If you have experienced the process of purchasing or selling real estate, it is likely that you have come across the phrase “clear title.”
The concept of clear title is two-fold. Clear title deals with the property itself, referring to title that is free from liens, encroachments, or additional issues that affect the land, building, or improvements. Clear title also refers to ownership and conveyance that is free from defects in chain of title, judgments, and more.
Prior to closing a real estate transaction, it is recommended (and required by institutional lenders) that a title search be performed by a title company.
A title company will perform a search of the public records that will reveal encumbrances such as mortgages that must be discharged prior to closing, any liens from unpaid taxes, easements that may affect the use of the property, and much more.
The title company will also provide a commitment. The commitment will list a number of requirements that must be met as a condition to the issuance of a title insurance policy. Additionally, the commitment will list standard and specific exceptions that will not be covered by the policy. An experienced real estate attorney can identify the exceptions that should be removed from the commitment, as well as those that prompt additional coverage through an endorsement.
An owner’s title insurance policy should be issued to protect against certain title defects that can arise once you own the property. A lender will require a lender’s policy to protect its interests as well.
The concepts of title searches, title commitments and the requirements and exceptions therein can be confusing, complex, and foreign.