Saturday, December 16, 2006

I respectfully disagree with Terrance R. Monnie.

Read this follow-up to a prior post.

I disagree on two points.

While every state is different, I can’t imagine that Ohio has no instances in which unfiled lienable items are valid clouds on title. The nuances of knowing which potential unfiled risks may affect title and where to find them make the title examination process tough. You must have an expert title examiner review title and make the call. This is precisely the reason why a courthouse dump of raw data is only a small part of the examination.

I need to make this perfectly clear because much of the media hoo-hah about title insurance touts cheap $25 electronic courthouse searches as acceptable substitutes for a real title examination.

The case in question involves a municipal assessment and whether or not it was a valid lien against the property. In Pennsylvania, municipalities have three or five years to file a lien at the courthouse, depending on the nature of the service. During that interim “grace” period, the amounts owed are considered lienable and must be paid to clear title even though there is no lien filed at the courthouse. I presume Ohio has a similar system. If not, the municipalities would have to immediately file liens each and every time a charge was incurred and that would be ludicrous.

So the crux of the matter rests with whether or not the assessment paid by the Crookers was a valid lien, filed or unfiled. The fact that the window of time for filing had expired, giving the municipality no legal right to place a lien against the property, caused the denial of the title insurance claim. If the claim had been made before the expiration of the filing “grace” period, the assessment would have been deemed lienable and the title insurance would have covered it. So when Mr. Monnie says, “the important thing for the public to understand is that title insurance covers only those items contained in the public record” - I disagree. Title insurance covers both filed and unfiled items. If you rely on a search of the public records alone to ascertain the status of title to real estate, you don't understand the risks and are likely not a title insurance pro.

I also have to take issue with this statement: “If the sellers had a real estate attorney representing them at closing, Monnie agrees the closing would have been put on hold until the title insurance underwriter was contacted and a claim made on that policy.” Maybe, maybe not. The Crooker’s case is not that unusual and frankly, in my personal experience, insured sellers more often than not pay first, then contact the title insurance company on the advice of an attorney. Not every attorney understands title insurance. Not every attorney is an expert title examiner. So the moral of the story still stands.

MORAL OF THE STORY: Sellers faced with title clearance conditions should immediately contact their title insurer for resolution. Allow them to do their job and defend your title.

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