Title Insurance Success Stories
Protect Your Most Important Investment
Title insurance protects your property against the past as well as the future. A policyholder is protected against challenges to rightful ownership of real property, challenges that arise from circumstances of past ownerships. Each successive owner brings the possibility of title challenges to the property. When you purchase real property, rely on Chicago Title to protect your interests. You'll be insured by a company backed by more than 150 years of successful title operations.
Below are several REAL examples of related Title Insurance Claims. See how title insurance has helped many consumers resolve a variety of title challenges.
Note: While the situations have taken place, the names have been changed to protect the privacy of the individuals and/or companies involved.
Easement Rejection - You Can't Get There From Here
Betty G., a real estate broker, purchased an undeveloped lot in a rural county in Northern California. She also purchased a title insurance policy protecting not only her title to the lot but also a road easement benefiting the lot across adjoining property. The lot was the northernmost of a four-lot subdivision. The original subdivider had attempted to reserve an easement over an existing north-south road that traversed the most westerly boundary of the three southerly lots. However, the document that attempted to serve the easement was defective because it did not contain the language necessary to give record notice that an easement was being created. When the owners of the three southerly lots found out that Betty G. intended to develop her parcel by dividing it into two lots and building homes for sale, they challenged her right to use the easement. Betty G. made a claim under her title policy.
It was determined that a successful reformation action to reform the document to correctly reflect the intention of the subdivider to create an easement could be successful. It was also determined that Betty G. had the right to an easement by implication, necessity and, arguably, prescription.
Following this analysis, contact was made with each of the owners of the three southerly properties. After an explanation that Betty G. was entitled to the easement on any one of several legal theories, two of the owners readily agreed to execute the documents necessary to grant Betty G. an easement over their property.
The most southerly property holder, however, still contested Betty G's right to an easement. They adamantly insisted that they would only execute easement documents if Betty G. agreed not to develop her property. Obviously, that was unacceptable. Through a series of correspondence it was made very clear to the most southerly property owners that the alternative to settlement necessarily would involve litigation or other dispute resolution mechanisms. After several weeks of dialogue and correspondence, the most southerly property holders agreed to a cash settlement in exchange for a clear and unambiguous easement grant deed.
This claim was resolved in a matter of weeks. Further, because of the facts Betty G was able to be assured that if she wished to sell her property during the time the claim was pending, title insurance would be available to her new buyer while efforts continued to resolve the easement problem.
Betty G. stated that, as a real estate broker, she had always considered title insurance to be simply a hurdle to delay a closing. However, after having her own claim with such a good result, she realized how important title insurance really is.
Unexpected Tax Lien - Carol B.'s Tax Lien and the Benefits of her Title Policy
A CLTA Standard Policy was issued to Carol B. She is a single mother, barely managing on her waitress' salary. She was only just able to qualify for a low-interest loan from the United States Department of Agriculture Rural Housing Community Development Service. This loan enabled her to purchase her own home.
The Development Service has very strict criteria for low-income individuals. These criteria include such items as the ratio of an individual's salary to their loan payments and the amount that they can afford to pay for real property taxes. Carol B. met these criteria, but an increase in either her loan payments or real property taxes would disqualify her from the Loan Program and would result in the loss of her home.
Shortly after her purchase of the property, Carol B. received a new tax bill for real property taxes. The bill disclosed that the taxes were over $2,000.00 per year, which would disqualify her from being able to keep her home. When she contacted the assessor's office, Carol B. was told that the increased taxes included a $9,000.00 special assessment for a special street tax. This special tax had not been shown as a separate matter in the preliminary report that Carol B. and the Loan Program had received.
Both Carol B. and the Loan Program then contacted the title insurer. Prompt arrangements were made to pay the special taxes, enabling Carol B. to keep her home.
