Title Documents and Issues

A document is recorded in the County Clerk’s Office whenever property in that county is sold or mortgaged or whenever some legal action occurs which affects title to property located anywhere in that county. These documents are recorded by category and in chronological order for all properties in the county. An “abstract” or “abstract of title” gathers, into a single and chronological listing, relevant information regarding whichever of these various documents apply to a single parcel of property. In effect, it is a history of the chain of title to that property.

The original abstract is usually sent to the buyer after the closing, retained by the buyer’s lender, or held by the abstract company that worked on it last. Your attorney can assist you in locating your abstract if you are unable to find it.

It is usually a thick document on legal sized paper (8 ½” x 14”), bound at the top, usually has a colored back cover, will have various numbered entries listed throughout and the first page is usually a cover page with the name of the company that last worked on preparing the abstract. These companies usually have the words “Title Company” or “Abstract Company” in their name.

An abstract is prepared by a professional who is trained to search the county records. (This is why an abstract is sometimes referred to as a “Title Search”). The original abstract is guaranteed or “certified” to be accurate and therefore can be relied upon by a buyer. A copy is not certified and, therefore, does not carry the necessary guarantee as would the original, certified abstract.

When a buyer purchases a parcel of real property, the abstract contains all the information in the County Clerk’s Office as of the date of the purchase. When the buyer later goes to sell the parcel, time has passed and additional documents may have been recorded in the County Clerk’s Office which affect the property. Rather than start over, the existing abstract is simply brought up to date. The process of adding this additional information to an existing original abstract is called a “redate”.

An “instrument survey map” is a map of real property, prepared by a licensed land surveyor in accordance with accepted standards and using very precise measuring equipment. The accuracy of an instrument survey is certified or guaranteed to certain specified individuals or entities by the surveyor.

In most cases, the buyer and the buyer’s lender require a new or current survey which is guaranteed or certified to them to be accurate. As such, the contract usually requires the seller to provide a new map. However, surveyors will often charge less to revise an existing survey than to prepare an entirely new map. Therefore, an existing survey is often useful. Under certain circumstances (usually when no lender is involved), the parties may be able to agree to use an existing map (or no map at all) in order to save time or decrease cost. This would need to be recited in the contract and you should consult with your attorney before he or she approves the contract on your behalf, to determine if this might be an appropriate option.

A “title exam” is the review or examination of the abstract to determine the sufficiency and status of the ownership or title to real property. The buyer’s attorney or a title examiner engaged by the buyer’s attorney will undertake or obtain a title exam of the property prior to closing to make certain that the buyer will be obtaining good title to the property being purchased.

In the Purchase and Sale Contract, the seller agrees to provide the buyer with good title to the property. As such, if the title exam discloses problems in the title, it is the seller’s obligation to try to correct them.

Any title issues that were observable and relevant at the time you bought your house should have been addressed and resolved at that time. However, various title issues may have arisen or become relevant or significant after you closed on your house. Many of these issues can arise without you ever knowing that they are occurring. Since these are new issues, they could not have been resolved when you bought the house and must be addressed when you are selling.

Fences are a historical way of marking boundaries to land. However, whether by accident or design, most fences are not installed on actual boundary lines. This can create a problem of determining ownership. There is a law in New York, as in most states, that the exercise of control over land, under certain conditions and over an extended period of time, can actually cause ownership of land to be transferred from the true owner to the person who controlled it. This is similar to the concept of “squatter’s rights”. Since fences may be one indication of control over land, the inaccurate placement of a fence may be an assertion of “squatter’s rights” over that land. To eliminate this potential problem, various documents may be required to acknowledge the inaccurate placement of a fence and to confirm that there is no claim of “adverse possession”.

By signing a contract for the sale of property, a seller agrees to provide the buyer with good title. This means it is the seller’s obligation to take whatever steps are reasonably necessary and appropriate to resolve any legitimate title problems. The refusal to do so could result in a lawsuit by the buyer against the seller for breach of contract. However, certain problems simply cannot be resolved. In this case, the buyer can either agree to accept the property with the title defect, can agree to accept “title insurance” with respect to the problem or can elect to cancel the contract.

