Chain of Title gets its name from its sequential nature; as it runs, tracing historical title transfers from a current owner to the original owner. It is used to describe a successive conveyance to a particular parcel of land. It refers to the record of passing down real property title ownership to the original owner from a present owner. Reports about title documents may be preserved by a civil law notary or by a registry office, due to their immense importance in settling ownership issues on property and assets.
The “chain”, which is the sequence of historical transfers for the title runs from the present owner down to the property’s original owner. The chain of title may be reconstructed in situations where it is needed.
When a real estate transaction is to be carried out, a title company carries out chain of title research to summarise entire title transfers in a title report. Buyers use title insurance to protect themselves against potential financial errors from errors in the title report.
Chain of Title includes notice in deed to property, legal distribution from estates, foreclosures, certificates of death of a joint tenant, judgments of quiet title and other documented transfers of title to real property.
A property purchaser usually first hires abstractors or title companies to investigate the chain of title and provide a report before purchasing a property in order to ensure that the title is clear of any claims. Insurance companies issue title insurance for many real estate transactions based on the chain of title to the property after it is transferred.
In real estate, the chain of title holds a significant amount of importance. Registration systems such as the Torrens title system, have been advanced to trace the ownership of individual pieces of property. Private title plants are sometimes maintained by title insurance companies to track real estate titles to corroborate official records. An abstract of title is used in other cases to establish the chain of title which can be certified by an attorney.
Holders of mortgage debt in the United States may find it impossible to establish a chain of title, even though a clear chain of title is sometimes an important requirement by the mortgage holder in order to proceed with foreclosure.
In cases where a chain of title is unclear, a company known as Mortgage Electronic Registration Systems (MERS) is relied on by lenders to nominally hold title. This allows mortgage liabilities to be bought and sold without having to register the changes of ownership to the property with the local government.
Homeowners are at a greater advantage when they are aware of and comfortable with property records documented against their property, especially in default. With such information, they can ensure that they are dealing with the proper grouped and informed of any inherent disparities that may prove useful through processes of short sale, foreclosure or loan modification.
Challenges to establishing chain of title include: the information may not always be updated, totally accurate or reflect the latest developments in the ownership of a particular property. Other problems may arise from the documents not being recorded, or if the property was re-conveyed to or from the third party created by Freddie Mac and Fannie Mae, because such records are closed off from the public.
There are also many circumstances where it is almost impossible to find completely inclusive account of al recordings on a particular property. Still, homeowners can begin the process as much as possible to stay informed where the overall status of their property is concerned.
The concept of chain of title is an important aspect of a lawyer’s job when it comes to representing a client who is interested in purchasing investment properties. Any concerns or liabilities that could arise from purchasing the property or properties in question need to be discovered. Key information about the history of the property and any liabilities the lawyer’s client may risk incurring can be acquired from investigating the chain of title.
With a comprehensive title report, a lawyer can easily discover any gap in the ownership history of the property and warn the client about unknown liens that could be inherited upon purchase of the property. It becomes the investor’s decision to go ahead and take the risk after they have been provided with all the available information relating the ownership of the property by the lawyer.
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