This month in Ohio, House Bill 525 went into effect requiring very strict formatting on documents to be recorded in the recorders' offices across the state.    Any document that does not conform will be be accepted ONLY if an additional $20 recording fee is paid.  It seems, like many well-intentioned laws, this one too will come with some unexpected consequences.  There are several common practices that may end up costing title companies lots of extra money if they aren't very careful. 

NALTEA has finalized the date and location of the October 2009 Conference.

  Most states in the American Constitutional Union of fifty, have a statute on their books which assures the public, access to public records.  In California, this law which is Government Code section 6250-6276.48 has been poorly understood by state officials, with an annual survey showing rampant violations of the law by local, county and state officials.  Perhaps it is a good time to review the provisions of this law.

Chicago Title, one of the Fidelity companies, recently filed a lawsuit against an attorney in New Jersey claiming that it was malpractice for him to rely on a title commitment he ordered for his client in the course of representing him in a purchase transaction.  I guess nothing in this industry should surprise me anymore, but I had to read this article twice just to make sure I wasn't missing something.  What does it say for the title industry when the nation's largest underwriter, controlling about 45% of the market share, sues an attorney who ordered its product for relying on its accuracy?

Errors and omissions insurance for abstractors is very expensive, at least in relation to the depressed fees that are prevalent in the industry.  Unfortunately, working without it is not an option for many abstractors.  Some states require abstractors to carry E&O insurance, and even if the state does not, many clients do.  Beyond that, it is rather foolish to incur the amount of potential liability that we do without some form of protection.

Recently, I was informed of an abstractor that crossed the line from foolish to criminal.  As ill-advised as it is to operate without E&O insurance, it is far worse to represent to clients that you have coverage when you don't.  Especially when in the process you forge a declarations page and pass it off as your own.  Issuing false certificates or proofs of insurance is insurance fraud.

The real drama of a Florida couple leads to a pretty bizarre court decision that should have most of us in the title business scratching our heads.  The MacLeods purchased a 70 acre farm and later found themselves in foreclosure over a lien against the prior owner.  Orix Financial had recorded its lien in 1996, but the county clerk never indexed it.  Thus, it was not discovered by the MacLeods, or their title agent... until the foreclosure action was instituted in 2006.

The Third Circuit ruled that the MacLeods' ownership rights trumped Orix's lien, but the First District Court of Appeals overturned the decision. The Court of Appeals stated that the MacLeods' "remedy, if any, will lie against the title insurer or abstractor or against the clerk of the circuit court." 

A few months ago, I wrote a blog post about the problem new home buyers can face with mechanics liens, especially with more builders having financial problems.

There has been some recent news reporting on the subject, but an article written this week points out how the public, and even the press is not completely correct in their understanding of the problem. In this article from the ABC affiliate in Philadelphia, a homeowner faces the prospect of a lien being filed from an unpaid subcontractor on his home. Pennsylvania's mechanics lien law has a specific provision which invalidates a lien waiver from a contractor if the general contractor has not posted a bond to cover their payment to subs. Contactors have up to 6 months to record a lien, so subsequent homeowners can be affected. Many home buyers would not be aware of the need to verify the existence of a payment bond, to validate the lien waiver.

In PA, second-tier subcontractors can also file mechanics liens, so even if a homeowner is give a stack of waivers from all of the primary subs, a direct vendor to one of these can still pop out of the woodwork.

There are also requirements for the contract for work be filed with the prothonotary office within 10 days of commencement of work or delivery of materials. This recording requirement also stipulates indexing in the name of contractor and owner.

This is just one example of the specific technical knowledge of a single aspect of title searching in one state. The point of this is to show that property rights can be affected by mechanics liens in ways which would not be readily apparent, unless searching is done by an experienced abstractor, with substantial local knowledge. The affects of mechanics liens on properties follow different rules in different states, which is another reason that thin searches, short searches, or online searches are not appropriate in every situation. For example, in Florida, a process exists for a contractor to protect their anticipated rights in advance, by filing a "Notice of Commencement", prior to engaging construction activity. This self-releasing document puts the public on notice that a vendor may be accruing rights to claim against a property if not paid.

What are the unique mechanics lien provisions in your state?

- Dave Pelligrinelli

Over the years I have written several articles about instances of deed fraud. In these cases, a person intending to commit fraud executes a deed transferring a property into their name without the knowledge of the true owner. The most common method used is to find a vacant and un-mortgaged home, and then forge the signature of the current owner on a quit-claim deed. Once this fraudulent deed is recorded, the criminal can sell, mortgage, or rent out the home and pocket the proceeds.

In a recent incident from California, a slightly different variation of the trick was used. In this case, the true owners apparently vested their California property into a corporation which the couple uses to do their real estate business. The company was named “California Housing Association LLC”, although it is domiciled in Nevada. This transaction was executed in 2007. 

Fast-forward to 2009, where a person named Raymond Tate allegedly forms a CA corporation with the same name, and then proceeds to sell the property to an apparently innocent third party. The original owners discover this unknown person living in their home, and the scheme is uncovered. The local county sheriff has some trouble figuring out what to do, and it takes some time to backtrack the process. Fortunately, the title insurer states that the new deed out of the CA corp is invalid. It would be easy to determine this if the corporation was not in existence when the property was vested into it in 2007.

As the host of Source of Title, I often receive questions via email.  I do my best to answer them and, every once in a while, there is one that is particularly interesting and worth sharing.  I received the following question today:

Would you be able to refer me to the reference clarifying whether a full search in California needs to go back 40-years or 60-years?

Often times, abstractors are contracted to provide a 40 year search, or a 60 year search, or perhaps some other quite arbitrary period of examination.  In such a case, the abstractor knows what the client expects.  However, other times, the client will just ask for a "full search."  Exactly how far back should the abstractor search to fulfill the request?

Yesterday, we got one of the phone calls that we all dread... "you missed a mortgage!"  That always causes a sense of panic and we rush to double check our work.  In this case, title was vested in Ray A. Smith, we checked the index again and only found the one mortgage that we showed.  The client, however, provided a volume and page.  When we pulled the document and it was, indeed, a mortgage with our legal description.  However it was executed by Andy Smith - NOT Ray A. Smith.  Thus, it was a stray document - outside of our chain of title.