As real estate professionals, you’ve all been asked to “pull title” on a property before you become involved in either listing a property or writing an offer on one. But pulling title is not enough. Once you have the Certificate of Title you need to read it from top to bottom and be sure to advise your client about what is registered on the title and what those registrations mean.
REIX is currently managing one of the largest claims in its history involving a potential mistake by an insured who failed to understand the importance of a right-of-way registered on the title. The right-of-way drastically restricted what the buyer could do with the property. The buyer had planned to add an additional building as well as a recreation area – both of which were not allowed because of the right of way.
So, what exactly are you looking for when you are looking through a Certificate of Title and the registrations listed? Some key pieces of information include:
Proper names of the owner(s) – make sure the owner(s) listed on title are the same people that you are dealing with. In other words, make sure your client has the authority to sell the property.
Rights of way – whether they’re for utilities such as electricity, water or natural gas, or for easements, many properties have rights of way registered on their title. Typically, this is to allow for maintenance, but there are also occasions when things such as access to an adjoining property or shared use of a property feature, are allowed; or a restriction as to future plans for the property as is the case in the REIX claim mentioned above.
Potential legal action – has someone has registered a court judgment on the property, or a Certificate of Lis Pendens (meaning that someone has registered a pending lawsuit that involves a claim to an interest in the property)? Other registrations also signal to you that more information is needed. These registrations may involve a foreclosure, divorce, differing kinds of debts, or interest in the property. These are all items that need to be researched further before a sale can occur.
Mortgage(s) or liens – if there are any mortgage(s) owing against the property. The amount shown on the title likely does not reflect the actual mortgage balance accurately, but it still indicates money owing against the title. If a lien or caveat has been filed against the property, there may be a balance owing that needs to be paid prior to the sale proceeding.
Other restrictions – such as restrictive covenants, which can vary widely depending on the terms in them. These covenants typically continue on and restrict usage and rights of the potential new owners. Potential buyers need to be aware of these before deciding to purchase the property. In some cases, these can be minor (colour or type of landscaping or fencing), but they may also be significant (property cannot be used to house livestock or maximum size or number of buildings on the site, for example).
Title registrations can be significant
It’s important for you as a real estate professional to ensure you understand all restrictions registered on a title. Communicate with your client and don’t hesitate to contact REIX if you are unsure about how to advise your client. It may be that your client needs to seek independent legal advice.
The bottom line?
Pulling title is definitely a key step in the real estate process, but not as important as carefully reading it and making sure your client is aware of the information provided on the title. As always, if you have a question, call REIX!