Definition
A Title Report is a document issued by a title company that outlines the current legal ownership of a property and identifies recorded liens, encumbrances, easements, restrictions, and other matters affecting title.
Purpose
- Verify ownership: confirms the seller has legal authority to transfer title.
- Identify liens: mortgages, tax liens, judgments, mechanic’s liens.
- Reveal encumbrances: easements, covenants, restrictions (CC&Rs).
- Facilitate title insurance: forms the basis of the title policy.
Key Components
- Legal description: formal property boundaries.
- Vesting information: current recorded owner.
- Schedule B exceptions: items not covered by title insurance.
- Recorded documents: deeds, liens, easements.
Why It Matters
- Risk management: protects against unexpected claims.
- Closing readiness: ensures clear title before transfer.
- Lender requirement: required for most financed transactions.
- Development feasibility: identifies restrictions that may limit use.
Example
During due diligence, a title report reveals a recorded utility easement crossing part of a development site. This may restrict building placement and require design adjustments. The buyer can assess the impact before closing.
Common Issues Found
- Unreleased prior mortgages.
- Unpaid property taxes.
- Boundary disputes.
- Restrictive covenants limiting property use.
Investor Considerations
- Review Schedule B exceptions carefully.
- Consult legal counsel for complex encumbrances.
- Confirm title insurance coverage aligns with risk tolerance.
- Address curable title defects before closing.