An interesting set of title problems — how could the buyer have been protected?

We recently were consulted by a couple who had purchased three residential lots with lake frontage.  They intended to build a home that straddles all three lots, so clear title to all three is critical to their plans.

Unfortunately, when they went to the bank for a loan on the properties to build their dream home, they learned that title to two of the lots is impaired.

Before buying the two lots, they had the title checked, and they thought the attorney wrote to them with a title opinion on both.  As they checked their paperwork, they did have one title opinion letter, but it recited neither of the lots in question, but rather a lot they had sold.  

Thus, they were ready to start construction of their home, but were “stuck” either with bad title, or waiting for the title to be cleared.

How could this situation have been avoided?

  • First, they could have purchased an owners’ policy of title insurance;
  • Second they could have read the policy — to make sure it covered the right property and that it did not have unacceptable “exceptions” to coverage (that topic is addressed in this blog entry); and
  • Third, they could have dealt with experienced real estate attorneys from the outset.

This firm worked to assure that the attorney handling the closing will in fact “stand behind” his deficient legal work, but with proper legal work or title insurance coverage in place, they could be proceeding to build their dream house music sooner.