Real Estate Title Claim Dispute Toolkit
By Nate Bernstein, Esq., Managing Counsel, LA Real Estate Law Group
Disputes involving real estate title can be complex and can involve multiple parties. Title claims can involve such issues as gaps in the chain of title, fraudulent transfer of real property, forged documents, recording in the wrong county, mistakes in title documents or maps, ownership disputes, unrecorded interests, lender priority disputes, or partition issues, and lis pendens disputes. These are just some examples, and there are many others. Issues may be litigated in courts of general jurisdiction where real property is located, the local probate court, and in certain situation U.S. Bankruptcy Court.
If you purchase property, you should have title insurance, and if you loan money secured by real property you should have title insurance. It is well worth it to have an insured deed with a policy of title insurance issued by a title insurance company. If you purchase property at a property tax lien sale auction, you may have to file a quiet title action to have a marketable title for a future transaction.
If you are submitting a real estate title claim to your title insurance company or a party to quiet title litigation, here is a checklist of items and issues and role players to have and think about, that you will need to help you resolve the claim or to assist your real estate counsel:
The “Docs”
#1. Copy of the Ownership Deed
Open up your real estate file and pull out your ownership deed. The deed has much useful information. It states who is the owner of the property at a given point in time. Usually the deed is in the form of a grant deed and has a recording number, the date of recordation, and the county it is recorded in. The deed also contains the assessors parcel number and the legal description. The deed can also take the form of a quitclaim deed or a deed with a right of survivorship or a community property interest.
The deed will tell you who or what entity owns the property at a given time – an individual, married couple, trust, or limited liability company, or corporation, for example. It also has the legal description attached.
If you don’t have a copy of the grant deed, you can call the customer service department at a title insurance company, your escrow company, or the county recorder’s office to obtain a copy. Obtaining a copy of the deed is always a good starting point in your journey to resolve a title issue.
#2. Preliminary Title Report
A “prelim” is an essential tool for handling any title issue, and it is created by a title insurance company. The prelim states who the title to the estate or interest at the date hereof is vested in at the time the report is provided, and also states the type of estate or interest in the land hereinafter described or referred to covered by this report is- for example, “a fee.” It has the legal description and a listing of most or all items that are recorded on title at a given point in time. It serves as a “title catalogue” of all recorded items that is listed numerically and by recording date.
The prelim contains a list of title exceptions and exclusions, informational notes on such items as property taxes, and a parcel map. Documents are recorded at the office of the county recorder where the property is located. Title insurance companies can generate the prelim and will sell it to you for a small fee.
During a real estate transaction, a copy of the prelim is provided to the buyer or the buyer’s agent so the buyer can review the state of the title. Certain title companies can provide a useful prelim with links to the actual documents that are recorded. The recorded document has a county recording number, the date recorded, and the complete document.
Take a few minutes at the beach or poolside or at a local Starbucks to review your preliminary title report- you may discover items that you did not know exist. You will discover that multiple documents are recorded on the same day- such as an ownership deed or a deed of trust.
The “prelim” can provide useful information on items that may be able to be removed from your title profile without litigation. When you review the prelim, you will discover items on your title that you may not know about- perhaps un unpaid deed of trust or property tax bill, or an abatement lien. You can also discover gaps in the chain of title. A prelim can also miss items, contain errors, and this can lead to claims down the line.
The prelim is an imperfect snapshot! But the prelim is the best and most complete snapshot of the state of the title profile you can obtain.
#3. Copy of the Title Insurance Policy
The policy is usually issued for a homeowner or secured lender at the time a property is purchased. The seller purchases the policy for the buyer. For example, the policy may be called a “CLTA Standard Coverage Policy.” If a lender is involved in the transaction, the lender will have a separate title policy to protect its lien priority interest- sometimes called an “ALTA loan policy”.
The policy will state the name of the company who issued the policy, who is insured, the type of interest that is covered (for example- “fee simple”) and the amount of coverage, and will also state what is covered, and what is not covered. The policy contains a lot of legalese and terminology, but don’t let it overwhelm you.
