Volume 3 Number 4
Title Tips by Tute
Volume 3, Number 4
Title Examination 102 -- Adverse Conveyances and Encumbrances
As you may recall, in the last column, we found the source of title and established the chain of title for a hypothetical property being examined. This time we will move forward from that point in history to the present time, finding those conveyances which encumber the title to the property being examined.
As an aside, Tute has often wondered why a title examiner only goes back for a period of 60 years. In informal discussions, it has been suggested that perhaps the period was selected because it exceeded the statute of limitations for enforcing a deed of trust which might be of record. However, the 30 year loan is, historically speaking, a rather modern concept, which did not begin to be widespread until the advent of GI loans in the 1940s. Others with a more historical interest in title examining have suggested that since the process of abstracting titles for others became a commercial enterprise in the early 1800s, a 60 year period would extend back to the founding of the United States. Over time, the concept of taking title back to the sovereign transmuted to an examination for a period of time. Yet others have suggested that title examinations could not go back to a date prior to the late 1860s, especially in certain parts of Virginia, due to the excess enthusiasm for pillage and plunder on the part of certain northern tourists. As title examination for title insurance purposes became common in the early 1920s, the lack of records may be responsible for setting the time period, at least in parts of Virginia. If you know the answer to this historical conundrum, feel free to share it with the readers (c/o Margaret Webb, Executive Director, VLTA).
Getting back to the topic at hand, having established the chain of title, the examiner begins to review the grantor indices in the Clerk's Office for the name of each owner of record. These indices are examined from the date of the deed into the owner through the date of recording the deed out of the seller. Why use different dates for starting and finishing? As a matter of ownership, title transferred upon delivery of the deed, which frequently is the date on the face of the deed. The owner did not need to record the deed on that date, and many did not. The owner could, however, exercise acts of ownership, such as mortgaging the property. Since the lender would be more concerned with obtaining the protection of the recording acts, it would require its lien to be promptly recorded, and in several titles Tute has personally examined, the liens of purchase money deeds of trust are recorded prior to the deeds reflecting the purchase. One may surmise that lenders' instructions were not as detailed then as they are now.
Moving right along, the grantor indices are examined to find liens, restrictions, easements, agreements or any other instruments affecting the property. In the case of voluntary liens, especially prior to the 1980s when the statute governing indexing releases mandated that releases be indexed with the borrower's name in both the grantor and the grantee index, the title examiner would normally find releases by checking the grantee indices in the owner's or borrower's name. (As a practical matter, nobody really wants to run Local Savings and Loan or the First National Bank in the grantor's index -- that would be a lot of work!) Upon reaching the date the deed from the owner was recorded, which is also the date it is indexed, the examiner moves on to the next name in the chain of title and repeats the process.
In some cases, the owner may die owning the property. In that situation, there probably is no deed referenced in the grantor's indices. Depending on the jurisdiction, wills and lists of heirs may be indexed in the same set of books as deeds, but the more common practice is to have a separate set of indices for wills and lists of heirs. The examiner begins running the names of the beneficiaries under the will, or the heirs under the statute of descent and distribution, at the date of death. When to stop running the deceased is a question that has different answers depending on the circumstances, but finding a deed from the deceased recorded after the will has been probated is a rare occurrence. If the will leaves property to the personal representative for the purpose of sale, or if the estate is involved in a protracted dispute, it is appropriate to continue to run the deceased's name, along with the names of the personal representative or feuding heirs, until the estate is closed.
In case it is not obvious from the text, (a quick scan by the writer suggests that this may need to be explicitly stated) the examiner must read each instrument that the entries in the indices disclose. Only by reading the document in its entirety will the examiner know if it affects the property in question. No Clerk warrants the short description of the "property affected" section of the indices, and Tute is all too aware of a number of incidents in which examiners have come to grief by failing to read the entire instrument. Here are a few examples: a pre-printed deed of trust in which the blank section had one property listed, and even though there was no "Continued on Exhibit A attached" note, following the deed of trust was a continuation with three additional properties; an easement that appeared to affect only one property shown on the "plat" attached, but which had three plats attached; a deed that conveyed a specific lot, and then on another page of the deed conveyed an easement over an adjoining lot. No one is thinking about making the examiner's job easier when preparing a deed, so make sure you review the entire instrument before moving on to the next one. (Oh all right, that may be over generalizing, very few drafters think about making the title examiner's job easier.)
While Tute is not sure this is common in all jurisdictions, Tute has noticed that in some courthouses, Virginia Electric and Power Company used to record easements in large batches. It was as if they saved up all their easements for six months or a year, and then recorded them all in one trip to the Courthouse. As a result of that observation, it is one of Tute's personal practices, especially in those jurisdictions in which this has been noted, to look past the date out (for a few months to a year) for easements to utility companies. While it is true that the easement is outside the chain of title, Tute is a firm believer in the old Holiday Inn advertising slogan that the best surprise is no surprise. In most cases, this is not a significant drain on the examiner's time. Except in the case of real estate developers, the indices do not have too many entries in the name of most "regular" folks, and the "tardy" filing is usually on the same page of the index as the deed out. [Computerized indices render this practice of scanning the page of the index past the deed out more difficult than it was when the indices were printed on paper.]
