Chapter 12 Title Examinations

1. Chapter 12
Title Examinations

2. Objectives
• After reading this chapter, you should be able
to
– Recognize the importance of title examinations.
– Explain the three types of recording statutes.
– Understand the process and procedures involved
in conducting a title examination.

3. Objectives
• After reading this chapter, you should be able
to
– Review a title examination report.
– Identify potential title problems and know how to
solve them.

4. Bona Fide Purchaser for Value Rule
• Rule
– Anyone who purchases property in good faith for
valuable consideration and without notice of any
claim to or interest in the property by any other
party is a bona fide purchaser for value
• Takes property free and clear of any claims to or
interest in the property by other parties

5. Bona Fide Purchaser for Value Rule
• Bona fide purchaser for value receives
ownership of real property subject to any and
all claims of which the bona fide purchaser
has actual or constructive notice
– Actual
• Purchaser has direct knowledge about title matters
– Constructive
• Presumption of law to be responsible to know all title
matters about the land

6. Bona Fide Purchaser for Value Rule
• Constructive notice
– For possession to constitute notice, it must be
• Open
• Notorious
• Exclusive
– Chain of title

7. Recording Statutes
• Give purchasers and the public notice of changes
in ownership of the property
• Protect subsequent purchasers and
encumbrancers of property from the same
common grantor by giving them notice of
information contained in the recorded
documents
• Determine priority among conflicting claims to
real property

8. Recording Statutes
• Three types
– Race
• Priority between successive grantees of the same land from
a common grantor is determined by who records first
– Notice
• Relies on the notice given by the recording of the instrument
or on the notice obtained through means other than
recording
– Race-notice
• Most common

9. Recording Statutes
• Race-notice
– Combines the notice principle that knowledge of a
prior unrecorded instrument serves as notice in
the same manner as the proper recording of the
instrument with the recording principle that the
first party to record an instrument has priority of
title
• Regardless of whether that person was a prior or
subsequent purchaser

10. Recording Statutes
• Race-notice
– Case
• City of Richland Hills v. Bertelsen, 724 S.W. 2d 428
(Texas 1987)
– Pleadings did not prove Bertelsen had either actual or
constructive notice to city's claim

11. Practice Tips for Ordering a
Title Examination
• Primary purpose of title examination to
ensure either
– That the seller has the ability to convey good title
to the purchaser at the time of the closing, or
– That the borrower has good title to the property
being pledged as security for the loan

12. Practice Tips for Ordering a
Title Examination
• Information needed to do an examination
– Legal description of property to be examined
– Name of current owner
– Copies of all deeds and surveys
• Or any prior title examinations or title insurance
policies that affect the property

13. Examining Title to Real Property
• Place to search
– Courthouse in the county where the property is
located
• Period of examination
– Title examination searches the owner's chain of
title by starting at the present time and working
backward to some predetermined point

14. Examining Title to Real Property
• What to search
– Chain of title
– Grantor and grantee indices
– Plat index
• Land lot and district (location designation)
• Name of owner designation
• Subdivision designation

15. Examining Title to Real Property
• Reviewing various instruments in chain of title
• The examiner usually
– Notes the identity of the parties to the
instrument, the date the instrument was signed,
and the date it was filed
– Examines the signature and witnessing
requirements

16. Examining Title to Real Property
• The examiner usually
– Makes a notation of what estate was being
conveyed
• E.g., fee simple, life estate
– Pays particular attention to any covenants or
other requirements that may be set out in the
instruments

17. Examining Title to Real Property
• Other items to examine
– Judgments
– Federal and state tax liens
– Delinquent taxes
– Uniform Commercial Code (UCC)

18. Examining Title to Real Property
• Other items to examine
– Lis pendens
• Notice of a pending lawsuit
– Civil suits
– Probate court records
– Mechanics’ liens

19. Examining Title to Real Property
• Preliminary title report should reveal
– The name of the current record title holder
– The legal description of captioned property
– Existing unpaid loans or mortgages
– Other lien holders
– Status of taxes

