What Is Title Insurance?
Title insurance is smart business and is a requirement of all real estate lenders. The buyer pays a one-time fee to insure his real estate ownership regardless of the prior ownership history of the property. Title Insurance protects you against past claims and title faults. It makes your home safely yours. Your title insurance policy is your shield of protection and will defend your ownership against loss. You pay one premium only - your protection and peace of mind last as long as you and your heirs remain in ownership.
Why Do You Need It?
Any home, no matter how new or apparently secure, is built on land as old as the earth itself. Undoubtedly this land has had many previous owners. Claims against any one of these persons can be filed against the property and against you as the present owner. Such hazards as fraud, missing heirs, old liens and many others can, and often do, arise like ghosts out of the past.
Know the Different Types of Title Insurance?
There are two basic kinds of title insurance, owner's and lender's. With the purchase of a property, you pay one premium that is all inclusive.
Owner's Coverage is issued at the time you purchase your property. One premium is paid based upon the purchase price or the loan amount, whichever is greater. Your full coverage will last as long as you or your heirs have an interest in the property. This is why an owner's policy is not issued when you refinance.
Lender's or Mortgage's Coverage protects the lender's investment in your property. However, this policy insures the lender against title defects that may affect the security of the mortgage loan - not your investment. The lender's title insurance policy is only in the amount of the mortgage and decreases as the mortgage is paid off. Even if the mortgage lender has a title policy, you still need an owner's title policy to protect your interest.
A History of Title Insurance
by Walter S. Smerconish, President, Main Street Abstract Company
Throughout earliest recorded history, rights in land were established by occupancy. Wandering communities foraged and fought, and it was not until the Agricultural Revolution that specific land was held to have intrinsic value, due to yield, that extended beyond a given year. (Noteworthy perhaps is that the knowledge of farming spread at a rate of only one mile per year for over 200 years. Some revolution!).
The introduction of the Feudal System, by William the Conqueror in 1066 A.D., established the concepts of tenancy and sub-leasing, with no one but the King having absolute ownership of the land. Though Parliament abolished the Feudal System in 1660, our own Anglican roots in law derive much common practice from Feudal principles.
Disregarding prior claims by the Dutch (Henry Hudson) and Swedes (who first settled in Tinicum Township), William Penn accepted land in lieu of cash from King Charles II. Penn systematically began conveying leasehold interests in Philadelphia (by lottery) and in the surrounding areas, obtaining deeds of transfer from Indian tribes along the way. Penn advertised extensively, and purchasers of suburban plots were given random Philadelphia plots as well.
Following the American Revolution, public sentiment held, that since common blood was shed to preserve the new land, personal ownership should be enabled. Upon review of the Penn deed, Pennsylvania Chief Justice McKean held that the claim was clear, and thereby allowed it to remain in effect for all of Pennsylvania. Pennsylvanians voiced disapproval to their legislators, and by Act of Assembly, the Divesting Act of 1779 transferred ownership interest away from the Penn heirs for the sum of $130,000. Had the Penn's declined to accept, and instead challenged the Act of Assembly in court, we would in all likelihood have continued to live in a state of tenancy with all Pennsylvania's lands being owned by the Penn heirs.
The Divesting Act established 67 counties, directed a recorder of deeds function in each county seat, and proscribed a system of search that is still peculiar to Pennsylvania. Land was purchased upon the search of records and the assurance of qualified legal counsel as to validity of title.
It was a landmark case in 1868 (Watson vs. Muirhead) in which Watson (buyer) sued Muirhead (searcher) for a substantial loss resulting from the purchase of property, paid for by Watson, that was sold instead at Sheriff's sale (undisclosed lien). Watson lost his lawsuit and his money, but as a result, in 1874, the Pennsylvania Assembly enabled the creation of the Real Estate Title Insurance Company of Philadelphia. We know them today as Commonwealth Land Title - one of the underwriters used by my firm, and the first title insurance company in Pennsylvania.
