ALTA/ACSM Land Title Surveys: What is Title Insurance and Why Should Surveyors Care?

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1 ALTA/ACSM Land Title Surveys: What is Title Insurance and Why Should Surveyors Care? Mitch Duryea, PLS 2015 PLSO Conference January 21, 2015 Salem, Oregon

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3 What is Title Insurance and Why Should Surveyors Care? Definitions of Key Terms History of Title Insurance Title Insurance vs. Casualty Insurance What a Title Company does What is covered in a Standard Policy What is covered in an Extended Policy Types of Reports, Policies and Endorsements

4 Definition of Key Terms Title Policy: An insurance policy insuring the Title to Real Property issued for the protection of persons acquiring interests in real property either as owner, lender or lessee. (Definitions of Surveying and Associated Terms, 2005)

5 Definition of Key Terms Title Insurance: Insurance against loss due to any defect or hazard insured against in a Title Insurance Policy. (Definitions of Surveying and Associated Terms, 2005)

6 History of Title Insurance The Conveyancer The Abstract of Title Watson v. Muirhead (57 pa 161) (First American Title Insurance Company, 1980)

7 History of Title Insurance March 28, 1876 Real Estate Title Insurance Company was founded in Philadelphia PA. (First American Title Insurance Company, 1980)

8 Abstract - Opinion Too slow Usually cost too much The liability of the abstractor was limited to own errors and opinions Limitations to financial liability of the abstractor (First American Title Insurance Company, 1980)

9 Title Insurance vs. Casualty Insurance Casualty Insurance Risk Assumer Annual Premium that can change at renewal Policy only good while premium is paid 65% to 112% of Premiums paid in claims

10 Title Insurance vs. Casualty Insurance Casualty Insurance Health insurance - $.99 Auto insurance - $1.12 Homeowners insurance - $.87 Workers comp - $1.42 Other Property insurance - $.67 Life insurance - $.65

11 Title Insurance vs. Casualty Insurance Title Insurance Risk Eliminator One Time Premium paid at time of closing Policy is good for as long as you own the property Approximately 11% of Premiums paid out in claims (American Land Title Association, 2012)

12 Title Company How they spend premiums The cost of maintaining current title information on property local to that operation, the "title plant" The cost of searching and examining the title to subject properties The cost to resolve or clear defects to the title The claims costs covering title defects, including legal fees The allowance for a reasonable profit (Gadow, 2005)

13 Title Insurance What the Title Company must do Examine, summarize and classify every instrument of Constructive Notice to determine its effect upon title to land and to whom it may relate. Interpret these instruments as to the effect of title (leases, trusts, reservations, future interests, etc.;) Interpret Judicial Proceedings affecting title Post this information to the proper parcel (First American Title Insurance Company, 1980)

14 Constructive Notice Definition of Constructive Notice Sources of Documents of Constructive Notice

15 Constructive Notice Definition of Constructive Notice Such notice as is implied or imputed by law, as in the case of notice of documents which have been recorded in the appropriate registry of deeds or probate. (Black, Nolan, Connolly, & West Publishing Company, 1979, p. 284)

16 Constructive Notice Sources of Documents of Constructive Notice Taxing Authorities County Recorder / Auditor / Clerk Clerk of Federal District Court (Bankruptcy) Other Court Actions (A copy of which is recorded) (First American Title Insurance Company, 1980)

17 How Many Documents is that? 2014 Deschutes County OR 4,250 Pierce County 16,500 King County 33,707

18 What is Title Insurance and Why Should Surveyors Care? Types of Policies Standard Extended Endorsements

19 Standard Policy- What is Covered Title being vested other than as stated in Schedule A. American Land Title Association Owner s Policy Adopted

20 Standard Policy- What is Covered A defect in the Title caused by forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation; failure of any person or Entity to have authorized a transfer or conveyance; a document affecting Title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered; failure to perform those acts necessary to create a document by electronic means authorized by law; a document executed under a falsified, expired, or otherwise invalid power of attorney; a document not properly filed, recorded, or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or a defective judicial or administrative proceeding. American Land Title Association Owner s Policy Adopted

21 Standard Policy- What is Covered A defect in the Title caused by The lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable, but unpaid. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term encroachment includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land. American Land Title Association Owner s Policy Adopted

22 Standard Policy- What is Covered Unmarketable Title. No right of access to and from the Land. The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (a) the occupancy, use, or enjoyment of the Land; (b) the character, dimensions, or location of any improvement erected on the Land; (c) (d) the subdivision of land; or environmental protection if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice American Land Title Association Owner s Policy Adopted

23 Standard Policy- What is Covered An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement referred to in that notice. The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records. Any taking by a governmental body that has occurred and is binding on the rights of a purchaser for value without Knowledge. American Land Title Association Owner s Policy Adopted

24 Standard Policy- What is Covered Title being vested other than as stated in Schedule A or being defective (a) as a result of the avoidance in whole or in part, or from a court order providing an alternative remedy, of a transfer of all or any part of the title to or any interest in the Land occurring prior to the transaction vesting Title as shown in Schedule A because that prior transfer constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency, or similar creditors rights laws; or (b) because the instrument of transfer vesting Title as shown in Schedule A constitutes a preferential transfer under federal bankruptcy, state insolvency, or similar creditors rights laws by reason of the failure of its recording in the Public Records to be timely, or to impart notice of its existence to a purchaser for value or to a judgment or lien creditor. American Land Title Association Owner s Policy Adopted

