By: José L. Carmona
Business Watch, Caribbean Business
Title insurance is a form of indemnity coverage that insures against financial loss resulting from defects in title to real property and from the invalidity or unenforceability of mortgage liens.
The insurance is meant to protect an owner’s or a lender’s financial interest in real property against loss due to title defects, liens or other matters.
With a properly endorsed policy, investors may be insured against damages created, suffered, agreed to or not known by the investor, but was known by other partners.
It will defend against a lawsuit that attacks the title because it is insured, or reimburses the insured for the actual monetary loss incurred, up to the dollar amount provided by the insurance policy.
It insures against fraud, forgery, false impersonation, missing heirs, errors in public records and other items. Title insurance offers protection against many unexpected matters.
“All insurance contracts, including title insurance, have a general exclusion clause. If you had prior knowledge of an issue and didn’t disclose it, that insurance contract won’t cover you,” Raúl Francisco de la Torre, vice president of Popular Insurance, explained to CARIBBEAN BUSINESS. “An endorsed property-insurance policy eliminates that exclusion, thus covering against these types of damages.”
There are two main types of title-insurance policies—lender and owner. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders also require title insurance (a loan policy) to protect their interest in the collateral of loans secured by real estate.
Some mortgage lenders, especially non-institutional lenders, may not require title insurance. Buyers purchasing properties for cash or with a mortgage lender often want title insurance (an owner policy) as well.
A loan policy provides no coverage or benefit to the buyer/owner, so the decision to purchase an owner policy is independent of the lender’s decision to require a loan policy.
“Title insurance enables the real-estate attorney to offer the client substantially greater protection than what is attainable with a legal opinion alone,” de la Torre noted.
Among the many risks covered by title insurance (that wouldn’t be covered by the attorney’s malpractice insurance) are: mistakes in the interpretation of wills or other legal documents; impersonation of the owner, forged deeds, mortgage releases, etc.; instruments executed under fabricated or expired powers of attorney; deeds delivered after death of seller or buyer; undisclosed or missing heirs; wills not probated; deeds or mortgages by those mentally incompetent or of minor age (or supposedly single but actually married); birth or adoption of children after date of will; mistakes in the public records; falsified records; confusion from similarity of names; and transfer of title through foreclosure sale where requirements of foreclosure statue haven’t been strictly met.
“Real-estate lawyers adequately protect the interest of a client—and their own—when they advise them of the availability and protection of title insurance,” de la Torre added.
Title insurers conduct a title search of public records before they agree to insure the purchaser or land mortgagee. Specifically, after a real-estate sales contract has been executed and escrow opened, a title professional will search the public records to look for any problems with the home’s title.
This search typically involves a review of land records going back many years. The title search also includes a request to the Municipal Revenue Collections Center (CRIM by its Spanish acronym) about the property’s debt certificate and tax value.
For instance, a previous owner may have failed to pay property taxes to CRIM and therefore has a tax lien.
“One thing we do here at Popular Insurance, especially with commercial property, is verify the property in the catastral [cadastral], or land survey maps, and its catastral number to make sure there are no problems or mistakes. We also check the land blueprints to verify the property’s boundaries and the right of access of the utility companies, if there are any,” de la Torre indicated.
Each commercial property is unique and can present its own set of closing challenges. As a general agent and authorized representative, de la Torre said Popular Insurance excels in title insurance industry knowledge.
“Popular insurance understands what lawyers and other real-estate professionals need to protect their commercial clients and works hand in hand with them to adequately protect their interests,” de la Torre stated. “Popular Insurance has the most highly qualified team in the industry.”
Senior manager de La Torre has more than 25 years’ experience in the title business, and his team of 14 professionals includes two experienced lawyers, one of which was a former registrar at the property registry.
The other attorney worked at the Puerto Rico Housing Department, resolving all legal problems related to property inscriptions at the agency, de la Torre indicated.
“Service and availability marks the difference. Popular Insurance has the best title-insurance policy management system in the market. It is proprietary and combines quoting with policy issuance, expediting the transaction process,” the Popular Insurance vice president added.