- How to Hold Title in Real Estate
- Homestead Law in Massachusetts
- What is Title Insurance?
- 20 Important Reasons Why You Should Have Owner's Title Insurance
- Examples of How Title Insurance Can Help You
How to Hold Title in Real Estate
There are four ways to hold title in real property:
1. INDIVIDUALLY is when only one person owns the real property. In the event of their death, their estate must be probated before the real estate can be sold.
2. TENANTS BY THE ENTIRETY is available only between husband and wife. In the event of the death of one of the spouses, title to the real property automatically passes to the surviving spouse. While the marriage lasts, neither spouse can divest themselves of their interest in the property unless the other spouse consents.
3. JOINT TENANTS With rights of survivorship (JTROS) is when two or more persons own real property. In the event of the death of one of the owners, title to the real property automatically passes to the surviving owners.
4. TENANTS IN COMMON is when two or more persons own real property in equal or unequal shares. In the event of the death of one of the owners, the share of the real property of the deceased owner passes to their heirs and their estate must be probated before the real estate can be sold or mortgaged.
Massachusetts Homestead Law
An estate of homestead is a type of protection for a person's residence. In Massachusetts, pursuant to M.G.L. c. 188, there is an automatic homestead protection of $125,000.00 of the equity in their homes. You do not need to do anything to have the benefit of this protection. By making a written Declaration of Homestead, recorded at the Registry of Deeds in the county where the property is located, a homeowner's homestead protection is increased to $500,000.00 of the equity of their home. The following are exempt from the homestead protection against attachment, seizure, execution on judgment, levy and sale for the unsecured debts of the owner of the home:
- federal, state and local taxes, assessments, claims, and liens;
- mortgages used to purchase the residence, and in the case of the elderly homestead, first and second mortgages held by financial institutions or others;
- an execution issued from the Probate Court to enforce its judgment that a spouse pay for the support of a spouse or minor children;
- where buildings on land not owned by the declarant of a Homestead estate are attached, levied upon or sold for the ground rent of the lot whereon they stand;
- upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity;
- debts contracted prior to the acquisition of the homestead.
What is title insurance?
Title insurance protects you from losses that occur from various matters affecting the title to land.
To protect what may be the most important investment you will ever make.
For a one-time premium, an Owner's Policy remains in effect for as long as you or your heirs own the property. Owner's coverage gives you the ultimate in peace of mind by protecting the title to your home.
I paid for a title search - why do I need to buy title insurance also?
A title policy insures against many defects which could not be discovered in a title search, as well as insuring against errors made in the title search itself.
An Owner's Policy insures against title defects that are not covered by an attorney's certification of title. An attorney's certification of title is an opinion of the quality of the “record” title based on a review of the public records at the registries of deeds and probate. However, the certifying attorney may not be responsible for numerous title defects that would not be found despite the most thorough search of public records, such as:
- Forged documents
- Unknown creditors
- Undisclosed or missing heirs
- Missing signatures
- Mistakes in recording
- Incapacity of a grantor
All of these hidden defects and many more are covered by the Owner's Policy. The attorney's certification covers those matters that could reasonably be discovered during the time frame of the title search.
What is covered under a standard Owner's Policy?
The standard Owner's Policy provides the basic coverage for a homeowner:
- It insures that you are the owner of the property.
- It insures against losses from any liens or encumbrances on the property except those listed in the policy.
- It insures against your title being rejected by a subsequent buyer because it is unmarketable due to a title defect or lien.
- It insures you have a legal right of access to the property.
The title policy not only protects you against losses due to title claims covered by the policy, it also pays for the attorney's fees and costs in defending the title.
You are covered under the policy for as long as you own the property, and also for liability after you sell the property if you provide title covenants in your deed to the new buyer.
20 Important Reasons Why You Should Have Owner's Title Insurance
These are just some of the hidden title risks that would not be disclosed by even the most meticulous title search, but are covered by an Owner's policy of title insurance:
- Fraud in the execution of documents
- Undue influence on a grantor of a deed
- False impersonation by someone purporting to be the owner of the property
- Incorrect representation of marital status
- Undisclosed or missing heirs
- Wills not properly probated
- Misinterpretation of wills and trusts
- Mental incompetence of a grantor of a deed
- Transfer of title by a minor
- Heirs born after the execution of a will
- Incorrect legal descriptions
- Non-delivery of deeds
- Unsatisfied claims not shown on the record
- Deeds executed under expired or false powers of attorney
- Confusion due to similar or identical names
- Dower or courtesy rights of spouses of former owners
- Incorrect indexing of the land records
- Clerical errors in recording legal documents
- Delivery of deeds after the death of the grantor
Examples of How Title Insurance Can Help You
John and Mary finally had a sale pending on their home and were ready to move to California where John had landed his dream job. Before the closing, the attorney informed that there was a potentially serious title defect that could delay their sale for an "undetermined" length of time. Since John was starting his new job in a couple of weeks and Mary was seven months pregnant, they could not afford to wait.Fortunately John and Mary had purchased an Owner's Policy, which allowed them to proceed with the sale of their home. Their title insurance company was notified, and the legal staff issued a "clean title" policy so that the sale could continue. John and Mary saved thousands of dollars on legal expenses, the new owners were happy with the transaction, and two weeks later John and Mary were in California.
Interest rates were dropping, so Jim and Ann decided to refinance their mortgage. Because they had bought an Owner's Policy when they first purchased their home, they were covered for title defects up to the time of their purchase – even after they sell the home. In the course of their refinancing, the attorney for the lender discovered a title defect. Their title insurance company looked into the matter and quickly agreed to insure the refinancing without exception to the newly discovered pre-existing defect, and then retained counsel to cure the defect so that it would not become an issue should Jim and Ann decide to sell the property.
A year after Bill, Bob and Barry had purchased their property, they were informed that their deed was invalid. It turned out that one of the two previous owners had no idea that the property was being sold and that his co-owner had forged his signature on the deed and had actually disappeared with the proceeds from the sale of the property. When the owner, who had never signed the deed, demanded the property be returned, Bill, Bob and Barry informed their title insurance company of the problem. A prompt response by the insurance company resulted in payment of the money due to the defrauded seller in exchange for the claim being dropped against Bill, Bob and Barry's property.
What kind of problems?
There are four primary categories that can cloud a title and result in significant risk for a prospective homebuyer. The title search meticulously seeks out and evaluates and known indication of any of these issues; however, even the most comprehensive search may not uncover every hidden area of title risk:
Prospective buyers should be certain they know what issues affect the title of the property they plan to buy and recognize that even new construction properties can be subject to these same kinds of problems. Buyers should make sure that all issues that come to light from the title search are adequately resolved prior to the closing.