Lack of Access to Property - The Saga of George and Kathy
Mr. and Mrs. George B. purchased a small farm in a rural northern California County for $70,000 in 1975. In connection with this transaction, they obtained an owner's title insurance policy.
The only means of access to and from the Insureds' property was an old dirt road that went across a neighboring parcel of land and connected with a state highway. The title search that was conducted when the Insureds purchased their property showed that there were no recorded grants of easement or other documents in the public records that gave them the right to use this road. The road had been used for many many years and most people in the immediate area had always recognized the old dirt road as an access way to the neighboring land. The title insurance policy purchased contained the now-standard provisions insuring against loss caused by the lack of a right of access to and from the property.
In 1990, the neighboring parcel was acquired by Out Of State Investment Corporation, a foreign corporation that began to implement plans to build a 200-to-300-home residential subdivision. When it determined that the dirt road used by the Insureds ran right through the middle of its proposed subdivision, Out of State hired a large law firm from outside the community to bring a lawsuit against the Insureds to prevent them from continuing to use the road.
When the Insureds were served with the lawsuit, they were struggling financially. They were in the process of trying to sell their farm so that they could finalize their pending divorce. They needed to be able to establish a right of access to be able to sell the farm, but could not afford the crushing cost of litigating a high-stakes quiet title action against a wealthy corporation represented by a law firm known for its "scorched earth" litigation tactics. Even if they could have afforded to retain an attorney, the Insureds had no experience or information that would have enabled them to locate an attorney with the highly specialized knowledge needed to effectively litigate the complex title issues presented by the lawsuit.
When the Insureds advised the title insurer of the lawsuit brought by Out of State, the insurer retained an experienced and highly competent real estate attorney to represent them. Drawing on its title expertise and its superior resources, the Company researched the history of the Insureds' property and the surrounding properties back to the mid-1800's. Using ancient maps and records, it was able to conclusively prove that the road used by the Insureds had been a heavily-traveled wagon road in the late 1800's and had been established as a county road under an obscure state law that had been repealed in the 1890's. Based on this showing, the Insureds were able to obtain a summary judgment that conclusively determined that the road was a county road and, therefore, that the Insureds had a legal right to use it to get to and from their property.
By successfully utilizing the summary judgment procedure, the insurer was able to avoid a lengthy discovery process, eliminate the need for a trial and resolve the lawsuit-which might otherwise have gone on for years-in less than six months after it took over the case. The Insureds were able to sell their farm, finalize their divorce and get on with their lives. Out of State, which had refused to grant the Insureds a private right of way over its property, had to revise its plans to accommodate the public road as a part of its proposed subdivision.
Property Extends Onto Adjoining Land - Harvey's Garage
Harvey was a happy new homeowner who delighted in his hobby, that is, his Harley Davidson Motorcycle. Harvey would never think to leave his Harley out of the garage and exposed to the elements. That was exactly the threat he had to face not three months after moving into his new home. It seems that some years ago, through inadvertence, a prior owner of the property built the garage two feet over onto their neighbor's land.
One early morning Harvey's neighbor woke up to the possibility that the garage was over the property line as he thrilled to the thunderous sound of the Harley being taken out for a spin by Harvey. The next day the neighbor, Jack, contacted his surveyor.
Harvey was in a sorry state until he searched through his closing records and found his title policy. Fortunately, the threat of a forced removal of Harvey's garage because it extended onto adjoining land was a covered title risk in Harvey's title policy.
Both Harvey and Jack wanted to be good neighbors, but a solution was necessary. Jack contacted his lawyer who drafted a lawsuit seeking to require Harvey to remove his garage from Jack's land. The title insurer was notified and the insurer suggested a mediation of the dispute to spare everyone frustration and expense. Fortunately, the mediator structured a reasonable settlement which required a fair amount of sound proofing material in the garage and a cooperative neighborly respect between both Harvey and Jack. The garage was allowed to stand on its original foundation, sound proofing was added at the title insurer's expense and a lot line adjustment was worked out, also at the insurer's expense. Harvey and Jack now could live next to one another without controversy, thanks to Harvey's title insurer.
