"Do I really need an owner's title insurance policy?"

As a real estate closing attorney in Massachusetts, the question that I most often encounter is "do I really need an owner's title insurance policy?"  My answer to this question is always a resounding YES!  Just like any other type of insurance premium, it's definitely a pain having to pay for it and you can risk not having it, but when a problem does arise, you are going to most certainly wish you had it!

So what exactly is title insurance and why should you have it?  Simply put, title insurance protects you against hidden hazards that can cause problems in any real estate transaction.  As a closing attorney, it is my responsibility to perform a thorough title search of the property by combing through the public records to determine whether there are any title defects.  These may consist of a number of items, such as liens for unpaid mortgages or real estate taxes, judgments, or complaints for unpaid condominium fees just to name a few.  It is my responsibility to find these defects and to remove them so the borrower gets "good, clear and marketable" title at the closing. 

Unfortunately, even the most diligent title search may fail to uncover defects that are hidden or off-record.  Purchasing owner's title insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim.  Below is a list of just a few of the hidden risks that could arise and that title insurance may protect against:

Forged deeds, mortgages, satisfactions or releases. Deed by person who is insane or mentally incompetent. Deed by minor (may be disavowed). Deed from corporation, unauthorized under corporate bylaws or given under falsified corporate resolution. Deed from partnership, unauthorized under partnership agreement. Deed from purported trustee, unauthorized under trust agreement. Deed to or from a "corporation" before incorporation, or after loss of corporate charter. Deed from a legal non-entity (styled, for example, as a church, charity or club). Deed by person in a foreign country, vulnerable to challenge as incompetent, unauthorized or defective under foreign laws. Claims resulting from use of "alias" or fictitious name style by a predecessor in title.
Deed challenged as being given under fraud, undue influence or duress. Deed following non-judicial foreclosure, where required procedure was not followed. Deed affecting land in judicial proceedings (bankruptcy, receivership, probate, conservatorship, dissolution of marriage), unauthorized by court. Deed following judicial proceedings, subject to appeal or further court order. Deed following judicial proceedings, where all necessary parties were not joined. Lack of jurisdiction over persons or property in judicial proceedings. Deed signed by mistake (grantor did not know what was signed). Deed executed under falsified power of attorney. Deed executed under expired power or attorney (death, disability or insanity of principal). Deed apparently valid, but actually delivered after death of grantor or grantee, or without consent of grantor. Deed affecting property purported to be separate property of grantor, which is in fact community or jointly-owned property. Undisclosed divorce of one who conveys as sole heir of a deceased former spouse. Deed affecting property of deceased person, not joining all heirs. Deed following administration of estate of missing person, who later re-appears. Conveyance by heir or survivor of a joint estate, who murdered the decedent. Conveyances and proceedings affecting rights of service-member protected by the Soldiers and Sailors Civil Relief Act. Conveyance void as in violation of public policy (payment of gambling debt, payment for contract to commit crime, or conveyance made in restraint of trade).
Deed to land including "wetlands" subject to public trust (vesting title in government to protect public interest in navigation, commerce, fishing and recreation). Deed from government entity, vulnerable to challenge as unauthorized or unlawful. Ineffective release of prior satisfied mortgage due to acquisition of note by bona fide purchaser (without notice of satisfaction). Ineffective release of prior satisfied mortgage due to bankruptcy of creditor prior to recording of release (avoiding powers in bankruptcy). Ineffective release of prior mortgage of lien, as fraudulently obtained by predecessor in title. Disputed release of prior mortgage or lien, as given under mistake or misunderstanding. Ineffective subordination agreement, causing junior interest to be reinstated to priority. Deed recorded, but not properly indexed so as to be locatable in the land records. Undisclosed but recorded federal or state tax lien. Undisclosed but recorded judgment or spousal/child support lien. Undisclosed but recorded prior mortgage. Undisclosed but recorded notice of pending lawsuit affecting land. Undisclosed but recorded environmental lien. Undisclosed but recorded option, or right of first refusal, to purchase property. Undisclosed but recorded covenants or restrictions, with (or without) rights of reverter. Undisclosed but recorded easements (for access, utilities, drainage, airspace, views) benefiting neighboring land. Undisclosed but recorded boundary, party wall or setback agreements.
Errors in tax records (mailing tax bill to wrong party resulting in tax sale, or crediting payment to wrong property). Erroneous release of tax or assessment liens, which are later reinstated to the tax rolls. Erroneous reports furnished by tax officials (not binding local government). Special assessments which become liens upon passage of a law or ordinance, but before recorded notice or commencement of improvements for which assessment is made. Adverse claim of vendor's lien. Adverse claim of equitable lien. Ambiguous covenants or restrictions in ancient documents. Misinterpretation of wills, deeds and other instruments. Discovery of will of supposed intestate individual, after probate. Discovery of later will after probate of first will. Erroneous or inadequate legal descriptions. Deed to land without a right of access to a public street or road. Deed to land with legal access subject to undisclosed but recorded conditions or restrictions. Right of access wiped out by foreclosure on neighboring land. Patent defects in recorded instruments (for example, failure to attach notarial acknowledgment or a legal description). Defective acknowledgment due to lack of authority of notary (acknowledgment taken before commission or after expiration of commission). Forged notarization or witness acknowledgment. Deed not properly recorded (wrong county, missing pages or other contents, or without required payment). Deed from grantor who is claimed to have acquired title through fraud upon creditors of a prior owner. When you buy a home, or any property for that matter, your expect to enjoy certain benefits from ownership - you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan.  Title insurance is designed to cover these rights that you bargain for! Owner's title insurance is a one-time fee that protects you as long as you own the property.  You hear it over and over again, "your home may be one of the largest investments you'll ever make".  That's why I advise my clients to obtain an owner's title insurance policy to make sure their investment is protected. If you have any further questions about title insurance, please feel free to contact me at jpuhlick@puhlicklaw.com or 508-668-6900.