“What is a Title Commitment?” is a question often asked by property buyers seeking title insurance. Prior to closing, a Title Commitment document is given to the buyer informing him or her that the title company has decided to insure the property up
for purchase, once a title search has been conducted. The title search looks for defects in the property’s chain of history that might lead to future problems with the title.
The buyer has several days to talk to their title company or their agent if they have questions or they find anything unacceptable on the title commitment.
The Title Commitment is divided into several sections:
Schedule A lists the commitment date, the proposed insured and the title policy to be issued, a description of the proposed properties to be covered by the policy and an interest statement about the land and owner.
What’s covered and what’s not?
Schedule B includes the Requirements, Exceptions, and Exclusions.
The Requirements are what must be done before the title insurance can be issued and escrow can close. If any of the Requirements can’t be met, there may be a delay or cancellation of closing. Some of the Requirements may be recording of a new deed, releases of various liens, tax payments, copy of trust paperwork or proof of identify.
Exceptions are what the title company will not cover against (including certain exceptions that are standard, like water or mineral rights.) If the problem is listed in Schedule B, the title insurance policy will not cover against it (nor pay attorney
or court fees regarding the problem.) If the buyer protests some Exception, the title company may be convinced to insure over it (with an endorsement) or obtain a release, quitclaim or other document to eliminate the exception. Some examples of Exceptions are interests in the land that can only be found at inspection, easements, and tax assessments for new construction. The buyer, however, should read
the Exceptions section carefully as there may be a limited time to make any objections before the title insurance is issued and the closing is completed.
Exclusions are things the title company will not cover, like any government police power over the property, rights of unrecorded eminent domain and claims arising from bankruptcy.
The property buyer can get additional coverage through endorsements that might cost little or nothing. Discuss these with your title agent.
At close of escrow, the title insurance policy is issued. The policy doesn’t say that no title defect will occur. It only insures the buyer against the defect if it occurred prior to the policy date. The same sections are usually included in the title insurance policy as are contained in the Title Commitment.
For more information about the Title Commitment, visit www.alta.org.