Unit 7: Title Records - Public Records, Title Search, and Title Insurance

Public Records and Title Records Overview

Public records reveal documents, claims, and other details that affect a property’s ownership. If the property is subject to any liens or other encumbrances, a prospective buyer or lender needs to know. A real estate professional should understand what is in the public record and what a search may disclose.

Learning Objectives

Explain the public recordation system and its importance to the title insurer.
Explain the benefits of title insurance and the difference between an owner’s policy and a lender’s policy.

Public Records

Recording: Placing a document in the public record.
- Significance: Establishes public notice of rights or claims against the property.
Constructive notice: Result of recording; the public record provides notice to the world.
- Physical possession
Actual notice: Information is available and someone is actually made aware of it.
- Significance: Actual possession or knowledge can also affect notice requirements and subsequent claims.

Priority

Priority: The order in which documents or liens are recorded.
Unrecorded Documents (items that may affect priority or rights if not recorded):
- Real estate taxes
- Special assessments
- Inheritance taxes
- Franchise taxes

Chain of Title and Cloud on Title

Chain of title: The record of property’s ownership over time.
Cloud on the title: A gap in the chain of title that creates question or dispute about ownership.
Action to quiet title: A court proceeding to establish ownership when a cloud exists. The court refurbishes the title.
The route of title refers to the documented path of ownership through various transactions and parties, detailing each transfer of interest in the property, which is essential for verifying clear title.

Title Search and Abstract of Title

Title search: Examination of public records to identify defects or encumbrances.
Abstract of title: A summary report of what is discovered during a title search.
TQ: How far back they look is always to the route of title, or next best is 40-60 years

Marketable Title

Marketable title: A title that is acceptable to a reasonably prudent person.
Characteristics: No serious defects; no questions of law or fact; will not expose purchaser to litigation; provides ability to sell or mortgage property later.

Proof of Ownership

Certificate of title: Evidence of ownership.
- Doesn’t prove ownership but establishes a presumption that the title is valid unless proven otherwise.
Title insurance: Insurance policy that protects against title defects.
- Best defense of title TQ
- Contract under which the policyholder is protected from losses arising from defects in the title.
Standard Extended (ALTA): Common form of title insurance policy (standard and extended variants).

Types of Policies

The Torrens System

Torrens System: A legal registration system to verify ownership of real estate.
Purpose: Issue a certificate of title that will allow future title transfer without the need for an additional search of public records.
Just have to look at the last 5 years and give a new registration number.

Notes on Formulas and Numerical References

There are no explicit mathematical formulas or numerical equations in the provided content.
Key numerical-like concepts present are the list of unrecorded documents and the policy types (Standard vs Extended ALTA).

Connections and Real-World Relevance

Understanding public records and notice concepts (recording, constructive notice, actual notice) is essential for identifying defects or claims against a property and for assessing risk.
Title search and abstract of title are foundational steps before property transfer to uncover defects and encumbrances.
A marketable title reduces risk for buyers and lenders and facilitates resale or financing.
Title insurance (owner’s policy vs lender’s policy) provides protection against undiscovered or latent title defects.
The Torrens system represents an alternative to traditional searches, aiming to streamline future transfers through a certificate of title.

Ethical, Philosophical, and Practical Implications

Accurate notice (recording and notice concepts) protects property rights and helps prevent disputes, fostering trust in real estate markets.
The availability of title insurance shifts some risk from buyers to insurers while asserting the importance of due diligence in title examination.
The Torrens system represents a policy choice about risk allocation and public record reliability, with practical implications for efficiency in transfers.

Key Terms to Remember