14A — October 11 - 24, 2013 — Mid Atlantic Real Estate Journal


T itle I nsurance

By Charles Katz-Leavy, Verrill Dana, LLP Are you covered for that? An intro to title insurance


itle insurance is a con- tract between an own- er of an interest in real

is available and recommended for various types of real estate transactions. For example, a fee purchaser can buy an owner’s policy, a mortgagee can buy a lender’s policy, and a lessee can buy a leasehold policy. However, title insur- ance is not something one should purchase without a thorough review of its terms and conditions. In order to take full advantage of the policy, it is crucial to obtain a clear understanding of what the policy does and does not cover. The first section of a title in-

surance policy is the “jacket.” The jacket contains preprinted provisions relating to what is covered, what is excluded from coverage, and other stipula- tions. Next is “Schedule A,” which contains general policy information, including: the policy number, the date of the policy, the amount of insur- ance, the name of the insured, the parties in whom title is vested, the type of interest be- ing insured, and basic property information. Lastly, “Schedule B” contains a description of the matters that may affect title to the property, but are

not covered by the policy. In addition to general excep- tions, Schedule B contains any exceptions specific to the insured property that the title company discovered during a title search of the property, e.g., easements, rights of way, and other encumbrances. Most title insurance policies outline the specific coverage provisions in the jacket of the policy. A standard policy will protect against loss or dam- age incurred by reason of: (1) title being vested other than as described in ScheduleA; (2) defects in or liens or encum-

brances on the title not listed in Schedule B; (3) unmarket- able title; and (4) lack of access to and from the land. Most title insurance policies also specifically state that the company will not pay for loss or damage incurred as a re- sult of: (1) permits or land use regulations restricting or regu- lating the right of the owner to use or develop the land; (2) conflicts in boundary lines, shortage in area, encroach- ments, or other facts that a survey would disclose; (3) defects, liens, encumbrances, adverse claims or other mat- ters created or assumed by the insured; (4) claims by reason of federal bankruptcy that the transaction vesting the title is a fraudulent transfer or voidable preference; and (5) any lien on title for real estate taxes or assessments imposed by governmental authority not yet due and payable. Many of these general exceptions can be deleted if the insured pro- vides the title company with a stamped survey and signed affidavits, and/or purchases certain title endorsements. Title insurance companies typically issue a commitment for title insurance or pro forma policy prior to the closing of a transaction. It is important to request a copy of the com- mitment or pro forma policy in advance of the scheduled closing date so that there is enough time to review the exceptions from coverage. It also is usually helpful to have an attorney review the com- mitment or pro forma policy. Such a review will enable one to flag title issues and possibly address them prior to closing, e.g., taking steps to remove an unwanted encumbrances or negotiate for affirmative coverage. Title insurance is a critical component of any real estate transaction, but in order to take full advantage of its benefits, one must have a thorough understanding of exactly what it does and does not cover. Thanks to Colin W. Hay who assisted with this article. Charles M. Katz-Leavy is an attorney at Verrill Dana LLP, which has offices in Maine, Massachusetts, Con- necticut and Washington, D.C. Charlie handles com- mercial and residential real estate transactions. n

estate and a title insur- ance compa- ny, whereby the insured pays a one- time premi- um and the i n s u r a n c e c o m p a n y provides the

Charles Katz- Leavy

owner with protection against loss or damage resulting from liens, encumbrances or other defects in title. Title insurance

We have the experience to guide you all the way from the property line to the dotted line.

No matter how big or small your real estate project is, we have the right size team to efficiently see you through.

Contact: Attorney Charles M. Katz-Leavy (207) 253-4920

Portland, ME • Boston, MA • Augusta, ME • Stamford, CT • Washington, DC www.verrilldana.com

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