Title Issues: Some things to know
In a previous “Title Tip” we discussed the requirements and procedures of a “title search”. The following is some interesting information that logically follows that discussion.
In many areas, the title to a property can be traced back to a royal grant, charter, or the United States Government Land Grant. In many areas, titles are not traced back that far; instead, local custom or title insurance underwriters requirements indicate a shorter search time period.
There are few titles, if any that have a perfect history from their source, or root, to the present day. Each transfer of ownership is a link in what is referred to as the chain of title. As each transaction or link takes place, there is potential for a problem. Even if the entire chain of title appears to be in order, the chain is still subject to interpretation. When searching a title, what we are trying to determine are the various rights and interests that make up each link in the chain as it has passed from one owner to another.
Every title is made up of many different rights and interests that may be owned by different people. The owners of the property own the most valuable of the property’s rights and interests, but other people may also have rights to the property, such as easements for utilities, mortgages, etc.
Each title can be compared to a box of toothpicks. The rights and interests are represented by the toothpicks. The owner owns what is called the “Fee Simple” title, which means they have purchased the most valuable toothpick including the right to possession, use, occupancy, enjoyment, inheritance, etc. Also within the box may be toothpicks that may be owned by other parties. These are called encumbrances and may consist of easements, mortgages, liens, etc.
When a person purchases a parcel of real estate, it is not only the physical property itself that is acquired, but also the sellers rights and interest and title to the property. It is essential for the purchaser to be aware of what rights and interests the seller and any other entities may have in the property. The title search must cover all of these various rights and interests before they complete the purchase. Title Insurance protects all of those rights and interests.
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