Oklahoma Abstracting and Title Insurance Overview Briana J

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

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

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

Commercial Real Estate Transactions n Parties: n n n n Seller Buyer Lender Listing Broker Selling Broker Attorney(s) for Seller Attorney(s) for Buyer Attorney(s) for Lender n Examples: n n 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 freestanding building)

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

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

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

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

How to Record in Oklahoma n Office of County Clerk in county where real property is located Books, records, maps, papers, plats, etc. affecting title to real property n Platted additions and subdivisions n n Payment of recording fee n $13. 00 first page of document; $2. 00 each additional page of same document

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

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

Abstract of Title n n 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

Oklahoma Abstractor’s Board n Regulates Oklahoma’s abstract industry Issues Certificates of Authority n Issues individual abstractor licenses and permits to develop abstract plants n Offers bi-monthly testing to individuals seeking abstractor’s license n Investigates consumer and industry complaints concerning abstracting issues n http: //www. ok. gov/abstractor n

36 O. S. § 5001(C) n 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.

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

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

Encumbrances n n Interests held by persons other than owner Two Kinds: n n n 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 Found by attorney (title examination) or surveyor

What is Title Insurance? n n n Information on status of title to real property Protection against adverse claims 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 Residential & Commercial

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

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

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

Title Commitment n n n Based on Attorney’s Title Opinion 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

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

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

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

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

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

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

Owner’s Policy n n n 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 Covers insured as long as insured has interest in property Coverage continues after insured sells if insured remains liable for warranties of title Nontransferable New purchaser must obtain own title insurance policy naming him as the insured

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

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

Owner’s Policy as Base Title n n n 36 O. S. § 5004(C) 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

Loan Policy n n n 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 Provides lender protection as long as lender has interest in property Policy ends once mortgage is paid off Also covers assignee of mortgage

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

2006 ALTA Loan Policy – Schedule B n 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 n Prior liens, easements, rights of way, roadway reservations, mineral reservations, existing leases, etc. n

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

Questions?

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