25 Standard Policy- What is Covered Any defect in or lien or encumbrance on the Title or other matter included in Covered Risks 1 through 9 that has been created or attached or has been filed or recorded in the Public Records subsequent to Date of Policy and prior to the recording of the deed or other instrument of transfer in the Public Records that vests Title as shown in Schedule A. American Land Title Association Owner s Policy Adopted

26 Standard Policy- What is Not Covered Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (i) (ii) (iii) (iv) the occupancy, use, or enjoyment of the Land; the character, dimensions, or location of any improvement erected on the Land the subdivision of land; or environmental protection; or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5 American Land Title Association Owner s Policy Adopted

27 Standard Policy- What is Not Covered Any governmental police power Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8. American Land Title Association Owner s Policy Adopted

28 Standard Policy- What is Not Covered Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 9 and 10); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Title. American Land Title Association Owner s Policy Adopted

29 Standard Policy- What is Not Covered Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors rights laws, that the transaction vesting the Title as shown in Schedule A, is (a) a fraudulent conveyance or fraudulent transfer; or (b) a preferential transfer for any reason not stated in Covered Risk 9 of this policy. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy and the date of recording of the deed or other instrument of transfer in the Public Records that vests Title as shown in Schedule A. American Land Title Association Owner s Policy Adopted

30 Extended Policy Unrecorded Liens Survey and Boundary Questions Claims of parties in possession, but not disclosed by the record Easements or claims to Easements that are not disclosed by the record

31 Types of Policies Owner, Lender & Leasehold Policies Standard with our without endorsements Extended with our without endorsements

32 Endorsements Addition to a Title Insurance Policy which expands the policy, fulfilling specific requirements of the insured. According to there are approximately 87 different endorsements available to the insured. (First American Title Insurance Company, 1980)

33 Endorsements ALTA Endorsement (Access and Entry) ALTA Endorsement is available for owner s and loan policies. The endorsement provides coverage for loss or damage suffered as the result of the Insured Land not being contiguous to a public right-of-way, not having physical access to a public right-of-way, or the limitation of the right of access via existing curb cuts or entries to a public right-of-way. This endorsement may be issued upon submission of a current and satisfactory survey of the Insured Land which shows the Insured Land to abut upon, with curb cuts or entries along a public right-of-way, as long as the public record does not disclose any limitation in rights of access (such as limitation of access along a highway).

34 Endorsements ALTA Endorsement (Contiguity) The Company insures against loss or damage sustained by the Insured by reason: 1. the failure of the Land to be contiguous [described the Land that is contiguous to the Land by its legal description or by reference to a recorded instrument-e.g. that certain parcel of real property legally described in the deed recorded as Instrument No., records of County, State of ] along the boundary lines(s); or 2. the presence of any gaps, strips, or gores separating any of the contiguous boundary lines described above.

35 Endorsements ALTA Endorsement (Encroachments) The Company insures against loss or damage sustained by the Insured by reason: An encroachment of any Improvement located on the Land onto adjoining Land or onto that portion of the Land subject to an easement, unless an exception in Schedule B of the policy identifies the encroachment; An encroachment of any Improvement located on adjoining Land onto the Land at Date of Policy, unless an exception in Schedule B of the policy identifies the encroachment; Enforced removal of any Improvement located on the Land as a result of an encroachment by the Improvement onto any portion of the Land subject to any easement, in the event that the owners of the easement shall, for the purpose of exercising the right of use or maintenance of the easement, compel removal or relocation of the encroaching Improvement; or Enforced removal of any Improvement located on the Land that encroaches onto adjoining Land.

36 What is the objective of the Title Insurance Company? Members of the American Land Title Association (ALTA) have specific needs, unique to title insurance matters, when asked to insure title to land without exception as to the many matters which might be discoverable from survey and inspection, and which are not evidenced by the public records. (Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys (Effective 2/23/2011), 2011)

37 What is Title Insurance and Why Should Surveyors Care? The title company is required to issue an extended coverage title insurance policy with certain endorsements. In order to provide this policy, the title company needs a survey that addresses the specific issues being insured.

38 What is Title Insurance and Why Should Surveyors Care?

39 American Land Title Association. (2006). Owner's Policy. American Land Title Association. (2012, April 25). Retrieved from Black, H. C., Nolan, J. R., Connolly, M. J., & West Publishing Company. (Eds.). (1979). Black's law dictionary: Definitions of the terms and phrases of American and English jurisprudence, ancient and modern Definitions of Surveying and Associated Terms (Rev. ed.). (2005). Gaithersburg, MD: American Congress on Surveying and Mapping. First American Title Insurance Company. (1980). Fundamentals - A Guide to Title Insurance. Santa Ana, CA: First American Title Insurance Company. Gadow, S. (2005). How your Title Insurance Dollar is Divided Up. Retrieved January 17, 2015, from EscrowHelp.com: (2011). Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys (Effective 2/23/2011). American Land Title Association and American Congress on Surveying and Mapping. Otis, L. L. (1966). What Protection is Title Insurance? Los Angles: Title Insurance and Trust Company. Robillard, W., & Wilson, D. (2013). Brown's Boundary Control and Legal Principles (Seventh ed.). Hoboken, New Jersey: John Wiley & Sons. Title Insurance and Trust Company. (1979). Title Handbook. Los Angles: Title Insurance and Trust Company. Watson v Muirhead, 57 Pa Retrieved from