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Oklahoma Abstracting and Title Insurance Overview Briana J. Ross, Vice President of Commercial Underwriting / Attorney / Agency Manager for American Eagle.

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Presentation on theme: "Oklahoma Abstracting and Title Insurance Overview Briana J. Ross, Vice President of Commercial Underwriting / Attorney / Agency Manager for American Eagle."— Presentation transcript:

1 Oklahoma Abstracting and Title Insurance Overview Briana J. Ross, Vice President of Commercial Underwriting / Attorney / Agency Manager for American Eagle Title Insurance Company

2 Residential Real Estate Transactions Parties: Parties: Seller Seller Buyer Buyer Lender Lender Listing Broker Listing Broker Selling Broker Selling Broker Attorney (rarely in Oklahoma) Attorney (rarely in Oklahoma) Examples: Examples: Sale or purchase of residence Refinance of residence

3 Role of Attorney in Residential Real Estate Transaction Attorneys rarely used in OK Attorneys rarely used in OK Provide attorney’s title opinion Provide attorney’s title opinion Prepare contract, review closing documents and vesting documents Prepare contract, review closing documents and vesting documents Perform title curative work Perform title curative work Perform settlement services Perform settlement services

4 Commercial Real Estate Transactions Parties: Parties: Seller Seller Buyer Buyer Lender Lender Listing Broker Listing Broker Selling Broker Selling Broker Attorney(s) for Seller Attorney(s) for Seller Attorney(s) for Buyer Attorney(s) for Buyer Attorney(s) for Lender Attorney(s) for Lender Examples: Examples: Sale or Purchase of vacant or developed land Refinance of a commercial property Construction loan for future development of commercial property Leases (e.g., office, ground, occupancy in free- standing building)

5 Role of Attorney in Commercial Real Estate Transaction Attorneys often used in OK Attorneys often used in OK Negotiate terms of contract or lease Negotiate terms of contract or lease Prepare attorney’s title opinion or review of the title insurer’s title commitment Prepare attorney’s title opinion or review of the title insurer’s title commitment Negotiate title insurance coverages Negotiate title insurance coverages Review surveys Review surveys Prepare contract or lease, review closing documents and vesting documents Prepare contract or lease, review closing documents and vesting documents Perform title curative work Perform title curative work Perform settlement services Perform settlement services

6 What is “Title” to Real Property? Evidence of ownership, extent of interest, and means for maintaining rights and possession Evidence of ownership, extent of interest, and means for maintaining rights and possession How does one prove title? How does one prove title?

7 The Recording System Purpose: Preserve record of instruments of title and evidence of their voluntary execution Preserve record of instruments of title and evidence of their voluntary execution Gives public notice of change of ownership of property or existence of liens thereon Gives public notice of change of ownership of property or existence of liens thereon Prevents loss of documents by owners Prevents loss of documents by owners Prevents non-owners from fraudulently selling property owned by another Prevents non-owners from fraudulently selling property owned by another

8 Recording System, cont. Real estate transaction is not binding upon one with no actual knowledge, unless: Real estate transaction is not binding upon one with no actual knowledge, unless: Instrument is in writing Instrument is in writing In consummation of such transaction In consummation of such transaction In legal form In legal form Executed and acknowledged in compliance with OK law Executed and acknowledged in compliance with OK law Is made a matter of public record Is made a matter of public record

9 How to Record in Oklahoma Office of County Clerk in county where real property is located Office of County Clerk in county where real property is located Books, records, maps, papers, plats, etc. affecting title to real property Books, records, maps, papers, plats, etc. affecting title to real property Platted additions and subdivisions Platted additions and subdivisions Payment of recording fee Payment of recording fee $13.00 first page of document; $2.00 each additional page of same document $13.00 first page of document; $2.00 each additional page of same document

10 Locating Title Documents in Oklahoma Oklahoma uses a tract index system Oklahoma uses a tract index system Preserves history of title through identification of transactions with a particular tract Preserves history of title through identification of transactions with a particular tract Must have legal description to search records Must have legal description to search records Cannot search solely by owner’s name Cannot search solely by owner’s name

11 Real Estate Contract Residential – provides a standard Residential Real Estate Contract form Residential – provides a standard Residential Real Estate Contract formwww.ok.gov/OREC Commercial – Usually customized to the transaction Commercial – Usually customized to the transaction

12 Abstract of Title A compilation in orderly arrangement of materials and facts of record, in office of county clerk and court clerk, affecting title to a specific tract of land issued pursuant to a certificate certifying to matters therein contained A compilation in orderly arrangement of materials and facts of record, in office of county clerk and court clerk, affecting title to a specific tract of land issued pursuant to a certificate certifying to matters therein contained Must be certified to by licensed and bonded abstractor Must be certified to by licensed and bonded abstractor