Mechanic Lien Claim - Loretta's Title Policy Covered a Mechanic Lien Claim
Loretta loved her new home. She was especially thankful for the fact that the seller replaced the roof so she would not have to spend money for the unexpected surprise of a leaking roof. She had that problem with her prior home. Much to her surprise as it turned out the seller never paid the roofing contractor. Surprise turned to frustration when the roofing contractor insisted he had a mechanic lien (you might call it a construction lien) which he could foreclose against Loretta's new home.
Imagine the relief when Loretta learned she could tender the problem to her title insurer to take care of the whole problem. She had a comprehensive ALTA Residential Policy that provided coverage for such liens. Her insurer contacted the roofing contractor and after a few months of negotiation the lien claim was settled and resolved. In the end Loretta was safe and secure under her new roof and she never had to fret over the contractor's mechanics lien claim.
Subordination Nightmare - Scenario of Security Lend Finance Company
The We-Sell Property Company is approached by Trust-Us Developers who offer to buy 6 acres of We-Sell's prime downtown real estate. Trust-Us explains that they have plans to build "Downtown Center," a beautiful complex of high-end retail and commercial tenants.
Trust-Us offers We-Sell $3,000,000.00 for the land on the following terms: $500,000.00 cash and seller carry back a Deed of Trust of $2,500,000.00. This Deed of Trust will, of course, have to be subordinated to a construction deed of trust for approximately $20,000,000.00. Trust-Us tells We-Sell the completed project will be worth "a fortune" and, the construction lender will monitor the construction.
We-Sell agrees to these terms on the following conditions: -Construction loan may not exceed $20,000,000.00 -Interest rate may not exceed Prime +2% -All construction loan funds must be used solely for the development of this project and are to be controlled by the construction lender.
A deed of trust in favor of We-Sell is executed by Trust-Us and a rider is attached which sets forth the automatic subordination provision and its conditions.
Shortly thereafter, Trust-Us finds construction financing with Security-Lend Finance Company. The construction loan is negotiated for a first deed of trust of $18,000,000.00 at Prime Rate +2% interest. Security-Lend sends its deed of trust to the title company and requests an ALTA Loan policy showing its lien in first position based on the automatic subordination provision in the We-Sell deed of trust.
The title officer reviews the We-Sell deed of trust and sees that the amount of construction financing and interest rate comply with the conditions set forth in the rider. The title officer however requires that We-Sell execute a standard CLTA form Subordination Agreement. We-Sell agrees and signs the CLTA form but adds language that the subordination is conditioned upon all construction funds being used solely for development of the "Downtown Center" project and that the construction lender will control disbursements.
The title officer rejected the document stating that he will insure only if an unaltered CLTA form Subordination is used. We-Sell complies, the transaction closes and the construction lender funds the entire loan amount to Trust-Us.
After three months, no work has begun on the project and We-Sell tries to contact Trust-Us. Their telephone has been disconnected and it appears that they have disappeared with all of the construction funds.
We-Sell receives a Notice of Default from Security-Lend Finance Company and immediately retains an attorney to file an action to enjoin Security-Lend's foreclosure. We-Sell claims that the subordination is invalid because all of its conditions that were set out in the rider attached to their deed of trust were not met. We-Sell argues that its conditions to subordination contained on the rider put Security-Lend "on notice" of those conditions, depriving Security-Lend from their first priority position as the title company had insured.
Security-Lend tenders its defense to the title company, who is pleased to see that their title officer required an unaltered CLTA form subordination agreement.
In litigation, with the title insurer defending Security-Lend, it is ultimately determined that the subordination language in the CLTA subordination form clearly provides that it supercedes all prior agreements regarding subordination of the deed of trust. Security-Lend is in first position as it intended and as it was insured.