Most people know that “car insurance” is required for anyone who owns a vehicle. Similarly, we have all heard of homeowner insurance that provides money to satisfy mortgages on a house or to otherwise pay the owner if a house is damaged by fire or some other calamity. Similarly, renters often have renter’s insurance that provides coverage for the goods that a renter owns inside of a house or apartment owned by someone else.
The insurance coverage that possibly has the biggest magnitude of difference between its value and its frequency of purchase/use is title insurance. Title insurance guarantees that a property buyer actually owns his/her property, which ownership depends upon all prior owners (since the federal government’s land grants in the 1800s) having had true and lawful ownership of the property.
Some people sometimes say, “I don’t need title insurance, because an attorney looked at the records at the Courthouse and said that I was ‘OK.’” Of course, an inferior but frequent substitute for title insurance is an attorney’s opinion/certificate of title. The biggest problem with attorneys’ title opinions/certificates is that the product that is received (an opinion or a certificate signed by an attorney) is only as good as the attorney’s malpractice insurance.
In other words, if an attorney makes a mistake in identifying the status of legal ownership of (or rights in) real estate in an opinion/certificate of title, the method of “making a claim” is to assert that the attorney committed malpractice. No one can dispute that making a traditional insurance claim (although sometimes cumbersome) is easier than initiating a formal lawsuit against an attorney.
And, there is a one-year statute of limitations for asserting malpractice against attorneys. Thus, in many instances, the protection of an attorney’s opinion/certificate of title, if any, is only good for one year following the purchase of the property. In contrast, owner’s title insurance provides coverage for the entire time someone owns the property.
Also, attorney opinions/certificates of title do not provide any “coverage” for things that do not appear in the public records. Specifically, the public records do not show the investigating attorney whether there was fraud or forgery; and, therefore, attorneys’ opinions/certificates do not provide coverage for such things. For instance, if a previous owner of the property committed fraud or forged a signature on a prior deed to the property, only title insurance can provide protection if the victim of the fraud shows up later to assert a claim of ownership in the property.
Similarly, only title insurance can provide protection if/when a former owner’s distant family members later assert that they have interests in the property or if a neighbor claims part ownership of property under adverse possession (continuous, adverse use for 21 continuous years).
The cost of title insurance is based upon state-mandated rates that reflect the amount of money paid for the property. Investing pennies on the dollar to protect our biggest assets (real estate) is money well-spent, but it is unfortunately often overlooked/forgotten.
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.