Why Title Insurance Is Still Necessary In Connecticut
November 6th, 2008 categories: Home Buyers
Title insurance protects both a home owner and a lender against loss that occurs from a defect in title, regardless of when the defects are found. Home buyers are required by their lenders to purchase title insurance that protects the home owner and the lender from any one of the following problems:
Basic Owner’s Title Policy Coverage:
- Clear title to the property
- Incorrect signatures on documents
- Forgery, fraud
- Defective recording
- Restrictive covenants
- Encumbrances or judgments
Basic Lender’s Title Policy Coverage:
- Mechanic’s liens and unrecorded liens
- Unrecorded easements and access rights
- Defects and other unrecorded documents
- Extended Owner’s Coverage
- Building permit violations from previous owners
- Subdivision maps
- Covenant violations from previous owners
- Living trusts
- Structure damage from mineral extractions
- Variety of encroachments and forgeries after title insurance is issued
If you are taking out a mortgage, your lender will require you to purchase title insurance. But if you are paying cash, you do not have to purchase title insurance.
The question that comes up is if a home has been around for 100 years (pretty typical in CT) and has been purchased many times over, with an attorney doing a title search each time, what are the chances that there could be a problem with the title today?
Recently, I had a closing where title was an issue. The sellers purchased a property about 4 years ago and did a title search, with nothing out of the ordinary - a clear title.
When they sold the property, another attorney did a title search and found an old private mortgage lien against the property. Had the sellers not had title insurance, they would have been personally responsible for clearing the title, i.e., paying off the balance of that mortgage that they never even knew about. Luckily for them, the title insurance covers this.
For more on title insurance, visit CTRealEstateLaw.com.
