9 Most Common Title Problems

The majority of people only get familiar with title insurance once they become first-time home buyers. Even then, they don’t think of it as anything more than another mysterious line item on their closing disclosure.  It’s wise to be familiar with the most common title problems

Because most homeowners never have to utilize their policy, it is often regarded as an unnecessary expense, especially since it has to be paid in one lump sum at the closing. Title insurance, however, can save you from losing your home or commercial property. To illustrate the true value of having a title insurance policy, in this article we will review some of the most common issues that can impact the property title and your ownership of it.

The one common aspect of all defects covered by title insurance is that they have occurred in the past – prior to you purchasing the property. If any new issues arise during your ownership – for example, if you fail to pay your roofing company or local taxes – they won’t be covered by your title insurance policy.

Over five decades of providing title insurance in New York and New Jersey, ANSTitle has helped clients resolve a wide range of title defects. Here is an overview of the nine most common title problems we’ve encountered over the years.  

Property Tax Liens

The local tax authority can place a tax lien on a property when the owner fails to pay their property taxes or other property-related charges. The tax lien can then be sold to a third party, which takes over the claim on the unpaid debt. The debt gets paid off when the property sells. However, if an additional tax lien is discovered after you purchase the asset, it will be covered by your policy.

Ownership Disputes Are Common Title Problems

Ownership claims can arise from a number of circumstances. For example, an unknown heir may come forward with an alternate will looking for their piece of inheritance. Or a shady owner may have sold the property without the knowledge of the co-owners, who are now looking for their rightful part.

Deed Errors

Sometimes, errors occur during the recording of the deed following the sale of the property. After all, the clerks at the local register office are only human. One of the most common mistakes in a recorded deed is an error in the legal description of the property. Other common issues include incorrect names and consideration amounts, a missing notary seal or acknowledgment, and a lack of witness signatures.

Property Survey Errors

Another type of issue covered by your title insurance policy is land surveying errors. Property surveying is a complex process and could be prone to simple human mistakes. One of the most common survey errors is an inaccurate calculation of the property boundaries, which in turn can result in easement and encroachment issues. Imagine having to tear down and replace the entire fencing of your property because it was placed on inaccurately surveyed boundaries.  

Mechanic’s Liens

These claims against the property are placed by contractors and other professionals who have not been paid for work they have done on the property. For example, in the state of New York, mechanic’s lien rights extend not only to direct contractors and subcontractors, but also to equipment lessors, material suppliers, laborers, design professionals, and landscape workers.

Lender’s Liens

As the name suggests, this type of lien can be placed by the bank, which provided financing or a home equity line of credit (HELOC) for the property. It entitles the lender to take possession of the home or commercial building and sell it if the loan is not repaid. When claims are satisfied after a sale, mortgages take priority over all other liens, except property tax claims – the government always gets paid first.

Forged Documents

Just like anything else of significant value, property ownership is subject to scams and forgery. For example, an individual may attempt to claim ownership of the property using a counterfeit deed. Or, a forged power of attorney document can give an illegitimate party the right to sell the property.

Easements and Encroachment Issues

Previously unknown easement and encroachment issues are also covered by your title insurance policy. Easements grant the right to others to use your property for some specific purpose such as creating a driveway or adding pole lines and underground cabling, which can end up impacting your use of the land. Encroachments occur when buildings, fences, and overhang trees extend over the property line into a neighboring lot.   Such issues may be the result of a property survey error or simple negligence. Correcting encroachment issues can become quite expensive – from a few hundred bucks to trim some tree branches to thousands of dollars to relocate your workshop or garage.  

Building Code Violations

Any work done on the property without the proper building permits and inspections may end up costing the owner. Oftentimes, people build additions, such as dens and patios, to their homes without following the local building code. If such violations were unknown at the time of your closing, they will be considered an insured risk under your title insurance policy.

While some of these common title problems may seem improbable, there are a number of homeowners who have gone through them and relied on their title insurance to avoid huge financial losses. The good thing about title insurance is that you pay a one-time premium and you remain covered for as long as you own the property. Also, there is no limit to the number of times you can use your policy to address an unresolved claim or error.

If you would like to learn more about the value of title insurance or you are looking to get a title insurance quote for NY or another state, give us a call.  ANSTitle also offers title searches, and settlement, escrow, and recording services.