Title Insurance Case Study

Title Insurance…A Case Study

Do you wonder if it really has happened?  You know, a buyer thinks they bought the perfect property only to find out…it’s not so perfect after all?

Over time, it’s quite possible a property’s title may have some unexplained mysteries.  Let’s put our sleuthing to work and run through this case study.

 

The setting: picturesque Nantucket Sound in Martha’s Vineyard , MA The property: 3.2 acres The Background: In 1890 the land was subdivided into 10 lots which were given away by a clothing store in Boston . If you bought a man’s suit, you got a free lot – such a deal! So it was that in 1894 one such lot, designated ” Lot 159,” was conveyed to a Charles F. Hill.

• By 1970 someone assembled the 10 lots to create the aforementioned 3.2 acres
• A vacation home was built over former Lot 159.
• In 1990 a title agent insured a first mortgage against the 3.2 acres for $187,000.
• By 1993 the loan defaulted and the lender foreclosed.
• The lender interested a buyer who, in turn, hired an attorney to examine the title.
• There was an issue with old Lot 159
• There is no deed of record out of Charles F. Hill
• Therefore, no chain of title linking Hill with the supposed owner in 1970.
• Even though no one else claimed ownership the prospective buyer won’t go forward until the lender can provide marketable title, free of cloud or defect.
• It turns out there were three Charles Hills listed in the Boston City Directory around 1894.
• The question of how far back one should search land records is usually governed by local custom and practice.
• In some localities a 10-year search is customary, in others it may be 60 years.
• In most jurisdictions an attorney’s failure to spot this issue would probably not be considered negligent, and there would be no liability under the attorney’s opinion letter.
• And even if a case for negligence could be made, in all likelihood the attorney would not be obligated to take any action in the absence of a real live adverse claim.