Title Company Lawsuits

A title company is a company that performs title searches and provides title insurance to property owners. Title insurance provides protections for the title that a property owner holds for a particular parcel of real estate. Title insurance also protects the interests of mortgage lenders from legal claims or lawsuits that are connected with the title to a parcel of property that is collateral for a loan.

A good title insurance policy protects the policyholder, who is generally the owner or lender of a certain piece of property, against loss of market value that could result from defects in the title to the property. Usually when a person buys property, they hire a title company to research the title and discover any defects or claims on it. Such defects might have appeared during a previous ownership; the buyer relies on the title company to uncover them, so they can be dealt with at the time of purchase.

In a routine transaction, the title company performs its research and then issues the title insurance. Per the policy, the role of the title insurer is to defend the policy holder against legal challenges to the title, and to pay the policyholder for the losses in value that are covered by the title insurance.

Title companies also complete tasks in addition to researching title and issuing title insurance, such as the following:

• Checking to ensure that a title is clear or free from any defects that might hinder a sale or transfer of a property or affect the interest of the buyer of property
  • This includes performing a title search with the county recorder of deeds to ensure that no other individual owns the property or has any claim to it and that there are no disputes regarding the title
• Checking to see if there are any liens, judgments, mortgages, or unpaid taxes on the property
• Checking for any easements, leases, or other issues that might interfere with the ownership of a new buyer of the property
• Requesting and supervising a property inspection or a boundary inspection to ensure that there are no conflicts regarding fences, boundaries, or encroachments onto the surrounding property areas
• Managing real estate trust fund accounts or escrow accounts
• Recording all titles, deeds, or other documents with the appropriate authorities and making sure they are filed in the appropriate manner

Working with a title company can make a property transaction proceed more smoothly, and having title insurance should offer protection in the event that a person’s title is challenged by someone with a claim of some kind to it.

However, title companies can be associated with certain specific types of legal disputes, including:

• A chain of title dispute, for example, if the company fails to identify all possible claims to ownership or unknown liens, easements held by third parties, or possibly the claims of a prior owners’ heirs
• An issue regarding whether title is marketable or whether it has title defects
• A fraud or a misrepresentation
• A breach of the insurance contract between the title company and the insured owner

A title company and its agents are held to a certain standard regarding the accuracy of their work. If a property owner believes that the company or agent did not exercise reasonable care in performing their duties, they may be able to hold the title company liable for losses incurred in connection with the purchase of property.

One option would be suing a title company for negligence. A property owner who is insured under a title insurance policy may sue the insurer for negligence for failing to advise them of the existence of a properly recorded encumbrance affecting property that is covered by the policy This would be consistent with the basic law of negligence which provides that a person who suffers injury caused by the allegedly negligent performance of a duty of care may seek compensation for their losses through a negligence action.

Courts in several states have recognized that property owners rely on a title insurance company’s representation that title to a property is good to make purchase decisions. This can be very important, because the impact of an unknown property encroachment, such as an easement or other right of use, can be a significant burden on a person’s enjoyment of their ownership of property. Losing a small portion of land because the boundaries were not correctly established can have a huge impact on accessibility and visibility, two factors that are especially important in valuing a piece of commercial property.

If an owner were to be unable to sue for negligence they might be left with only the legal right to claim a small recovery for loss of value of the parcel, when, in fact, the impact on the owner’s use and enjoyment is much more than a reduction of its fair market value.

Of course, the law of negligence and whether it can be used against a title insurance company may vary from state to state. A property owner would want to consult an experienced real estate attorney to ensure that a claim for negligence is sanctioned in the state in which the property is located.

What Legal Remedies Are Available When Suing a Title Company?

A dispute with a title company can arise when an owner discovers that some entity claims an interest in the property of which the owner was not informed when they bought it. For example, there might be an easement that was never recorded that gives the public the right to use a roadway across the property.

The response of the title company in such a case should be to research the claimed interest to determine whether it is valid. If the company determines that the claim was missed by the title company’s research prior to the sale to the current owners, the title company would have to make the payment to the owner that is promised in the contract of title insurance. Often the policy calls for payment of the reduction in value caused by the existence of the burden on the property up to the amount of the policy limits.

