In the midst of the sale of real estate or when real estate is used as collateral for a loan, the quality of the title (or ownership) of the real estate is examined. Nobody wants to buy property from someone who does not own the property in the first place.
The process of searching the public records to see who owns a parcel of property and whether that owner properly bought the property from someone else who, in turn, properly bought it from someone else is commonly called, a “title search.” Title searches also include identifying any liens or easements (rights-of-way) that affect the property.
A person does not need to be an attorney to do a title search. When a title search done by someone other than an attorney, the recorded instruments identified that could affect ownership or use of the property are listed in a document called a “title report.”
Attorneys can conduct title searches themselves and can review non-attorneys’ title reports to give an official opinion that, based upon the documents in the public record, “this person owns this property” and “these people have the right to use the property or have liens against the property.” That opinion from an attorney is called a “Certificate of Title.”
Unlike most of the United States, our region has traditionally relied upon Certificates of Title as sufficient documentation and protection in the midst of buying or mortgaging property.
The best protection to ensure that the property has no ownership or use issues is title insurance. Title insurance is like a Certificate of Title, except that it provides literal insurance that the Certificate of Title’s conclusions, which are based solely on recorded instruments, are accurate in reality.
For example, a Certificate of Title may state that the public records show that John Doe owns a house and lot in Lima. However, in reality, John Doe may have committed fraud and had the deed to the property forged to show that John Doe owned the property. If the buyer buys the property based on the Certificate of Title and eventually finds that John Doe does not own the property, the buyer is stuck. However, if the buyer had title insurance, the title insurance would have guaranteed that John Doe was the owner, and the title insurance company would have, if necessary, re-purchased the property from the person from whom John Doe stole the property through fraud.
Title insurance can also provide guarantees that the property is accessible to and from a public roadway, that the property has rights to access surface water, that the property has no easements that will preclude certain uses or that the property is not subject to certain assessments.
Title insurance for buyers lasts forever, as long as the buyer owns the property. When a bank or lender secures title insurance, the insurance can be in effect for the life of the loan.
In summary, title reports are sometimes OK, Title certificates are much better, and title insurance is the best.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.