20. Examining Title to Real Property
• Preliminary title report should reveal
– Listing of all easements, covenants, and other
restrictions
– Any objections to marketability
– Other matters that affect title
– Requirements for vesting marketable title in the
purchaser

21. Title Defect and Problems
• Record title holder
– May require suit to “quiet title” if title is not clear
• Breaks in the chain of title
• Errors in prior recorded deeds
• Name variances
• Improper and missing power of attorney

22. Title Defect and Problems
• Sales contracts, options, and leases
• Unsatisfied or unreleased mortgages
• Notice of lis pendens
• Easements
• Restrictive covenants and conditions
• Mechanics’ and materialmen's liens

23. Title Defect and Problems
• UCC financing statements
• Judgment liens
• Tax liens
• Title through estates

24. Role of the Paralegal and
Practice Tips
• Paralegals may perform a title examination,
order a title examination, and/or review the
results of a title examination
– Paralegals are underused in the area of title
searching
• Perhaps due to concerns about unauthorized practice
of law

25. Role of the Paralegal and
Practice Tips
• Title examination involves studying the actual
copies of all the documents in a package,
including the following:
– Liens
– Mortgages
– Restrictive covenants
– Easements

26. Record Rooms and
Electronic Records
• Most land records offices have converted (or
will be converting) to electronic databases
• Many states have enacted the Uniform Real
Property Electronic Recording Act
– Allows for the recording of electronic documents
involving real property
• E.g., deeds, mortgages, easements, etc.

27. Checklist: Ordering or Performing a
Title Examination
• Purpose of examination
– Purchase and sale of property
– Mortgage loan transaction
– Acquisition of easement
– Lease transaction

28. Checklist: Ordering or Performing a
Title Examination
• Items required for examination
– Current owner's name
– Legal description of property to be examined
– Plats or survey of property to be examined
– Prior title insurance policies on property to be
examined
– Prior title examinations or abstracts on property
to be examined

29. Checklist: Ordering or Performing a
Title Examination
• Period of examination
– Full examination
• 50 to 60 years
– Limited examination
• From date of prior title policy
• From date of prior mortgage
• From date of prior title examination

30. Checklist: Ordering or Performing a
Title Examination
• Indices to be checked
– Plat index
– Grantee index
– Grantor index

31. Checklist: Ordering or Performing a
Title Examination
• Other records to be searched
– Judgment index and records
– Federal and state tax lien index and records
– Lis pendens
– UCC financing index
– Tax records

32. Checklist: Ordering or Performing a
Title Examination
• Other records to be searched
– Special assessments
• Sanitary and water
– Probate records
– Civil docket

33. Checklist: Ordering or Performing a
Title Examination
• Preliminary title examination
– Certification to title company if title insurance is
involved
– Copies of all title exceptions
• Title defects or problems
– Breaks in chain of title
– Errors from prior recorded deeds
– Name variances

34. Checklist: Ordering or Performing a
Title Examination
• Title defects or problems
– Improper or missing power of attorney
– Sale contracts, options, and leases
– Unsatisfied or unreleased mortgages or deeds of
trust
– Notices of lis pendens
– Easements
– Restrictive covenants and conditions

35. Checklist: Ordering or Performing a
Title Examination
• Title defects or problems
– Mechanics’ or materialmen's liens
– Tax liens
– Unpaid real estate taxes or assessments
– UCC financing statements
– Title through estates
– Judgment liens

36. Ethics: Document Falsification
• Paralegals should never be involved in
falsifying a document for any reason
• Failure to list all utility easements in a title
examination report makes the report
misrepresent record title to the property
– Could be considered falsifying a title examination
report

37. Summary
• Importance of bona fide purchaser and
mandate to record any conveyance in real
property interest
• Title examination procedures
• Importance of the grantor/grantee indices
and other indices, such as for judgment,
federal tax liens, and unpaid taxes