Title Insurance (TI) is always a bit mysterious. It usually appears on a deal when a seller doesn't have a Real Property Report (RPR) and wants the buyer to accept TI in lieu. 

We previously discussed what TI does and whether a buyer should accept TI instead of the RPR and compliance. Today let's discuss a situation where TI can be very useful and a great comfort. 

A client was buying a raw lot in a rural subdivision. The purchased lot had been subdivided out of a larger one, creating two new titles. We did the usual tax search on the new lot, which showed no taxes yet assessed or outstanding. We worked with the seller's lawyer to determine the taxes for the current year and made our tax adjustments on that basis. Everything was good, and the deal closed.

Shortly after closing, our client got a letter from the County saying that previous years' taxes on this new lot were outstanding and that although the previous owner was responsible, our client was also responsible. The outstanding tax bill was a significant $3,500!

Following further investigation with the County, they apologized and said that when the lot was subdivided they mistakenly did not add the outstanding taxes to the tax accounts for the two new lots. They were apologetic, but these taxes have to be paid. 

What should we do? Call the seller's lawyer and tell them their client had to pay the outstanding taxes? That might have worked, assuming the sellers were still available and cooperative.

Before making that call, we contacted the TI company, gave them the facts and showed them our searches said that taxes were clear. Within one day, they agreed that TI covered this, and they paid the tax bill!

The benefits of TI are numerous, and now we have experience with new TI coverage on the tax side.

You may want to recommend to your client that they obtain TI when they buy.

Protect yourself.

Cheers,

Barry

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Field Law when you write your next deal.