Title Insurance is also a Title Commitment
A commitment for title insurance provides a buyer with the terms and conditions for which the title company will be issuing a title insurance policy. Title insurance protects buyers and lenders from errors and defects in the title on real estate being purchased. After the title company receives an effective contract, the title company has 20 days to produce the title commitment. An automatic 15 day extension is available if needed. The title commitment outlines the status of title, along with issues or defects such as liens, past due taxes, judgments, lawsuits and other such encumbrances that need to be corrected and/or addressed before closing. Every party to the real estate sale will receive a copy of the title commitment. A buyer should also receive copies of documents pertaining to easements, restrictions, encumbrances, or any other exceptions mentioned in the title commitment. Its very important that a buyer objects to any and all items of concern in the title commitment. Do so in writing and within the time period outlined in the contract.
A buyer must understand that a title commitment is usually not a complete and comprehensive title search. Many searches can only go back to a certain year. Often a title insurance company will insure certain risks without even disclosing them in the commitment. When a title company deems a title commitment clean this doesn’t mean a buyer will never have title problems. It simply means a buyer will have coverage if they do have problems.
Normally the seller pays for the title insurance for the buyer on the property being purchased. Although its a good practice to always purchase a title policy you are not required to do so by law, however it will be required by a buyer’s lender. A buyer can also do their own title search, obtain a title report or abstract of title on the property. Some seasoned real estate professionals do their own title searches and it can help reduce cost and the amount of time needed to close a deal. In that situation its usually best that you have an attorney review your findings.
A title commitment contains four separate schedules, A through D. The best way to understand your title commitment is to understand the purpose of each schedule:
Schedule A contains the effective date, the proposed policy coverage amount, the name of the current record title owner of the property, and a legal description of the property to be conveyed (lot and block or metes and bounds). Always check to make sure all of this information is correct and accurate.
Schedule B contains a list of standard exceptions that the title policy will not cover. More importantly Schedule B also lists exclusions and exceptions to coverage including such matters as restrictive covenants, setback requirements, easements and rights-of-way, and mineral reservations. Schedule B items may not be shown when its a residential property. If they’re not shown the Schedule B items can usually be provided by the title company upon request. Always review Schedule B items very carefully as it can impact how you can use your property!
Schedule C lists potential title issues that may need to be corrected or addressed. Some of these title issues may include mechanic’s liens, tax liens, judgments, lawsuits, assessments, and other such encumbrances affecting the title. On Schedule C you can also find records from probates or bankruptcies, clarification of homestead status, or a new or updated survey.
Schedule D discloses information regarding ownership of the underwriter and the title company. It also shows the total policy premium, who’s responsible for examining title and issuing the policy.
Information about Minerals
Currently, per Texas Insurance Code 2703.0515, title insurance companies are not required to insure the mineral estate. Title companies have traditionally taken the view, the job of determining title to minerals belongs to a landman or an attorney.
***This post is not a substitute for the advice of an attorney.***