Title issues relating to a parcel of real property one is looking to acquire.  Oftentimes ignored, unfortunately they just don’t disappear or resolve on their own.  While we find that self-represented purchasers are oftentimes tempted to ignore, briefly skim, or rely on their broker to read and/or interpret the preliminary title report and the myriad of exceptions listed therein (whether for a residential, commercial, or industrial property), there is always a significant risk in doing so.

Over the past few years, when we’ve been retained by a purchaser client to assist with a real estate closing after the due diligence/feasibility period has expired, one of the most common issues we have to address is problematic title exceptions that have not been properly vetted or objected to prior to the waiver of contingencies.

One of the first items on any purchaser’s “to-do” list after executing a Purchase and Sale Agreement and opening escrow should be to immediately request an updated preliminary title report from the title company and set to work reviewing the exceptions and underlying documents upon receipt.

Oftentimes, one can successfully lobby the seller and title company to remove several of the more problematic exceptions.  In recent months, we have reviewed title reports which contained express restrictions against residential development (for a parcel of real property that a client wished to pursue residential development on) and incorrect exclusive use lot designations in commercial subdivision CC&R’s that would have potentially exposed a client to contractual liability from an existing tenant and resulted in a significantly devalued investment.

Furthermore, a review of the preliminary title report and its exceptions may provide strong guidance in terms of whether a purchaser wants to acquire an extended owner’s policy with its additional coverage and reduced exceptions.  If so, a licensed surveyor should be promptly retained to prepare a survey and work with the title company to prepare an updated title report and pro forma that is acceptable before due diligence/feasibility expires and a waiver of contingencies is required.

While title work can be tedious and not as exciting as other parts of evaluating and acquiring properties, properly reviewing, vetting, and working with the title company to ensure that title at closing is acceptable is a must for any real estate investor.

CategoryCivil law

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