13 Oklahoma Abstractor’s Board Regulates Oklahoma’s abstract industry Regulates Oklahoma’s abstract industry Issues Certificates of Authority Issues Certificates of Authority Issues individual abstractor licenses and permits to develop abstract plants Issues individual abstractor licenses and permits to develop abstract plants Offers bi-monthly testing to individuals seeking abstractor’s license Offers bi-monthly testing to individuals seeking abstractor’s license Investigates consumer and industry complaints concerning abstracting issues Investigates consumer and industry complaints concerning abstracting issues

14 36 O.S. § 5001(C) No insurer shall issue, permit or cause to be issued, either directly or by an agent, a binder, commitment, or policy of title insurance until either the title insurance company or its authorized agent shall have obtained an opinion of title by an attorney licensed to practice law in the State of Oklahoma based upon an examination of a duly certified abstract of title prepared by a bonded and licensed abstractor. No insurer shall issue, permit or cause to be issued, either directly or by an agent, a binder, commitment, or policy of title insurance until either the title insurance company or its authorized agent shall have obtained an opinion of title by an attorney licensed to practice law in the State of Oklahoma based upon an examination of a duly certified abstract of title prepared by a bonded and licensed abstractor.

15 Attorney’s Title Opinion Purpose: To determine whether title to subject property is “marketable” Purpose: To determine whether title to subject property is “marketable” Generally addresses: Generally addresses: Legal description of property Legal description of property Identity of owner Identity of owner Restrictions, liens and other encumbrances affecting title Restrictions, liens and other encumbrances affecting title Requirements to make title insurable Requirements to make title insurable Must be signed by attorney and state OBA # Must be signed by attorney and state OBA #

16 Title Examination Standards Title Examination Standards Committee Title Examination Standards Committee New and revised standards presented at OBA Annual Meeting for vote New and revised standards presented at OBA Annual Meeting for vote If approved, they go into effect January 1 of following year If approved, they go into effect January 1 of following year

17 Encumbrances Interests held by persons other than owner Interests held by persons other than owner Two Kinds: Two Kinds: Physical Encumbrances – may give others limited rights to use or may limit rights of owner to make unrestricted use of property Physical Encumbrances – may give others limited rights to use or may limit rights of owner to make unrestricted use of property Encumbrances on Title – affect value of property; may give rise to right of holder of encumbrance to sell property to satisfy obligation Encumbrances on Title – affect value of property; may give rise to right of holder of encumbrance to sell property to satisfy obligation Found by attorney (title examination) or surveyor Found by attorney (title examination) or surveyor

18 What is Title Insurance? Information on status of title to real property Information on status of title to real property Protection against adverse claims Protection against adverse claims Shifts risk of covered title defects from insured owner or lender to title insurance underwriter Shifts risk of covered title defects from insured owner or lender to title insurance underwriter A contract to indemnify if loss is a covered defect A contract to indemnify if loss is a covered defect Residential & Commercial Residential & Commercial

19 Title Insurance Differs From Other Types of Insurance Relates to past rather than future occurrences Relates to past rather than future occurrences Protects title as it stands when policy is written Protects title as it stands when policy is written Coverage ends where other insurance begins -- at the date of policy Coverage ends where other insurance begins -- at the date of policy

20 Risks of Transferring Property Confusion from similarity of names Confusion from similarity of names Forged documents Forged documents Signatures of minors or mentally incompetent persons Signatures of minors or mentally incompetent persons Mistakes in recording legal documents Mistakes in recording legal documents Undisclosed or missing heirs Undisclosed or missing heirs Fraud Fraud Invalid divorces Invalid divorces Misrepresentation of marital status Misrepresentation of marital status Unpaid taxes Unpaid taxes Clerical errors in public records Clerical errors in public records Errors in the examination of title Errors in the examination of title

21 American Land Title Association (ALTA) Members include: Members include: Title Insurance Underwriters Title Insurance Underwriters Agents Agents Abstractors Abstractors Standard policy and endorsement forms Standard policy and endorsement forms Most widely used forms in Oklahoma Most widely used forms in Oklahoma

22 Title Commitment Based on Attorney’s Title Opinion Based on Attorney’s Title Opinion Agreement of underwriter to issue title insurance policy when requirements properly satisfied Agreement of underwriter to issue title insurance policy when requirements properly satisfied Only issued in Oklahoma after duly certified abstract of title has been examined by attorney licensed to practice law in State of Oklahoma Only issued in Oklahoma after duly certified abstract of title has been examined by attorney licensed to practice law in State of Oklahoma

23 2006 ALTA Commitment – Schedule A File Number File Number Effective Date Effective Date Policies to be Issued Policies to be Issued Estate or Interest in Land Estate or Interest in Land Record Owner Record Owner Insured Property Insured Property