A policy of title insurance will contain items such as covered risks, deductible amounts, exclusions from coverage, conditions and stipulations, limitations of liability, subrogation, and in some policies, an arbitration provision (because title insurance companies don’t like juries).
It is very important to have title insurance- especially if you get sued in a quiet title case. Generally speaking, the title insurance company has a duty to defend you in such a litigation case or to file an action to quiet title to fix the title issue.
#4. Initial Litigation Documents
If you or your trust, LLC, or corporation gets sued on a title claim and or a lis pendens is recorded that effects your title, you should take the time to read the summons and complaint documents, and you should pay close attention to time deadlines to respond to the case.
In most litigation, the time is 30 calendar days from the date of service. Time extensions to respond are frequently negotiated. The documents will contain the name of the Court and the case number, and generally you can review the docket online.
Perhaps the plaintiff wants to fix the title or unwind a fraudulent transfer through litigation but is not suing for monetary damages. The case could be settled by signing additional documents or a stipulation and court order.
Other cases involve fixing the title, and allegations of monetary damage. You have the right to your own attorney. You can also file a claim with your title insurance company under your policy and see what the company does with the claim.
The Title “Players”
#1. Real Estate Attorney
A real estate attorney can play various roles in the area of title disputes and real estate transactions in general. The roles are transactional, claim filing and monitoring, prosecuting or defending litigation, dissolving a business relationship, providing a second opinion analysis, and settlement negotiation. The attorney can review the documents and provide basic advice and counsel.
You can hire an attorney for assistance with transactional documents during a pending escrow or can negotiate certain issues. The attorney can organize the facts, documents, and legal authorities to file a title insurance claim, and can counsel the client along the way while the claim is being administered by the title insurance company adjuster.
The attorney can help you review a court docket to check what is happening in pending litigation, who the parties are, what rulings have been made by the Court, and what hearings are pending and on the calendar.
If a title insurance company agrees to defend or prosecute your claim, the title insurance company can refer the matter to its own litigation department or hire outside counsel for you, at its own expense. The attorney can also defend title litigation and prosecute cross-complaints for indemnity and contribution. After you have hired counsel or an attorney has been hired for you by your title insurance company, don’t be afraid to get a second opinion if you think something is just not right and you want a second look and further review.
#2. Working with a Title Officer
Generally speaking, the job of a title officer is to:
- Review and analyze land records and other legal documents to verify legal ownership of property and to identify any claims or defects that might affect the title.
- Prepare and issue title insurance policies that protect mortgage lenders and property buyers against losses resulting from title defects.
- Coordinate with real estate agents, attorneys, lenders, buyers, and sellers, and title underwriters to facilitate the closing process, ensuring all necessary documents are correctly executed and filed.
- Perform detailed searches of public records to trace the history of property ownership and to compile a chain of title.
It is important to develop communication and some rapport with a title officer at a title insurance company. This is especially the case where you purchased a property with an uninsured deed, purchased at a property tax lien sale auction, and you need to file a quiet title action.
A title officer works for a title insurance company and can provide some guidance on what is needed to fix and remedy the title problem so title insurance can be issued in the future. The name of a title officer may be stated on the actual preliminary title report. The goal is have a marketable title, such that an insurance company can issue a policy of title insurance for a purchaser, or can process a secured loan by provided by a mortgage lender who can receive a lender’s policy.
The title officer works for the insurance company and is not your fiduciary or advocate, but can provide valuable guidance and a pipeline to the underwriting department to see what is needed to insure title. The title officer can also see what the underwriting department specifically requires to issue a policy of title insurance going forward. The title officer can work with your own attorney.
Title insurance companies are trying to avoid future claims. They make money by selling title insurance, and resolving claims quickly- if possible. Title officers can be more active or passive, but since they have access to the underwriting department of the title insurance company and critical information, they are essential to navigating and resolving your title issue or avoiding a future issue.
