Clearing Old Title Encumbrances
The world is full of insurance – health insurance, residential property insurance, liability insurance, car insurance, and more. One type of insurance often gets ignored – title insurance. When a homeowner purchases a home, the homeowner often obtains an owner’s policy of title insurance. If that homeowner has a lender with a security interest in the home, that lender will also have a lender’s policy of title insurance. Title insurance is critical when it comes to real property ownership, as it can provide coverage in circumstances where title issues have arisen. My colleague, Andrew McKenzie, has posted an excellent two-part blog post here and here about title insurance.
For purposes of understanding the various encumbrances on title, prospective and current property owners should perhaps take the closest look at the “special exceptions.” The special exceptions refer to particular restrictions, covenants, and encumbrances that affect the specific real property at issue, rather than the standard exceptions that one might broadly find in title commitments for most properties. Special exceptions may include easements and other covenants, liens, judgments, deeds of trust, joint maintenance agreements, and any number of other items that have an impact on the property purchased.
The special exceptions can provide immensely valuable information to a property purchaser or owner about what encumbrances and covenants affect their property. Sometimes, however, a special exception will appear on title that should not be there. Perhaps a lender in the past failed to reconvey their deed of trust after receiving payment in full on the applicable loan. In this case, the deed of trust will remain on title despite satisfaction of the underlying debt. Perhaps a buyer and seller entered into a transaction and recorded a real estate contract to memorialize the terms of the deal but then failed to record a fulfillment deed after completion of the terms of the real estate contract. If this happens, the real estate contract will still appear on title even though the transaction has long closed.
Often, these sorts of encumbrances may be decades old, with the real property changing hands multiple times since the time of their recording. Indeed, this passage of time often begs the question of why title companies in the past did not require clearing these encumbrances before agreeing to insure the new transaction. Inevitably, some unfortunate property owner seeking a refinance, or trying to sell, must deal with it. Whatever the case, at some point, a title company may require that a prospective property seller or owner clear these encumbrances before closing a sale or refinance. This can present a significant challenge where the encumbrance at issue is very old, as the parties involves may be deceased (in the case of individuals) or defunct (in the case of entities).
Nonetheless, hope persists. Sometimes, a property owner can reach a solution by finding the proper heirs, or in the event of entities, the proper successor(s) in interest, and having them release their interest through the appropriate documentation. Other times, a property owner can initiate a quiet title lawsuit naming all the potential parties and clearing their interest in the property through litigation. Once cleared to the satisfaction of the title company, the property owner can proceed with sale or refinance.
Beresford Booth has successfully solved these challenges on numerous occasions, even in complex circumstances involving numerous parties and significantly aged transactions at issue. If you are a property owner, or prospective purchaser or seller, who needs assistance with clearing title of encumbrances, or simply understanding various types of encumbrances on title, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100. The lawyers at Beresford Booth remain ready and available to assist you.
