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Chapter 12

Title Examinations

Objectives

• After reading this chapter, you should be able to– Recognize the importance of title examinations.– Explain the three types of recording statutes.– Understand the process and procedures involved

in conducting a title examination.

Objectives

• After reading this chapter, you should be able to– Review a title examination report.– Identify potential title problems and know how to

solve them.

Bona Fide Purchaser for Value Rule

• Rule– Anyone who purchases property in good faith for

valuable consideration and without notice of any claim to or interest in the property by any other party is a bona fide purchaser for value• Takes property free and clear of any claims to or

interest in the property by other parties


• Bona fide purchaser for value receives ownership of real property subject to any and all claims of which the bona fide purchaser has actual or constructive notice– Actual• Purchaser has direct knowledge about title matters

– Constructive• Presumption of law to be responsible to know all title

matters about the land


• Constructive notice– For possession to constitute notice, it must be• Open• Notorious• Exclusive

– Chain of title

Recording Statutes

• Give purchasers and the public notice of changes in ownership of the property

• Protect subsequent purchasers and encumbrancers of property from the same common grantor by giving them notice of information contained in the recorded documents

• Determine priority among conflicting claims to real property

Recording Statutes

• Three types– Race

• Priority between successive grantees of the same land from a common grantor is determined by who records first

– Notice• Relies on the notice given by the recording of the instrument

or on the notice obtained through means other than recording

– Race-notice• Most common

Recording Statutes

• Race-notice– Combines the notice principle that knowledge of a

prior unrecorded instrument serves as notice in the same manner as the proper recording of the instrument with the recording principle that the first party to record an instrument has priority of title• Regardless of whether that person was a prior or

subsequent purchaser

Recording Statutes

• Race-notice– Case• City of Richland Hills v. Bertelsen, 724 S.W. 2d 428

(Texas 1987)– Pleadings did not prove Bertelsen had either actual or

constructive notice to city's claim

Practice Tips for Ordering a Title Examination

• Primary purpose of title examination to ensure either– That the seller has the ability to convey good title

to the purchaser at the time of the closing, or– That the borrower has good title to the property

being pledged as security for the loan

Practice Tips for Ordering a Title Examination

• Information needed to do an examination– Legal description of property to be examined– Name of current owner– Copies of all deeds and surveys• Or any prior title examinations or title insurance

policies that affect the property

Examining Title to Real Property

• Place to search– Courthouse in the county where the property is

located• Period of examination– Title examination searches the owner's chain of

title by starting at the present time and working backward to some predetermined point


• What to search– Chain of title– Grantor and grantee indices– Plat index• Land lot and district (location designation)• Name of owner designation• Subdivision designation


• Reviewing various instruments in chain of title• The examiner usually– Notes the identity of the parties to the

instrument, the date the instrument was signed, and the date it was filed

– Examines the signature and witnessing requirements


• The examiner usually– Makes a notation of what estate was being

conveyed• E.g., fee simple, life estate

– Pays particular attention to any covenants or other requirements that may be set out in the instruments


• Other items to examine– Judgments– Federal and state tax liens– Delinquent taxes– Uniform Commercial Code (UCC)


• Other items to examine– Lis pendens• Notice of a pending lawsuit

– Civil suits– Probate court records– Mechanics’ liens


• Preliminary title report should reveal– The name of the current record title holder– The legal description of captioned property– Existing unpaid loans or mortgages– Other lien holders– Status of taxes


• Preliminary title report should reveal– Listing of all easements, covenants, and other

restrictions– Any objections to marketability– Other matters that affect title– Requirements for vesting marketable title in the

purchaser

Title Defect and Problems

• Record title holder– May require suit to “quiet title” if title is not clear

• Breaks in the chain of title• Errors in prior recorded deeds• Name variances• Improper and missing power of attorney


• Sales contracts, options, and leases• Unsatisfied or unreleased mortgages• Notice of lis pendens• Easements• Restrictive covenants and conditions• Mechanics’ and materialmen's liens


• UCC financing statements• Judgment liens• Tax liens• Title through estates

Role of the Paralegal and Practice Tips

• Paralegals may perform a title examination, order a title examination, and/or review the results of a title examination– Paralegals are underused in the area of title

searching• Perhaps due to concerns about unauthorized practice

of law

Role of the Paralegal and Practice Tips

• Title examination involves studying the actual copies of all the documents in a package, including the following:– Liens– Mortgages– Restrictive covenants– Easements

Record Rooms and Electronic Records

• Most land records offices have converted (or will be converting) to electronic databases

• Many states have enacted the Uniform Real Property Electronic Recording Act– Allows for the recording of electronic documents

involving real property• E.g., deeds, mortgages, easements, etc.

Checklist: Ordering or Performing a Title Examination

• Purpose of examination– Purchase and sale of property– Mortgage loan transaction– Acquisition of easement– Lease transaction


• Items required for examination– Current owner's name– Legal description of property to be examined– Plats or survey of property to be examined– Prior title insurance policies on property to be

examined– Prior title examinations or abstracts on property

to be examined


• Period of examination– Full examination• 50 to 60 years

– Limited examination• From date of prior title policy• From date of prior mortgage• From date of prior title examination


• Indices to be checked– Plat index– Grantee index– Grantor index


• Other records to be searched– Judgment index and records– Federal and state tax lien index and records– Lis pendens– UCC financing index– Tax records


• Other records to be searched– Special assessments• Sanitary and water

– Probate records– Civil docket


• Preliminary title examination– Certification to title company if title insurance is

involved– Copies of all title exceptions

• Title defects or problems– Breaks in chain of title– Errors from prior recorded deeds– Name variances


• Title defects or problems– Improper or missing power of attorney– Sale contracts, options, and leases– Unsatisfied or unreleased mortgages or deeds of

trust– Notices of lis pendens– Easements– Restrictive covenants and conditions


• Title defects or problems– Mechanics’ or materialmen's liens– Tax liens– Unpaid real estate taxes or assessments– UCC financing statements– Title through estates– Judgment liens

Ethics: Document Falsification

• Paralegals should never be involved in falsifying a document for any reason

• Failure to list all utility easements in a title examination report makes the report misrepresent record title to the property– Could be considered falsifying a title examination

report

Summary

• Importance of bona fide purchaser and mandate to record any conveyance in real property interest

• Title examination procedures• Importance of the grantor/grantee indices

and other indices, such as for judgment, federal tax liens, and unpaid taxes

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