To Buy or Not to Buy Owner’s Title Insurance?: That is the Question!


I’m often asked whether a buyer of Massachusetts real estate should spend the money to purchase owner’s title insurance on their new home. This is a type of insurance policy protecting a homeowner when problems arise regarding their rights of ownership in their real estate. My response is the answer often lies in how the property owner generally manages risk, but considering the purchase of real estate is often the greatest investment they’ve made to date, it is a wise purchase.

In the past few years, I’ve been able to assist homeowners to access their owner’s title insurance coverage to remedy problems with undischarged, prior owner mortgages still on their title. The coverage allowed sales of homes to proceed without delay while the problems were later fixed. Another client was unable to tear down a small home existing on their lot to build a bigger house because an easement ran through the width of their property which prevented rebuilding a larger home. That owner was paid over $45,000 for the loss in value he suffered. Finally, another client tried to build a new home on his vacant lot, only to be told by his bank’s lawyer that a probate had once been done in the wrong procedure and the bank wouldn’t continue with the loan until the correct procedure was corrected. I was able to do the correct probate and his owner’s title coverage payed for the legal fees and costs.

Given the substantial value of the real estate investment and the low, one time, premium I believe Owner’s Title Insurance Coverage is a good value.

You’ve Been Certified!

Purchasers of Massachusetts real estate which is improved by a one to four family home they will occupy and which is financed with a purchase money mortgage are entitled to a Certification of the real estate title by the lender’s attorney. Massachusetts General Laws, Chapter 93, Section 70 requires the lender’s attorney to examine the property title records for a period of fifty years. The Massachusetts real estate attorney must then provide the purchaser with a Certification that the purchaser holds “good and sufficient record title to the mortgaged premises free from all encumbrances” except only those matters which are listed in the Certification. Any such exception must be specifically enumerated. Broad and general exceptions, such as “all easements of record” are not acceptable. The MA real estate lawyer must also make a certification to the lender that its mortgage is a “good and sufficient record first mortgage” to the property.

If you have a real estate title problem which surfaces after you’ve closed, you may have recourse against the attorney who certified your title. The certifying attorney remains liable to the purchaser in the amount paid for the property as long as they own the property. The attorney remains liable to the mortgage holder in the original amount of the mortgage for the life of the loan. The Certification provides buyers and lenders with a remedy against a negligent attorney.

Of course, attorneys retire, become disabled, die, or if lucky, retire to a tropical island. If that happens, your Certification may not be worth much. Always strongly consider the purchase of an Owner’s Title Insurance Policy. The cost is reasonably discounted because the lender is always requiring a Lender’s Policy that the buyer is paying for, and insurers will allow for a reduced rate to the buyer. After all, the purchase is likely to be your most major investment, and the insurance premium is a one time charge.

Have you had your title checkup recently?

Many people often visit their physician annually for a checkup. These visits are preventative and help disclose health issues early when they can often be most easily treated. We do the same for our oral health when we visit the dentist for cleaning and checkups. But our annual reviews don’t end with our body. We often take our motor vehicles for quarterly oil changes and periodic tuneups and servicing. And don’t forget finances. We often see our bookkeeper or accountant at least annually. Most people also make at least an annual call on their financial planner. But how many of you have made it a point to check on the health of your Massachusetts real estate title?

As a Massachusetts real estate lawyer, I represent many lenders, buyers and sellers in real estate closing transactions. When I represent a buyer and lender, I must review the status of the real estate record title found at the registry of deeds and registry of probate. My job is to determine that the buyer will acquire a piece of real estate that is free from defects of title, and that the lender’s mortgage will not be subject to any real estate title problems. When I represent a seller, I might be contacted by the buyer’s or lender’s attorney in regard to a title problem they have found in their search of the records. As the seller’s real estate attorney, I then have to correct the problem. Very often, there is very little time to do this prior to the scheduled closing date. In these circumstances, real estate closings are often delayed or perhaps fall apart.

There are many common issues that I have encountered in representing either side of the transaction. Perhaps the most common is an undischarged mortgage. Somewhere in the chain of owners there is a mortgage which may have been paid off, but which has never been discharged (released) on the record. This is a serious issue if the problem is from prior owners, as the current owner won’t have any information about the pay-off. Hopefully, the current owner purchased a Massachusetts Owner’s Title Insurance Policy and the title company will take care of the problem. If not, the owner bears the burden and cost to clear the matter. Even if the problem mortgage is with a current owner, the matter may not be easy to clear. If the problem is from an older mortgage the bank may now be out of business. A successor must be located. Sometimes these chains of successor banks will pass through many failures, name changes and mergers.

There are other problems which I have found in titles over the years. Improperly completed probates, interests of a part-owner that never was conveyed to the successor, wrong parties signing the deed, and descriptions of the property which are inaccurate and insufficient. The list goes on and on.

So, if you own real estate and might refinance it or sell it, why not see your Massachusetts real estate lawyer for a checkup today. You can have a current or two owner search completed. If there are issues, they can be remedied now when there is plenty of time to act. A correction that can be made at leisure might also be less expensive to make than the same matter attempted in a rush in short time.