Your mortgage lender (assuming you need one) conducts a title search on the property you intend to purchase. Because the title is attached to the home, the title search is a closer look at the title’s history.
- Is the record accurate?
- Has the deed ever been forged or altered?
- Does someone have a claim on the property that isn’t the seller?
Imagine your lender conducts the search and finds that the title is clean. There are no liens, easements, or encumbrances. We will explain what those are in a moment, but for now, pretend that the title search turned up nothing. You buy the home. Several years later, a contractor who previously worked on the property—and was hired by a previous owner—claims he hasn’t been paid. He wants to place a lien on your house until you pay him.
These are the situations that title insurance can protect you from.
Different Types of Title Insurance
In Illinois, there is both owner’s insurance and lender’s insurance. These are precisely what they sound like. One covers the lender, the other the owner. Regarding the previous scenario involving the unpaid contractor, the owner’s title insurance would cover the costs of fighting or paying the party behind the claim. The lender will likely purchase coverage to safeguard the amount of money they loan you.
Liens, easements, and encumbrances are examples of what title insurance protects you from. Liens are a claim on an asset as a means of collecting a debt. Easements are an outside party’s right to use your property even though they do not own your land. Examples include:
- Shared driveway
- A path that cuts through your land that people use to access a public space (e.g., a beach)
- Electrical or gas lines that run through your property (workers may need to repair and maintain them)
Title searches will likely identify any easements on your future property. Plot surveys can also show you exactly what land you will own. And easements are usually noted on the deed. An encumbrance is simply a broad term that covers anything that stops you from using the property how you intend to use it. Liens can prevent you from selling it, and easements allow others to use your land. These are both examples of encumbrances.
Encroachments are another. For instance, you may discover that the neighbor’s fence has been built on your property when you pulled the plot survey—and that is an encroachment. Zoning laws may also limit what you can and cannot do to your property or on your property.
Jayaraman LawRegardless of whether you intend on buying or selling a home, investing in real estate, or need to acquire commercial property, Jayaraman Law will advise and support you. Contact us to schedule a free consultation.
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