What Are Some Issues That May Affect Real Estate Title In New York?

There is a wide range of different issues you can run into, once a title report is issued. Oftentimes, there is an old mortgage that is still open as of record, even though the Seller has already paid off the loan. In this case, the lender never filed a satisfaction of mortgage with a county clerk. These types of issues may delay a closing. In addition, as part of the title search, the title companies in New York do municipal searches. If there are any sort of improvements or additions that were built and the owner did not obtain a valid permit or certificate of occupancy that was required, this will be identified by the Purchaser, who will almost certainly insist that the municipal records are corrected prior to closing.  These types of issues often delay the closing as well as it takes time for the local building department to inspect the property, advise on what work needs to be done to get the improvement up to code, and then do a final inspection and issue the certification to the Seller. Sometimes, the purchaser decides to cancel and demand the return of the down payment, rather than waiting a long period of time for the Seller to remedy these issues.

There are also issues that can be identified by a survey. For example, if a fence is two or three feet inside of the property line and it is been that way for a long time, it could be that the purchaser is buying a property where the land on the other side of the fence is now out of possession based on the legal doctrine of adverse possession.  Another example is that the current owner is encroaching on a neighbor’s property and the Purchaser must consider how this will affect his future ownership of the property.  Usually, if the encroachment is six inches or less, the title company will provide insurance for the exception to coverage.  There are a lot of boundary issues that can be identified with a survey that could lead to potential issues.

Finally, there can be a defect in the “chain of title” that needs to be corrected.   This means that there is some question or defect in the current state of title vested in the Seller.  For example, if a deed transfer is recorded out of sequence, the current owner may have to obtain a correction deed or take other steps in order to provide good title to the property – often referred to as “marketable” title.

What Is A Title Defect? What Can An Attorney Do To Assist Me?

A title defect refers to anything that would negatively affect the ownership interests of the purchaser after the closing.  The most obvious and extreme example is if the Seller does not own the property.  Another example is where a seller does not pay their real estate taxes for federal taxes and the government puts a tax lien on the property.  This tax lien must be paid off and satisfied before or at the closing.  Other liens include mechanic liens for unpaid contractor work, a money judgment against the seller properly filed with the county clerk where the property is located, and mortgage and home equity lines of credit.

If there is a covenant, restriction, or easement that runs with the property and is property filed with the county clerk, this could potentially negatively affect the use or enjoyment of the property for the purchaser.  These agreements between prior owners that run with the land are therefore passed along to future owners could be considered a title defect as well depending on their terms and scope.  Some title defects are liens on the property, such as a mortgage, a tax lien, or a money judgment. All those issues are identified through the title report and then, as the purchaser’s attorney, you have to communicate with the seller’s attorney and make sure that the seller is able to remedy all of those title defects prior to the closing or at closing.

A good title company is going to make sure that the title defects are cured either prior to the closing or at the closing otherwise these defects will be omitted from the insurance coverage. Otherwise, they are not going to furnish a title insurance policy to the purchaser or to the purchaser’s lender. There are certain informational aspects of a title report that they provide for informational purposes only.  For example, the title company does not insure whether there is a Certificate of Occupancy for the structure and any improvements that were done. However, they do pull the building department and municipal records for the purchaser and his attorney to review.  For the most part, if you get a title insurance policy and there are not any omissions from that policy coverage, then you are protected from any title issues that arise after the purchase.

What Are Some Issues I Can Avoid by Having A Competent Real Estate Attorney?

Real estate varies greatly from location to location. The process and procedures are very local in nature. You should always find a real estate attorney who practices in the area where the property is located. It is also important to use an experienced real estate attorney, who is familiar with all the aspects of the standard contract of sale, the title report, and who knows how to prepare for the closing properly. In the New York City and Westchester area, it is very difficult for a buyer or seller to purchase or sell a property without an attorney. A lot of legal aspects require an experienced expert to help guide you through the process. Your attorney should be available to answer your questions and explain the various stages of the real estate transaction, so you know what to expect.

Most experienced attorneys utilize riders that will be negotiated before the Contract of Sale is signed by the parties. Riders are additional contract provisions that supplement and become a part of that contract. For example, when I represent purchasers, I try to negotiate a term in my rider where before the purchaser loses their right to cancel the contract because they were unable to obtain a mortgage commitment, the seller will have to give notice to the purchasers’ attorney that they are demanding the commitment letter. That protects the buyer from losing their right to cancel the contract, if that commitment date goes by and they have not received an extension of the commitment date from the seller.   I also ask the Seller to make certain representations or promises concerning the property to minimize risk to the Purchaser.  When I represent Sellers, I negotiate terms that protect the Seller such as clarifying that the Purchaser is taking the property subject to certain conditions that may exist on the property such as a minor encroachment on the boundary line of the property.  You should review the Contract terms very carefully and speak to your real estate attorney about the terms.  This will help your attorney to customize the contract terms based on our concerns and the specifics of your purchase or sale.

An experienced real estate attorney will also provide you guidance with the post-contract issues and preparation for closing.  You should review the title report with your attorney immediately after it is provided.  As purchaser, you should know what issues, if any, are identified concerning the property and know what will be done to remedy theses issues on or before the closing date.  As a seller, you should know what title issues you need to address in order to provide marketable title and be able to close the sale.  It is always a good idea to identify and address any title issues right away to avoid cancellation or delays.

Additionally, a good real estate attorney will go through a checklist and make sure that all items that need to be taken care of before the closing are professionally handled.  Preparation and organization for the Closing is critical to ensure a smooth transaction and real estate closing.

For more information on Issues Affecting Real Estate Title In New York, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (800) 619-3570 today.