Just like health problems are insurable or accidents are insurable, title problems are also insurable. For the payment of a one-time premium, an insurance company will “insure” against financial loss which may result from a title problem in the future. This doesn’t keep a problem from occurring (any more than health insurance prevents an illness or liability insurance prevents an accident) but it provides monetary reimbursement should it occur. This monetary reimbursement, however, does not extend beyond the buyer’s purchase price for the property. For example, let’s assume a buyer purchases vacant land for $1,000 and obtains title insurance with respect to various title issues. The buyer then builds a house on the land so it is now worth $100,000. To the buyer’s dismay, someone raises an issue to his/her title to the property so he/she makes a claim against the title insurance policy. At most, the insurance company is obligated to the buyer for $1,000—the original cost to the buyer to purchase the property. For an additional cost, a “Market Value Rider” can be purchased which will increase the payment on a claim to account for appreciation in the value of the property. This does not, however, apply to any increase in the value as a result of improvements made to the property.

Marketable title is title that is free from observable title objections. Insurable title is title that, while it may not be free of title objections, an insurance company has considered the title risks to be so remote or small as to be willing to assume certain financial obligations which would arise if the title issues became a problem. Title insurance is necessary in order to transfer property where all title problems cannot be resolved and marketable title cannot be provided. Title insurance is advisable in all cases, as it provides additional financial protection to a buyer, even with respect to marketable title (as is further illustrated by the answer to the next question).

Certain defects can remain hidden, despite the most thorough title investigation Various irregularities may occur in recorded documents or in the circumstances surrounding these documents (i.e. invalid documents, forged documents, typographical errors, lack of authority by those signing the documents, documents signed by incompetents or minors, documents affected by undisclosed marital status, documents affected by death, documents executed under fraud or duress, etc.). In addition, various irregularities are not disclosed by documentation (i.e. county clerk error, misapplied payments, missing information, etc.). This can result in problems that cannot be uncovered by your attorney. Many such problems may not be discovered for years.

The type of title insurance required by your lender is different from the type of insurance you would obtain for yourself. The insurance required by your lender (called a “Mortgagee Policy”) protects only the lender and provides no protection to the buyer (even though the buyer pays for the policy). The policy obtained by a buyer (called an “Owner’s Policy” or “Fee Policy”, referring not to the cost for the policy but the nature of the ownership of the land) protects the buyer. Fortunately, if you need to provide your lender with a Mortgagee Policy, you do not need to buy an entirely separate Owner’s Policy. Instead, for an increase in the premium (but far less than the cost of two separate policies), the title insurance company will provide a policy that will protect both the lender and the buyer.

Probably. If you required insurance, it means the problems were not resolved but were insured. Although the insurance policy provided to you by the seller is good for as long as you own the property, it is personal to you only and is not transferable to any subsequent owner. Assuming the title problems have not been cured during your ownership, it is likely that any buyer will similarly require you to provide title insurance for them. Interestingly, however, certain problems can “disappear” simply by the passage of time. After some problems become a certain age, they are no longer considered significant and would not be considered to be valid title objections. If this were the case, it is possible that you would not be required to provide title insurance, even though you had required it when you purchased. However, this is unusual.

A “deed” is the formal document that transfers ownership of real property from the buyer to the seller and shows evidence of this transfer. This gets recorded in the County Clerk’s Office of the county where the property is located.

Once the deed is recorded in the County Clerk’s Office, the transfer is considered to be “of record” or official. Thereafter, the original deed is no longer required as proof of the transfer of ownership since copies of the County Clerk’s records are sufficient. Nevertheless, your deed may be useful to you in the future and it is helpful, although not necessary, to save it for future reference.

A “bill of sale” is the formal document that transfers ownership of personal property from the buyer to the seller and shows transfer of this ownership. That is, a deed transfers real property (i.e. land and the permanent buildings on the land) and a bill of sale transfers personal property that may be transferred with the land (i.e. refrigerator, washer, dryer, window treatments, etc.). Although a bill of sale may be recorded in the County Clerk’s Office, this is not usually done. Therefore, it is a good idea for a buyer to retain a bill of sale in a safe place in the event title to the personal property should ever be an issue.