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Why Banks need Title opinions
By Deborah T. Bucknam
When
you purchase a new home, or refinance your existing residence,
the bank requires that you obtain a title opinion to determine
whether you have clear title. Although it may seem
like an unnecessary expense, it is not. Determining
clear title not only protects the bank, but also protects
you. Here are some title defects that a title search
would reveal which would jeopardize your ownership in the
property:
- Defects in previous owners’ deeds. Under
Vermont statutes, a property owner has clear title if there
are no title defects for a period of 40 years. Therefore,
the title searcher must research the chain of title for
a period of over 40 years to determine whether the deeds
the former owners held were valid. Some common problems
are deeds that have not been executed properly, “heir’s
deeds”, in which a deceased persons’ heirs
convey the property without the required distribution through
probate court, and deeds conveyed to trusts, rather than
trustees, as required by law.
- Liens: A title searcher also searches the
land records to determine whether there are any undischarged
liens against previous owners. Some common liens
are judgment liens, IRS liens, and undischarged mortgages. Those
liens are liens on the property itself, and not just on
the owners. Therefore, they put your title to the
property at risk.
- Subdivision permits and Act 250 defects: If a previous
owner neglected to obtain a required state subdivision
permit or Act 250 permit, that constitutes a defect in
title, and must be remedied.
- Local zoning permits: If your town has local zoning
ordinances, and there is a dwelling on the premises that
was built or remodeled after the zoning ordinances went
into effect, the property must have a certificate
of occupancy. A lack of a certificate of occupancy
is considered a defect in title.
- Easements: A title search may reveal easements
that you were not aware of. Easements are rights
conveyed to others to use your property in some way. Examples
of easements are rights to cross your property to another
property, power and telephone line easements, and spring
and water rights.
Some information a title searcher does not determine:
- Boundaries, and the accuracy of deed descriptions. That
information can be obtained by a survey.
- Ownership rights based on adverse possession or easement
rights based on prescription: Those claims would
not be in the land records because they are rights obtained
by a claimant who has either possessed or used the property,
or a portion of it, for more than 15 years, against the
right of the owner.
- Environmental hazards: If there were pollutants
on the property, you would be responsible for clean up. A
title search would not reveal such a problem.
Deborah T. Bucknam is an attorney practicing in St.
Johnsbury and a member of Liberty Title and Closing Company
of Vermont , LLC.
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