seller, or grantor, to the buyer, or grantee. The deed also includes street
address and legal and metes and bounds description of the property, often
attached is a plat map and long legal description. There are sale transfers,
family transfers, and a several types of grant transfer deeds.
Financial documents (deeds of
trust) are liens, a creditor enters into an agreement with a lender to borrow
money. The lender provides cash through a warehouse line to purchase the
property. The cash is settled by an escrow company in Southern California and a
title company in Northern California. When the mortgage debt is paid off, depending
on the terms of the note say 15 or 30 years, the lender has title to the property.
Once the mortgage is paid, the former creditor owns the property “free and
clear.” The date of the mortgage or lien determines which lien is a priority
for payment if there is more than one lien in competition. A deed of trust,
also known as a trust deed, assigns the property to a trustee. The trustee
holds the title as security for a loan between the lender and the borrower. In
such a case, the lender is known as the beneficiary and the borrower as the
trustor.
Involuntary lien documents include
liens, lis pendens and tax liens. Involuntary liens, as the name implies, are
liens that arise without the owner’s consent, usually due to nonpayment of
debts. Examples of involuntary liens include property tax liens when local
property taxes are not paid; income tax liens, for failure to pay the IRS;
judgment liens from a creditor, ordered by the court, and mechanic’s liens. The
latter is filed by contractors if the owner does not pay for work done on the
property. If an owner is unable to pay for construction work of any type a
contractor can place a mechanics lien. The release of the lien is a process and often owners fail to not just pay the bill, but properly follow up on
the filing of the release. Involuntary liens “cloud” the title and require
payment before the property changes hands. In some cases, the property is sold
at auction to satisfy the lien. A lis pendens is notice that a lawsuit has been
filed regarding the property’s title or ownership.
Covenants and
restrictions are
documents creating restrictions on the use of the subject property. Such
restrictions may include limits on the types of improvements made to the
property, uses of the property and property occupancy. Condominium and
townhouse projects may have a long list of rules and regulations recorded against
the subject property. Rules which violate United States laws are not considered
enforceable.
Easements, also known as rights of way, are
documents affecting usage rights. Utility easements allow access to the
property for the purpose of maintaining electrical lines, water/sewer lines and
the like. Some areas of California have water rights easements, oil and gas
lines or mineral rights. Private easements allow another party, usually a
neighbor, access through the property. It may mean direct access, such as a
shared driveway, or non-direct access. A road maintenance agreement is often
recorded between neighbors who share a road or driveway. If there is no agreement
recorded it is a best practice to get such an agreement in place and recorded
as an owner might not be able to drive or walk to their property. Other
examples are for solar access, whereby a neighbor might be mot allowed to build
a tall structure or plant trees that block their solar collection. Also, there
are agreements to not have trees or structures blocking a neighbor’s view
rights and so forth.
An
easement by necessity, and the property owner cannot interfere with the
neighbor’s ability to access his or her land.
Other documents
involved in the chain of title may include:
·
Death
certificates, when the property passes to a joint tenant through the right of
survivorship. This joint tenant is generally the decedent’s spouse. An original
certified copy of the death certificate is required by the Title Company to clear
a recent death of an owner.
·
Affidavits,
documents that affirm a fact related to the property
·
Correction
deeds, correct an error in a previously recorded document.
·
Be
mindful that persons can file a deed on a property without the knowledge of the
owner, these pose special handling by the title officer and lender.
·
Filing
a Living Trust, filing a family transfer deed or a Homestead can also cloud the
title if not properly handled.
·
Death,
divorce and disaster can cause a cloud on title. In California because we are a
community property state it is required that a living spouse sign a grant deed
to not be included in a transaction.
Chain of Title clouded
is like a string of pearls without knots
Sometimes, there is a
break in the chain of title. This occurs if the title transfer was inaccurate –
or fraudulent. Errors include misspellings of names of the grantor or grantee,
incorrect legal descriptions of the property, lack of signatures on the deed,
mistakes in when the chain of title documents were recorded. Having a
Grandfather, son who is Junior and grandson who is the III can complicate the
title when their names are confused. When there is a break in the chain of
title, correction is necessary. To correct such breaks the property owner may
have to go to court and seek quiet title action. Depending on the nature of the
break, a judge can rule that the break is not relevant and no longer exists.
However, if the break is known to have resulted due to a particular party, the
owner can seek out the party and have them fill out a quitclaim deed, be notarized
and give up rights to the property. Organizing the proper form and making certain
the party has current identification to be notarized is not a simple task.
Today there are four
main title companies in the United States with many operating under the “umbrella”
of one of the big four: Fidelity National Financial Inc., First
American Financial Corp., Old Republic International Corp., and Stewart
Information Services Corp. Perhaps by 2020 year-end there will be three when
Fidelity takes ownership of Stewart Title. In the past year a couple new Fintech Title
companies have opened shop claiming to be faster and cheaper as they use only
their secret sauce math, this remains to be seen how a title company without employees
can repair broken chains of title and search down or bond around fraudulent liens.
Will they be able to track down a bankrupt lender, find the correct Trustee and
execute a reconveyance deed?
The future of the Title and Lending Industry is sure to change. Being
able to fix a cloud on title requires skill. If you have a problem please feel
free to contact me for assistance.
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