Those items which do affect the property being examined must be abstracted (summarized, or copied verbatim, are two definitions of this term heard by the writer) by the examiner, unless the local court allows you to make photocopies instantly, and noted in the final report. A title report submitted to an underwriter that reports an exception, with the notation "see copy" when there is no copy is guaranteed to get the examiner a phone call interrupting an examination of an entirely different property in order to fill in the missing information. At a minimum, the examiner should note grantor, grantee, deed book and page, date, and the nature of the reported matter.
Repeating the process up to the current date, the examiner should find all matters that are recorded and which affect the property in question. Since the title examiner does not want to report matters that no longer affect title, a review of the grantee's index for releases of any of the encumbrances may be necessary. While liens are the most common encumbrance released, utility easements are often relocated and sometimes quitclaimed back to either the original grantor (formerly VEPCO would only quitclaim back to the original grantor) or to the owner at the time of the request. This is one area in which the move to microfilm as an archival medium by the Clerk's has made title examination more difficult. A marginal notation regarding a quitclaim or release is a real time saver for the title examiner. But be warned, if an examiner were to make such a marginal notation in the paper records of the Clerk's Office, there are criminal penalties. 1
Once the examiner completes the process with the grantor/grantee indices, there are a few other records to check as well. The judgment lien docket book indices will show "involuntary" liens against the property. These are primarily the docketed judgments and notices of lien filed by the taxing authorities, but the judgment lien docket book is also the designated recording site for such things as street and sidewalk assessments, and delinquent water and sewer bills. Again, detailed information available from either the judgment lien docket book, or the actual judgment instrument itself, should be abstracted. Every examiner has had an owner named Johnson, or White, or Brown, or Smith, or Jones, and had to report dozens of judgments, knowing full well that the vast majority probably did not effect the property in question. The more information about the judgment that is available, the easier it is for the owner of the property to provide information to the closing attorney or settlement office, and the title insurer, that the judgment is not against that owner, but someone else with a similar name. The indices are run against each owner of the property during the preceding 20 years since judgments are a lien for 20 years; notices of IRS liens are a lien for 10 years. There is a right to extend a judgment lien for an additional 20 year period, but such an extension must be noted in the judgment lien docket book in the year in which it is extended.
Another anomaly should be noted at this point. During the late 1980s, when the federal deficit was even more in the public eye than it is at present, the Congress passed what was called the Federal Debt Collection Procedures Act. This law had the effect of eliminating state rules of priority regarding judgments in favor of the United States of America, or one of its agencies. The federal government thought they could increase revenues if their judgments were not wiped out by foreclosure. Since the passage of this act, it has become standard practice to examine the judgment lien indices in the name of a purchaser of property, since one rule of priority eliminated by the federal act was the priority of purchase money deeds of trust.
Another set of indices to be examined are those for the Uniform Commercial Code financing statements. Since these are intended primarily for personal property, you may wonder why a title examiner, concerned with real property, would want to check these records. Back in the middle ages, some alchemist's experiments to change lead into gold backfired, as they all did, but must have wandered into lawyer's office, and resulted in the concept of personal property changing into real property. This sort of property is called a fixture, and when the personal property (say sheets of vinyl siding, or rolls of carpet) are "affixed" to real property they are miraculously transformed into real property. If there is purchase money financing for the personal property before it become real property, as evidenced by a filing in the UCC records, that lien will have priority over any other liens affecting the balance of the real property. The title examiner will want any such lien paid or released prior to certifying the property is free and clear of liens.
One other set of records must be checked, and these are not maintained by the Clerk. It has been said, only partially in jest, that no one really owns their property; we are all renting it from the sovereign. That rent is reflected by the real estate taxes paid to the local government. In the case of property located in an incorporated town, taxes are due to both the county and town governments. These taxes are a lien for a period of 20 years. The tax is assessed by the Commissioner of the Revenue and collected by the Treasurer. Should the examiner discover the land has not been assessed for taxation, the Commissioner may assess the omitted tax for the current year and the preceding three years. Again, to avoid unpleasant surprises, the examiner should note the omission and call for the assessment and payment of any omitted taxes
At this point the examiner should be prepared to complete a report summarizing the findings of the title examination. On the basis of the deeds and the instruments found in the grantor/grantee indices, the examiner can provide the description, and the name of the owner. Based on the instruments found during the search of the various indices, the current liens and encumbrances are reported. The examiner should note the ending date and time for the period of examination, as that will be the effective date of the commitment, and a run up at the time of recording the proposed documents will be necessary to date down the title and discover any "late breaking" instruments or new encumbrances.
And that's it -- after all that work the title examination is complete, and the report is turned in. Now, for a really good recipe for cookies . . . oops, that's another program. Keep those cards and letters coming, and we'll see you next time on "This Old Title" oops, that's another program too.
Send mail to email@example.com with
questions or comments about this web site.