24 2006 ALTA Commitment – Schedules B-I and B-II B-I – Requirements B-I – Requirements Must be accomplished before title to real estate pronounced marketable Must be accomplished before title to real estate pronounced marketable Revealed by title examination; shown on attorney’s title opinion Revealed by title examination; shown on attorney’s title opinion May include title curative matters or vesting requirements May include title curative matters or vesting requirements B-II – Exceptions B-II – Exceptions Matters representing encumbrances on property Matters representing encumbrances on property Excluded from coverage by title insurance policy Excluded from coverage by title insurance policy

25 Pre-Closing Requirements must be satisfied Requirements must be satisfied Closing documents prepared Closing documents prepared Settlement statements prepared and approved Settlement statements prepared and approved

26 Closing Procedure or event by which ownership transfers from seller to buyer Procedure or event by which ownership transfers from seller to buyer All documents satisfying requirements are presented at closing All documents satisfying requirements are presented at closing Funds transferred Funds transferred Closing Protection Letter Closing Protection Letter

27 Post-Closing Original executed documents are recorded at County Clerk’s office Original executed documents are recorded at County Clerk’s office Final title search Final title search

28 Types of Title Insurance Policies Estates: Estates: Fee Simple Fee Simple Leasehold Leasehold Life Estate Life Estate Easement Easement Policies Policies Loan Loan Owner’s Owner’s

29 Owner’s Policy A contract of indemnity between insured owner and title insurance underwriter A contract of indemnity between insured owner and title insurance underwriter Insures title to real property subject to exceptions and exclusions contained in policy and is used to insure fee simple or lesser estate Insures title to real property subject to exceptions and exclusions contained in policy and is used to insure fee simple or lesser estate Covers insured as long as insured has interest in property Covers insured as long as insured has interest in property Coverage continues after insured sells if insured remains liable for warranties of title Coverage continues after insured sells if insured remains liable for warranties of title Nontransferable Nontransferable New purchaser must obtain own title insurance policy naming him as the insured New purchaser must obtain own title insurance policy naming him as the insured

30 2006 ALTA Owner’s Policy – Schedule A File Number File Number Policy Number Policy Number Date of Policy Date of Policy Amount of Insurance Amount of Insurance Name of Insured Name of Insured Estate Insured Estate Insured Owner of Property Owner of Property Mortgage encumbering property Mortgage encumbering property Insured Property Insured Property

31 2006 ALTA Owner’s Policy – Schedule B Title matters excluded from coverage Title matters excluded from coverage Mortgages listed in Schedule A Mortgages listed in Schedule A Additional title exceptions not disposed of prior to closing Additional title exceptions not disposed of prior to closing Prior liens, easements, rights of way, roadway reservations, mineral reservations, existing leases, etc. Prior liens, easements, rights of way, roadway reservations, mineral reservations, existing leases, etc.

32 Owner’s Policy as Base Title 36 O.S. § 5004(C) 36 O.S. § 5004(C) Title examined from effective date of prior owner’s policy Title examined from effective date of prior owner’s policy No need to locate abstracts certified to prior to effective date of prior owner’s policy No need to locate abstracts certified to prior to effective date of prior owner’s policy

33 Loan Policy A contract of indemnity between insured lender and title insurance underwriter A contract of indemnity between insured lender and title insurance underwriter Insures validity and priority of a lien created in favor of lender against specific property subject to exceptions and exclusions contained in title insurance policy Insures validity and priority of a lien created in favor of lender against specific property subject to exceptions and exclusions contained in title insurance policy Provides lender protection as long as lender has interest in property Provides lender protection as long as lender has interest in property Policy ends once mortgage is paid off Policy ends once mortgage is paid off Also covers assignee of mortgage Also covers assignee of mortgage

34 2006 ALTA Loan Policy – Schedule A File Number File Number Policy Number Policy Number Date of Policy Date of Policy Amount of Insurance Amount of Insurance Name of Insured Name of Insured Estate Insured Estate Insured Owner of Property Owner of Property Insured Mortgage Insured Mortgage Insured Property Insured Property

35 2006 ALTA Loan Policy – Schedule B Title matters excluded from coverage Title matters excluded from coverage Title exceptions reflected in attorney’s title opinion that would have priority over lien being insured and that have not yet been disposed Title exceptions reflected in attorney’s title opinion that would have priority over lien being insured and that have not yet been disposed Prior liens, easements, rights of way, roadway reservations, mineral reservations, existing leases, etc. Prior liens, easements, rights of way, roadway reservations, mineral reservations, existing leases, etc.

36 Endorsements Riders modifying coverage of policy Riders modifying coverage of policy Mostly used to expand coverage Mostly used to expand coverage Can be used to limit or interpret coverage Can be used to limit or interpret coverage Wide variety available Wide variety available Underwriting guidelines may vary from company to company Underwriting guidelines may vary from company to company

37 Questions?

38 The End


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