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Title Insurance


By Ilyce R. Glink and Samuel J. Tamkin

Summary: Before you go to closing, ask about your title insurance protection, and be sure to protect your home with an owner's title insurance policy. In this article, a reader discusses a closing mistake in which the closing attorney paid property taxes for the wrong property.

Q: I bought a foreclosed lot for $17,000.  After I bought it I found out that it had a 2,000 square foot brand new home on it. The closing attorney prorated and paid the real estate taxes, but he paid them for the property next door. At one time the property I purchased was part of the same parcel as the next door property.

I have done everything from filing a claim with the title insurance to calling the seller and now I have hired a private real estate attorney to make the closing attorney clear my property of delinquent taxes. What do I do next?
(article continues below useful links)

A: Let’s review what’s happened: You bought a house for $17,000 and there are delinquent taxes on the property. Based on your information, it would appear that closing attorney has made a mistake. This mistake needs to be cleared up.

Since you have title insurance, the title company should be responsible for picking up the tab, unless it noted that the taxes were unpaid and listed the correct property identification number.

Starting at the top, you will have to force the attorney to own up to his mistake. To do this, you might have to file suit or file a misrepresentation claim with your state’s attorney registration and disciplinary committee. (These are the folks that keep all attorneys registered and make sure they behave properly. I don’t know what the private real estate attorney is doing for you, because you can do this on your own.)

Anytime you buy real estate you (the buyer and/or your attorney) must make sure that any unpaid real estate taxes are paid at the closing, typically out of the closing proceeds.

In addition, you must make sure that you receive the proper credit for any real estate taxes that will be billed to you as the buyer for the time the seller owned the property.

Prior to preparing the closing statement, your attorney should have received a title commitment from the title company. The title commitment is the document that discloses anything that could affect the title to the real estate.

For example, the title commitment will show the name of the owner of the real estate that is being purchased along with the amount of real estate taxes owed, the property’s legal description, the name of any lenders that have mortgages on the property, whether there are any liens against the property or easements which could be a problem for the new owner down the line.

Just because there is a title commitment does not guaranty that the seller can convey “good” title to a buyer. A title commitment is basically a list of facts that the title company found when researching the property. If the title company has done a good job searching the title to the property, you, as the buyer, will have a good understanding of the issues that will affect your title.

When a buyer is told that the title to a property is “clean” or will be “clean” at closing, this phrase generally means that after paying off existing lenders, paying any real estate taxes that are due and paying off any existing liens, the buyer will be able to enjoy the property without threat of litigation or other matters that may have been caused by the seller.

Somewhere along the line, someone made a mistake. Perhaps the title company provided the closing attorney with the wrong property identification number, or the attorney made a mistake and paid the wrong tax bill. If on the title policy your taxes appear as “paid,” you will need to pursue your claim against the title company and closing attorney.

This is why buyers should always obtain a title insurance policy for themselves, not just for the lender (which is required when you get a mortgage).

A final option would be to go to the tax collector and talk to someone about the mistake, and see if they can apply the payment to the correct account. Frequently, you can correct errors make in the payment of taxes, but you’ll have to follow strict procedures set up by the tax collector’s office, including providing copies of cancelled checks, closing statements and affidavits.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website




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