#3. Title Claims Counsel
If you file a claim with a title insurance policy, the claim will be assigned to a claims representative. The claims representative is like an insurance adjuster. Title claims counsel is not your attorney and not your fiduciary or advocate. In the title insurance business, most claims representatives are licensed attorneys, but don’t represent you as a client. It is important to understand that claims counsel work in a different department than the litigation attorneys at a title insurance company.
Initially, after receiving the claim, claims counsel will usually investigate and try to resolve the claim without litigation. This may include obtaining additional signatures of certain parties on key documents, and conducting an investigation. The claims counsel will review the issues and determine whether there is coverage for the claim.
Claims counsel can also deny coverage for certain items and accept coverage for certain items, based on the language in the title policy. If claims counsel cannot resolve the claim, claims counsel may assign the claim to in-house litigation attorneys that work for the title insurance company. Claims counsel directs litigation counsel with legal strategy.
Alternatively, claims counsel can assign a claim to outside attorneys and law firms. This may be the case if there are multiple parties, and conflicts of interest exist. Claims counsel has “authority” to settle a claim. Authority means they can pay money to settle a claim, or pay attorneys to try to resolve the claim through a litigation-based strategy. That level of authority can be increased or limited. Claims counsel play a very important role in settlement of disputes, have the authority to offer money on a claim, and also attend mediations to settle cases.
Keep in mind that claims counsel is also the “No man” of the title insurance company, and are trained to say “No” to coverage of certain aspects or components of claims. They bring to life and accentuate exceptions and loopholes in the murky language of title insurance policies. They try to toe a line between what is a proper “No” to coverage, and, alternatively, what could be considered “bad faith” denial of a claim.
Keep in mind, simply stated, that title claims counsel are essentially insurance company adjusters and are not your attorney and it is advisable to have your own attorney who can also help communicate with and negotiate with claims counsel or litigation counsel hired by the title insurance.
#4. Outreach to Government Agencies
If a government agency filed a lien of some sort on your title, sometimes the lien can be released through negotiation without protracted court litigation. Government agencies often file tax liens or nuisance abatement liens. It may take a few persistent phone calls to a government agency to find out who has authority to fix the title issue, but it is worth the effort.
Sometimes a lien may exist from a previous owner, or your seller. It’s important to review the preliminary title report for these types of liens that cloud your title. Trying to remove items from a title profile from a prior owner can make a quiet title action much easier, narrower, and less expensive.
#5. Other Players
If you are in the real estate business, obviously, you know that an escrow officer can be a useful source of information in a real estate transaction, and can assist with providing certain information relating to a title claim. Don’t be afraid to ask the escrow officer assigned to the file to provide information or documents that you need. Real estate brokers and their agents will also be able to assist you with information and obtaining copies of documents that you may not have in your personal file.
I recommend that when you close an escrow to a transaction- you create a master file that has all of your documents organized by categories. You can have a paper file, or a computer folder that has all your PDFs. Being organized will help you think clearly about your title issue, and help your attorney to represent you.
About the Author
Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate title litigation, commercial litigation, landlord tenant law, employment law, and bankruptcy matters. Attorney Bernstein served as in-house corporate litigation counsel at Fidelity National Title Insurance Company, and represented the company subsidiaries and insured institutional lenders. He is a 31 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise in bankruptcy law, the federal bankruptcy court system, creditor’s rights and out of court workout solutions. He serves as an expert witness on real estate, title, joint venture, and other business issues.
Mr. Bernstein, a frequent speaker at apartment owners association seminars, and has been a featured speaker with the California Associations of Realtors, Apartment Owners Association, AAGLA, AAOA, the Collateral Lenders Association, and the Beverly Hills Bar Association. He created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. LA Real Estate Law Group handles litigation in Los Angeles, Ventura County, Orange County, Inland Empire, and San Diego. For more information or to schedule a professional consultation, please contact the office at (818) 383-5759, or email [email protected].