Why God Created Title Insurance- When Attorneys Disagree

“The title should be fine.” - Everyone

“It certainly should be.”- Me

Anytime I speak with a client about title insurance, the sentiment is the same. The title to the property should be fine.

But, the title isn’t always fine. Roughly 25-30% of titles I review reveal something to be cleared up. It’s rare when lawyers disagree on whether an issue is an issue or not. Here’s a recent example of a disagreement, and we’re only moving forward because the seller has title insurance.

I came across a title showing 2 prior owner mortgages still on record. Meaning the person who sold the property to the seller had two mortgages in their name, and those mortgages still show up on the property’s records. This is a garden variety title issue.

But, this one has a twist! Here’s the timeframe:

Today, Seller is selling to my Buyer. – easy enough.

In the early 90’s, everyone took a break from consuming carbohydrates and the Seller bought the property from Builder.

In the late 80’s, Builder borrowed money from Lender A and Lender B and gave them mortgages.

These mortgages remain as liens on the property until released-IT DOESN’T MATTER WHO OWNS THE PROPERTY.

Now, after inquiring about the releases, I was told that Builder declared Chapter 11 bankruptcy and the court issued a Clerk’s Certificate releasing all liens. The Certificate contains this language which leads to the disagreement: