We’re often asked by clients for assistance with “simple” conveyances of real property between family members or friends. We strongly advise each of those clients to commission a title search before a deed is signed. Does anyone question that advice? Yes. Here are three typical objections:
1) “A title search is too costly and too slow.”
That’s the most common objection. It’s true that a title search usually takes a couple of weeks and usually costs several hundred dollars, although the actual time and cost depend on the complexity of the title. Skipping the title search when transferring property to a family member or a close friend definitely will save time and money. But it could spell trouble later, when the new owner tries to sell or to finance the property.
If a title problem emerges in a later sale or a financing, the owner may spend considerably more money and time to fix it than he or she would have spent during the initial property transfer. The former owners may be missing, deceased, or otherwise unable to sign documents that are needed to clear the title. Or a bank that once held a lien on the property may have merged or dissolved, complicating the process of correcting a defective mortgage discharge. Those problems may delay or even prevent a later sale or financing.
2) “I’m certain that the title was clear when I acquired the property.”
Real estate lawyers have encountered faulty mortgage discharges frequently in recent years, as banks “disappear” through dissolution, merger, and acquisition. Each mortgage held by a disappeared bank must be assigned to the new banking entity. That process multiplies the risk of mistakes. If an old mortgage has not been discharged properly, it is a blot on your title.
Bank issues are not the only issues. If a parcel of land is owned by an entity such as a trust, a limited liability company, or a corporation, rather than an individual, the title requires extra attention. With a trust, for example, the correctly appointed trustee must sign the conveyance documents on behalf of the trust in accordance with trust law. Otherwise your title may be marred. Similarly, an LLC or a corporation must keep up with all its annual filings lest it be involuntarily dissolved by the Secretary of the Commonwealth. In that case, the entity’s deed to you may have been ineffective.
3) “I know the sellers really well. They would never owe money to anyone.”
Just because you know someone well doesn’t mean that you know their financial practices. A title can be subject to liens of all sorts, such as mechanics’ liens for repairs or renovations performed at the property; municipal liens for outstanding taxes, water/sewer bills, or betterment charges; or a lis pendens [notice of suit] related to a prior dispute. Each of those issues would be a legal and monetary headache. The best way to avoid those headaches is to commission a professional title search.
Long story short: you should opt for the title exam when given the chance. Ignorance is not bliss! I would be pleased to advise you regarding any transfer of property. You may phone me at (508) 756-2423, or email me at email@example.com.