After there is a search of the property, products are created to outline who has an interest in the property. Title assurance typically come in one of three forms (1) abstracts, (2) title opinions or certificates, and (3) title insurance. Each product also has different rights and protections for the purchaser. Typically, a buyer will utilize multiple products to ensure they cover all their bases.
Abstracts
A title abstract is a written analysis of the property in question extending back towards the chain of title (complete). Today, most abstracts extend between 20–40 years, depending on the jurisdiction (extending further to show any potential encumbrances such as a mortgage or easement) (root title). Most abstracts are also arranged chronologically. Additionally, abstracts do not opine on whether title is good, but instead leaves it to the reader to interpret its meaning.
Title Opinions
A title opinion is written by an attorney who has reviewed the abstract and opines on whether the legal title is marketable based on the information gathered in the abstract. Attorneys who create title opinions could be liable for negligence, based on malpractice standards, while those who prepare abstracts are generally not liable (depending on the jurisdiction).
Title Insurance
Title insurance is provided to insure the purchaser against any title defects on the deed. When creating policies, the insurer conducts a search (rather than the abstractor).
What’s better, title insurance or title opinions? Title insurance may protect the purchaser better financially (being fully liable to insured defects while an attorney is only liable for malpractice), but does limited amounts to repair any defects in the title.
How is title insurance different from other types of insurance? Most insurance types will insure against future events, but title insurance will insure only against past events.
Vestin Mortgage, Inc. v. First American Title Insurance Company
139 P.3d 1055 (Utah 2006).
Question
Whether the title insurance policies covered both actual assessments and assessment notice or only actual assessments.
Holding
A notice of intent to create a special improvement district (SID) and levy future assessments does not fall under the insurance policy, affirmed.
Facts
Vestin provided two loans to The Ranches. Title of the property was insured by First American. Before the loans were made, the city had filed a notice of intent to create a SID in the area where the property was located. The SID would levy assessments against any sale of the property (a future event). Eventually, The Ranches defaulted on their loans and Vestin foreclosed. When they attempted to sell to another party, they discovered of the incoming assessments and the buyer backed out. So, Vestin attempted to file a claim, saying the assessments affected marketable title. These claims were denied and Vestin sued.
Analysis
Vestin argues that the creation of a SID was a defect on the title falling under the provision of the insurance policy. However, First American argues that the policy covers only actual assessments before the policy was issued. Because the SID occurred after the policy was issued, First American argues they are not liable.
Here, the court agrees with First American. Notice of the assessment does not create a lien, only actual assessment. Because the actual assessment occurred after the policy was issued (and title insurance does not insure against future events), the lien falls outside the scope of the policy. Further, the assessment only affects Vestin’s ability to sell the property, but it does nothing to affect the title, Vestin still has full title.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
