All About Title:
Title Commitments, Title Objection Letters, and Final Title Policies
By: Lindsey Abboushi- North Carolina Licensed Attorney with Brownlee Whitlow & Praet, PLLC
*Title commitment is used for reference is a Chicago Title Commitment
Title insurance is used to protect parties from post-closing title matters. To begin the process, an attorney or title
company performs a title search on the property during the due diligence period of a transaction. Think of this period as a mystery, the title searcher will scour to find answers to common property questions and find solutions to potential title
related problems. For example, finding the record owner isn’t always the same person that claims they own the property.
After a title search is completed, the searcher submits their findings to a title insurance company to generate a preliminary
title commitment. The preliminary title commitment then gets sent to all applicable parties to the transaction for review. If
the contract permits, both parties (the buyer and seller) have an option to object to certain requirements in the title commitment and draft a title objection letter that gets circulated among the parties, their representation, and the title company. A title objection letter is essentially a formal way of asking the title company and/or the other party to edit the title commitment or address any other problems or potential problems with the title to the property. After the transaction closes and the commitment requirements are met, then a final policy is issued granting coverage of post-closing related title issues.
So, what is a commitment? A title commitment is a preliminary document to obtaining your title insurance policy.
Basically, it is a set of requirements that need to be met to ensure protection for a title policy to be issued. There are two
types of commitments, a Lenders Policy, which is required by most lenders, and an Owner’s Policy. As the name suggests, a Lender’s Policy protects the lender from any post-closing title matters, and an Owner’s Policy protects the owner.
The commitment is typically divided into 3 sections: Schedule A; Schedule B, Part I; and Schedule B, Part II.
Schedule A-Basic Information
Schedule A is the informational page prepared by the issuing office of the title policy. It shares the commitment date, policy(s) to be issued, the amount to be insured, type of title transferred, current owner, how the current interest was
obtained, and the legal description of the property to be insured. Common objections to this section include the policy(s) amount to be insured and the legal description. It is important that the policy(s) reflect the value and/or the loan amount pertaining to the transaction. This amount can change various times throughout the due diligence period which is why a
typical objection would note that the amount to insure should be either the purchase price, or the price that the buyer’s
lender requires prior to closing.
During the due diligence period, a survey is usually performed on the property, and many lenders require it. Depending
on the transaction, the new survey could recombine parcels, subdivide parcels, or change the legal description altogether.
To properly convey title in North Carolina, a legal description is used to tell the world what is being transferred. So, a common objection to Schedule A is that the legal description must be “word for word” on the title policy the legal description that is used to convey the property, and usually the legal description that the Seller received when they bought the property.
Schedule B, Part I-Requirements
Schedule B, Part I is the requirements section of a title commitment. It clearly lines out what the title company requires
for a policy to be issued based on the specific property. As this section consists of requirements from both parties (buyer and seller), one may object that the other party is obliged to participate in a timely manner to prevent delays in obtaining the final policy.
Schedule B, Part II-Exceptions
Schedule B, Part II is the exceptions section of a title commitment. This section lists all the exceptions to coverage on the future title policy. Common exceptions include easements, covenants, restrictions, surveys, and various other property related agreements. As a buyer, you want to object to as many exceptions as possible to limit the number of exceptions you have on the final policy. It makes sense, the less exceptions there are the more coverage that is provided. The easiest place to start is requesting that all general, standard, vague, and blanket exceptions be removed from the final policy. As for specific exceptions, it is in the buyer’s best interest to require the seller to confirm as much as they can regarding these exceptions to give a clearer picture of the status of the property from firsthand knowledge. This may include requesting that the seller provide information on leases, copies of existing agreements, renewal times for restrictions and covenants, confirm if certain agreements are still in place, etc.. This section is also very helpful for the buyer during the due diligence period because it
gives a list of title related items to consider. Usually the bulk of these exceptions “run with the land” meaning that a change in ownership will not affect the existing obligations/restrictions. Sometimes the seller will clarify that certain items are no longer
in effect and/or they can be removed prior to closing.
Overall, having a title insurance policy is a necessity, and understanding a title commitment can be very beneficial during
a transaction for both the buyer and seller. If you have any further questions on title commitments, title objection letters, and title policy’s, feel free to reach out to BWP.
*The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information in this article is for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Viewers of this material should contact their attorney to obtain advice with respect to any particular legal matter. No viewer of this material should act or refrain from acting on the basis of information in this presentation without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this article does not create an attorney-client relationship between the reader and Brownlee Whitlow & Praet, PLLC or any contributing law firms. All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed.
