Title Defects
Important things you should know and ask your attorney

            Volumes of legal writings and opinions have been written about title defects and their effect on the use and enjoyment of real property. In past articles I discussed the elements of a title search, which determines the status of the title and whether any title defects exist. Let’s now explore title defects and what to look for when purchasing your home.

Marketable versus Insurable Title

            The recognized standard in Connecticut by which someone acquires title is that the seller is conveying marketable title. This standard sets forth those conditions in the title search that may affect title and may be a defect, but statutory law, case law, or administrative interpretations have determined that such conditions do not cause a defect. For example, a deed in Connecticut requires that the signer execute the deed in the presence of two witnesses and a notary public. Almost every year a law is passed that “validates a deed” that has been improperly executed; therefore, while the deed itself may have caused the title defect, subsequent law made the defect a nullity, thus making title to the property marketable.

The critical question to ask your closing attorney is whether the deed to the property will convey marketable title. Without this assurance, ask your attorney what problem(s) exist that do not allow for marketable title.

If title is not marketable, the only other condition of title you should consider is insurable title. This means that there is a title defect, but the title insurance company is willing to insure that the defect will not affect title. For example, there may be a very old mortgage on the property that has not been released. There may be sufficient evidence showing the mortgage should have been released but something precludes the closing attorney from obtaining the proper paperwork before the closing. If this were the kind of defect that causes insurable title, I would recommend that you continue with the closing but obtain written assurances that the lien will be released shortly after the closing. When you sell your home, you do want to be the one to clean up the mess several years later.

A good seller’s closing attorney can make a case for many issues to be resolved post closing and can persuade a title insurance company to provide insurable title. I caution you to discuss all this information with your closing attorney and make the best choice for you. Insurable title is far from perfect and ensures only that the title company will cause the defect to be corrected or pay you money damages for the defect if it is not corrected. An insured defect may still take much time and may still result in a loss if not handled correctly. Consider insurable title only when everyone is sure the defect can be cured quickly and with ease.

Surveys

            When you obtain title to the property, the description of the property you are purchasing is contained within the deed. Descriptions in Connecticut may be very exact and may contain specific metes and bounds from pins placed from a survey. Other descriptions, most commonly found in descriptions from very old deeds, may be inexact and describe boundaries by former neighbors and or measuring points that no longer exist. In the case of either description, without the benefit of obtaining a survey for your closing, you cannot determine where your property line exactly exists or if anything encroaches on your property.

            I am not advocating that you obtain a survey for your closing, because a survey is a very costly expense and it is not required by your lending institution; however, what it does mean is that you may not be able to determine your property lines exactly.

            For example, a neighbor’s fence may in fact be on your property, but you may not be able to determine that fact without the aid of a survey. If a fence encroaches on your property by a few inches, is it worth the roughly $1,000 fee to determine it?

            I do not consider these small issues to be title defects, but the question is often asked, “Where exactly are my boundary lines?” Without the aid of a survey, that answer cannot be simply given.

            The subject of title defects is very complicated, and its nuances are best left for the attorney. The differences between titles with defects and titles without defects are often complicated or require intricate knowledge of the law. Your task as a purchaser is to ask your lawyer if you are obtaining marketable title or insurable title. If the answer is marketable title, your work is over, and you can feel comfortable that you are obtaining title to a property that is within the custom and practice of the laws of the state of Connecticut. If your attorney tells you that he is suggesting that you obtain insurable title, then you must ask questions and obtain proper answers until you are satisfied.