If an insurance company should fail to deliver the performance promised by its insurance policy, the owner might have to resort to a lawsuit against a title company. They might claim breach of contract, or insurance bad faith or breach of the duty of good faith.

As explained above, if the facts warrant it, a claim of negligence for their failure to discover the burden or defects in the title might be an option. Another option would be a claim for breach of warranty deed covenants. If the facts support it, a person might claim fraud and seek money damages for their full losses.

A person would want to consult an experienced real estate lawyer for a full analysis of their options and to find out what the law is in the state where the person has purchased the property at issue. State law on these issues is likely to vary from state to state.

If an individual believes it may be necessary to file a lawsuit against a title company, there are several steps they should take, including:

• Consult with a lawyer: It is important to consult with a real estate attorney to discuss your unique situation as well as to determine what, if any, claims you may have against the title company.
• Gather evidence that can support the claim or claims: There are several steps related to gathering evidence, including:
  • Reviewing the title insurance policy to understand the coverage and identify potential breaches by the title company
  • Collect any documents that are related to the property transaction, including:
    • the purchase contract
    • closing documents
    • title search report
    • correspondence with the title company
  • Document the damages, or financial losses, that were incurred because of the title company’s actions, which may include lost property value, legal fees, and costs to resolve the title issue
• Try to resolve the issue with the title company: It is important to send a detailed letter to the company that outlines the issues and requests a resolution
  • It may be possible to reach an agreement with the title company prior to commencing any legal action
• File a complaint with a regulatory body, if possible: The regulatory bodies that may be available vary by state and may allow individuals to file formal complaints

If an individual is unable to resolve their issues using these steps, they may need to proceed to filing a lawsuit. The steps involved infilling a lawsuit against a title company include:

• Filing a lawsuit in the correct court: A lawsuit must be filed in a court with jurisdiction over the case based on the location of the property, which includes:
  • Drafting a complaint that outlines the details of the negligence, breach of contract, or other wrongdoing on the part of the title company as well as a request for damages
  • Serving the complaint on the defendant, or title company
  • Attending any necessary court hearings or meetings
  • Attempting to negotiate a resolution outside of court, if possible

It is important for an individual to be aware of any applicable statute of limitations that may apply to their case. This means that there may be a time frame in which the lawsuit must be filed or it will be dismissed by a court.

Do I Need a Lawyer for Help with a Title Company Lawsuit?

It is essential to have the help of an experienced title dispute lawyer with a title company lawsuit. A title company may be very helpful and provide assistance during a property sale or when a potential purchaser is considering purchasing a property.

However, there may be times when a dispute arises with a title company. In these cases, an attorney can review your case, advise you of possible remedies, and help you file a lawsuit, if necessary. Your lawyer will represent you during any court proceedings.

A title issue can be a major hindrance to completing a real estate transaction. Having an attorney may be the difference between having a clear title and not being able to purchase a property. The law in this area is technical and getting the advice of an experienced attorney is important.

Your lawyer can help you with all aspects of your issue or dispute, including:

• Understanding the legal issues in your case: Your lawyer will analyze and explain the facts of your unique situation, including whether you may have more than one possible claim.
• Gathering evidence: Having an attorney will help ensure you have gathered all of the necessary documents, which may include:
  • contracts
  • title reports
  • closing documents
  • any correspondence with the title company
  • any other documents that may support your claim
• Drafting legal documents: Your real estate lawyer will draft all documents necessary to resolve your claim, including the complaint, which outlines your allegations against the title company.
• Consulting with expert witnesses: If your case is complex, your attorney may need to consult with title insurance or real estate experts who can provide expert testimony on the legal issues in your case.
• Facilitating negotiations and settlements: With the help of your lawyer, you may be able to reach a settlement agreement before a trial begins.
• Representing you in court: If you are not able to reach a settlement with the title company, your attorney will represent you in court and present evidence and arguments on your behalf.

LegalMatch can help you find an attorney in your area who can help you with all of these aspects of your case and more. You can submit your legal question or issue at no charge on the website and, in around 24 hours, you will have responses from member lawyers near you who are ready to begin working to resolve your issue.