Yes, you need title insurance if you own real estate. It provides protection against losses that occur when the title to a property in California is not free and clear of defects.
Examples include an undiscovered lien (such as a mechanics lien) or easement against the property. Most lenders require title insurance as a condition for getting your loan.
Normally, there are two types of policies available when you are purchasing a property – a lender’s policy and an owner’s policy. The lender’s policy will protect the lender’s security interest in the property.
An owner’s policy will protect you, the owner, from claims by others against your property.
You may believe that as long as the lender has a title insurance policy, you do not also need to buy one. You may also believe that if the former owner of the home had a policy, you are protected.
Neither of those statements is true – the lender’s policy protects the lender, and the former owner’s policy protects the former owner. You need your own policy to protect your legal title to the property.
The policy will cover you for as long as you own the property. Your policy will only cover the value of the property.
If you choose to buy title insurance, you should obtain the policy for the full purchase price of the property. Who pays for the title insurance depends on where you live – it’s not set by law, but instead is a matter of local custom.
It may be paid by the buyer or seller, or be split between the parties. In general, in northern California the buyer pays for title insurance, or in some cases it is split between the parties. In southern California, the seller normally pays the premium. The parties are free to negotiate something different than what local custom dictates.
Before you purchase title insurance, it’s important that you understand any exclusions contained in the policy. For example, if you are aware of a lien or claim against the property and your insurance company is not, you may not have coverage for that lien or claim.
You also may not have coverage for eminent domain issues. Before you choose to purchase or refinance the property, you need to understand what your title insurance will cover.
Once you have the policy, you will hope that you never need to use it. If you do find out that there’s a lien or encumbrance on your property, you should pull out your title insurance policy and read it.
Check to make sure that whatever type of claim has arisen is not listed as an exception. You should promptly notify your title insurance company after learning of the problem. This should be done in writing, and you should let the title agent know as well as the attorney who helped you with your closing.
You may be tempted to ignore the problem and hope that it will go away. That’s understandable, but title issues do not go away on their own – they become worse. If you wait until a lawsuit is filed, it’s going to be more expensive, and you may not have the same level of coverage that you would otherwise since you failed to notify the title insurance company immediately.
If your issue with the property is covered under the policy, the title insurance company is required to help you resolve the situation. The company may help negotiate an old, undiscovered mortgage with a lender and obtain a release.
If covered, the title insurance company would pay your defense costs and attorneys’ fees. Another situation may require litigation to get resolved. The title insurance company has the right to fix the title defect, to litigate the case, to settle the case, or possibly even to pay you the amount of insurance under your policy and terminate any further responsibility.
In many cases involving title insurance situations, you should hire your own attorney. In some cases, the interests of the title company will not be the same as your interests.
You should be aware of your legal rights. Your attorney can also help you with the proper notification of the title insurance company, as well as with all of the legal issues that arise after that.
If you are having an issue with your title and you need an attorney’s help, call real estate attorney Robert Levy at 510-465-0025. He can help with title issues, whether you are covered by title insurance or not.
He works with clients throughout the Oakland and Walnut Creek area. Call today to schedule a free consultation on your case.