Title Insurance
Often clients will ask me to explain the difference between title commitments and title policy. An easy way I’ve found is to tell them to think of the title commitment as an offer to issue a title policy along with an overview of the important parts of the policy in question. Of significance to point out to clients is that a commitment is usually not an all-encompassing search back to the original owner (insurance companies manage this risk internally). Consequently, a clean commitment does not always ensure that the buyer will never have title problems, only that he will have coverage if problems do arise. That’s why it’s important to make sure you are working with a reputable title company who will likely still be in business if a problem does arise.
Additionally I take time to highlight the four title commitment sections for clients called schedules which provide information in a standard format for ease of understanding.
Schedule A Covers basic information about the transaction such as the effective date; policy coverage amount; the legal name of the current record title owner and a legal description of the property. Problems will arise if this information is incorrect.
Schedule B Contains a pre-printed list of standard exceptions that the title policy will not cover. Most importantly it will also list matters specific to the transaction that could impact the usefulness of the property, ie restrictive covenants, easements, and rights-of-way.
Schedule C Considered the heart of the commitment as it lists the requirements that must be satisfied for the issuance of the title policy. Examples include information on marital status, updated surveys, liens, judgments, lawsuits etc. Generally the seller is responsible for resolving discrepancies identified in Schedule C.
Schedule D discloses the total policy premium, along with an explanation of how the premium is divided among the various parties who may be responsible for examining title and issuing the policy.
In order to ensure clients are getting the coverage they expect, I always recommended they discuss any questions they have with real estate attorney.
