This month we’ll take a look at a number of recurring issues that continue to be the cause of claims.Survey issues. Survey issues continue to be a major area of claims. The fact that title companies now provide survey coverage for loan policies hasn’t helped any. It is good practice to always advise the purchaser of the need to obtain a current survey. The first thing we hear from claimants is that nobody told them they should get a survey.
Surveys show the boundaries, where fences are located, where improvements are located, the existence of encroachments and any setback line violations. In short, they show the actual placement of the property lines compared to what is actually in use.
Mobile Homes. Mobile home are personal property which are not secured by deeds of trust unless certain procedures are followed to convert the mobile home into real property. Form MVR-46G needs to be filed with the Department of Motor Vechicles pursuant to G.S. 47-20.6 in order to retire the title to the mobile home as the first step in converting the mobile home from personal property to real property.
Equity Lines of Credit. NCGS. 45-81(c) provides that the borrower may request the lender to make a written entry of satisfaction. Absent such a request and regardless of the fact that the account may show a zero balance, the borrower may draw upon that account at a later time. If an equity line deed of trust shows up in the chain of title be sure and have the borrower sign a document at closing requesting the lender to terminate the line of credit.
Access. The area of access continues to be a major area of claims. If access to the property you are insuring traverses over one or more unrelated tracts of land in order to reach a public road then the chain of title to the easement providing access to your property should be searched.
Insurable Title versus Marketable Title. Insuring over a problem doesn’t make it go away. It doesn’t give you marketable title either, only insurable title and when your client goes to sell the property, the new buyer may require the seller to cure the problem before completing the sale. This problem often arises when an attorney has tacked onto an existing title policy and is unaware of the problems that were previously insured over.
Federal Liens and Judgments. There are several areas the title examiner must be careful in when dealing with Federal Liens and Judgments.
First, judgments that attach to property prior to the filing of a bankruptcy proceeding are not discharged in Chapter 7 Bankruptcy, which only discharges the debtor's personal liability.
Second, judgments against one tenant where property is held as tenants by the entirety is one such area. United States v. Craft 535 U.S. 274, 122 S. Ct. 1414 (2002) held that a Federal Tax lien against one tenant would attach against property held by the entireties.
Another area that can be problematic concerns Federal judgments and purchase money mortgages. Under the Federal Debt Collection Procedures Act of 1990 (28 U.S.C. 3201(b) judgments in favor of the United States take priority over purchase money mortgages.
In Drye v. United States, 152 F.3d 892 (1999) the Federal appeals court ruled that a Federal tax lien attached to property that had been inherited even though the heir had disclaimed his interest in the property pursuant to state law.
All of the areas touched upon in this short article underscore the need to be vigilant when presented with the types of title issues outlined above. The market is changing and presenting us with new challenges every day. Please do not hesitate to call one of our underwriting attorneys if you have a situation you would like to discuss.