Title disputes can arise at any stage of a real estate transaction and often catch both brokers and clients off guard. The Seller’s attorney will need to clear out the disputes before the closing. But if disputes arise later, after the closing, the issue is between the Buyer (now owner) and the title insurer.
Before closing, these disputes can delay closings, create financial liabilities for the Seller, and even derail sales altogether.
For real estate brokers, understanding the nature of title disputes and how to address them effectively is essential to maintaining smooth transactions and protecting client interests.
Common Causes of Title Disputes
Title disputes generally stem from unclear or conflicting claims of ownership or claims against title that have not been released. Some common causes include:
Boundary Discrepancies: Disputes over property boundaries can arise when there are inconsistencies between the property’s legal description and physical boundaries. These issues can be due to outdated or inaccurate surveys.
Unresolved Liens: Liens placed on a property for unpaid debts, such as mortgages, taxes, or contractor fees, can create disputes if not properly addressed before the sale. These liens must be resolved to transfer a clear title to the new owner.
Easements and Rights of Way: Existing easements or rights of way, where other parties have the legal right to use a portion of the property, can lead to conflicts if not clearly disclosed and understood.
Heirs and Probate Issues: Properties that have passed through multiple generations or were part of an incomplete probate process can have unclear ownership, leading to disputes among potential heirs or claimants.
Properties that are “flipped”: Short periods of time of ownership can cause problems because of liens that might be filed during ownership of a “flipper” with the property getting sold before the liens are recorded and made public.
Preventive Measures for Brokers
To avoid title disputes, brokers should adopt a proactive approach during the initial stages of the transaction. Here are some key strategies:
Thorough Title Searches: Encourage clients to have their attorneys conduct comprehensive title searches through reputable title companies. A detailed search can uncover any potential issues early, allowing them to be addressed before they escalate.
Clear Communication: Maintain open lines of communication with all parties involved, including title companies, attorneys, and surveyors. Clear and consistent communication can help identify and resolve potential disputes quickly.
Accurate Property Descriptions: Ensure that the property’s legal description in the sales contract matches the most recent survey and title documents. Accurate documentation can prevent boundary-related disputes.
Due Diligence on Liens and Easements: Verify that all outstanding liens are paid off and any existing easements or rights of way are disclosed to the buyer. Properly managing these issues can prevent legal complications down the line.
Order the survey early: While surveys are only good for six months, if there are potential disputes it is best to know about them early. This is a seller cost but the cost of updating the survey can be avoided if nothing is done to change the footprint of the property. An “Affidavit of No New Improvement” is generally acceptable to a Title Company and a Buyer.
Addressing Title Disputes
Despite best efforts, title disputes can still arise. When they do, it is crucial to handle them promptly and efficiently:
Legal Assistance: Recommend that clients seek legal counsel to address any title disputes. Experienced real estate attorneys can offer guidance and negotiate resolutions that protect the client’s interests.
Title Insurance: Advise clients to purchase title insurance, which can provide financial protection against certain title defects. Title insurance can cover legal fees and other costs associated with resolving disputes. Understand that Title Insurance is only good for the initial purchase of the property. If the property is deeded into a Trust or there is a liability for a breach of warranty deed (think alternative actions for Failure to Properly Disclose), the owner should make sure that they are obtaining new Title Insurance coverage.
By understanding the causes of title disputes and implementing preventive measures, real estate brokers can help their clients address these challenges effectively. This proactive approach not only safeguards the transaction but also enhances the broker’s reputation as a knowledgeable and reliable professional in the real estate industry.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property owners. For more information, schedule a consultation today.
