Topic 9.4: Protection of Title

Learning Objectives

After successfully completing this topic, you will be able to
• distinguish between an abstract of title and a chain of title, and
• explain the different types of title insurance.

Title Companies

Chain of title vs. Abstract of title

Chain of title

A chain of title is the successive history of conveyances affecting a particular property. Successive changes of ownership are linked to form a “chain.” The chain should show the history of a property. The Florida Marketable Record Titles to Real Property Act eliminates clouds on title more than 30 years old, so the “root of title” will consist of finding the deed that granted title to the person who owned the property more than 30 years ago.

Abstract of Title

An abstractis a summary of the recorded documents and provides a history of the property.

Example of a chain of title An attorney is looking through an abstract of title for a specific property that Atkins is selling Webster in 2020. The search shows Atkins acquired the property by deed in 1998, with Jones as the grantor. Since we need to go back at least thirty years, we need to know when Jones acquired the property. A further search shows Jones acquired the property in 1950 by a will from her father. Barring any other liens or mortgages, the attorney’s opinion is that Atkins has clear title to the property and can transfer the title to Webster at the closing.  

Title Opinion

An opinion of title is an attorney’s professional opinion of the condition of title, based on examination of the recorded documents pertaining to the property. Buyers must remember that it is only an opinion. If the title to the subject property is later found defective, it may be difficult to be reimbursed for damages unless the attorney was negligent. Today, attorneys acting as closing agents order title insurance just as a title company does.

Title Insurance

Title insurance is protection from adverse claims on the title of property, and will pay for any defect in title not specifically excepted in the policy. Title insurance has become the dominant method of protection for buyers and lenders because it will pay for losses sustained by the new owner or the lender; the new owner does not have to prove negligence.

Like most insurance policies, there are exclusions and exceptions from the insurance. These arise mainly from government restrictions on ownership (police power, emi­nent domain, and ad valorem taxation) and private restrictions (deed restrictions).

ALTA Title Policies

Exactly which defects are covered under the insur­ance depends on the type of insurance policy.

A standard coverage policy normally insures the title based on a search of the public records. It also insures against such hidden defects as forged documents, conveyance by incompetent grantors, and incorrect marital statements.

An extended coverage policy, such as an American Land Title Association (ALTA) policy, gives more coverage. For example, it will protect against defects that may be discovered by a property inspection, rights of parties in possession, examination of a survey, and certain unrecorded liens. Most lenders require a lender’s ALTA policy.

Two Types of Title Insurance

The two basic types of title insurance are owners’ title insurance and lenders’ title insurance.

Owner’s policy

An owner’s (mortgagor’s) policy protects the buyer against title defects. It is not transferable.

Lender’s policy

A lender’s (mortgagee’s) policy protects the lender. It is transferable.

Municipal Lien Search 

A municipal lien search will uncover unpaid utility bills and code violations.

While a title search will disclose any recorded liens or encumbrances on a property, there can be other charges on a property that could later become a lien. Examples include code violations, building permits that have not been closed properly, and structures that were not properly permitted will cause future problems. The new owner may become liable for unpaid utility bills as well. Buyers should ask the title agent to perform a municipal lien search as part of the title search.