Resolving Gaps in Real Estate TitlesThe Paralegal Resource
January 14, 2014 — 1,300 views
In many cases a complicated phenomenon can only be described best with the help of multiple examples indicating the existence of the situation. Similarly, in the case of gap that is often associated with title insurance can appear in many different situations or circumstances. This gap can have numerous implications that include claims. In each of these situations, the gap is generally the difference between the time of the last examination of the title and the difference between the date recorded by the notice of the mortgage or deed that has been insured. This is known as a gap in title.
Different Forms of Gap
The gap can assume many different faces based on the circumstances. This includes situations such as the following:
- The title of the company and its plan posted seven business days prior to the recorded time
- The files of the title company are closed without down dating, continuing or extending the prior records of search
- The county recorder's office has records of the instruments approximately a month after they are presented to the recorder's office.
- The execution of the documents is secured on a loan which is subjected to the right of rescission by the title company.
Each of these situations leads to a gap in the title insurance.
The gap between filing and recording of any instruments varies widely depending on the county. In some of the locations, the examination is done with no gap between examination and the date of the issue of policy or there is a small gap of a few hours. However, commonly, this gap can vary for anything between a few days to a few weeks whenever the title is either continued or down dated until the time of filing. However, in many counties the gap can vary for anything between 2 to 8 months. This is visible mostly in the area surrounding Atlanta where the gap can vary by about 4 months and the same is also true about Minnesota due to the switch in procedures to imaging.
Reducing the Risk of Gap
In many situations, title claims can take place during the gap during the gap period. Many things can take place such as the borrowers may face a judgment or a tax lien filed against them. The sellers may get a builder to grant an easement or obtain an equity loan. In some of the minority states, it is also possible to have the insured instrument not to have a priority over the deed that is unrecorded. Mortgage may also be executed at times before the instruments are recorded and in many cases, these gap claims can cause huge losses. As a result, it is very important to reduce the risk of gap as much as possible. Since the gap varies from one county to the other, and from state to state, you will need to employ different methods as per the situation at hand.
In many situations a simple continuation of the title until the closing can help close the gap. If the closing is subject to rescission, you may have to use additional continuation or other methods to make sure that no claims take place during the period of gap. As a result, it is very important to be fully aware of the local practices and use the same to alert you whenever a risk presents itself.