Almost every buyer expects to conduct an inspection of the property to ensure they have a good understanding of the property they are purchasing. The importance of making an informed decision about a physical inspection of the property can be found in our prior blog here.
Equally important, for a Buyer, is an inspection of the Title commitment. Both the “AS IS” and the “Standard” FR/BAR Contracts give the Buyer the right to review a Title Commitment (the “Commitment”) and “object” to matters contained within it. The purpose of the Title Objection is two-fold, to protect your buyer’s right to terminate their contract if the issues cannot be resolved in a timely manner, and to put the seller on notice of defects that must be resolved in order for them to convey marketable title as required by their contract.
By default, a Buyer has 5 days from the receipt of the Commitment to provide written notice to the seller of any defects that render title unmarketable – this is the “Title Objection.” Upon receiving a Title Objection, the Seller is granted 30 days to cure the defects, after which, the Buyer can elect to terminate the contract or provide an additional extension, in the buyer’s discretion. So, when can a Buyer object? A licensed real estate attorney can review a title commitment on a buyer’s behalf and ensure that all matters on the Commitment are standard or customary.
Some common title objections arise when the Commitment shows any of the following:
- Unexpected persons on title – If there is a defective deed in the chain of title, it may become necessary for the seller to track down a prior owner to have a corrective deed signed before they can convey title at closing. People who have passed away may also appear on title requiring death certificates or probate before marketable title can be conveyed.
- Unexpected mortgages, judgements or liens – If a lien is not properly satisfied, a judgement may attach to the property whether on purpose or accidentally. It is imperative that the seller resolves these types of issues prior to closing to ensure the Buyer does not inherit any title defects. This also covers any tax liens or tax certificates that may be outstanding.
- Boundary/Survey disputes – Encroachments of structures into easements, beyond building setback lines, etc. are common issues. If a buyer objects to them timely, the seller is responsible for resolving the issue by obtaining either a vacation of easement or variance depending on the situation.
- Mineral/Subsurface Rights – If any subsurface rights to minerals, oil and gas that may have been granted to third parties will be outlined on the commitment, and without an objection to ensure the seller has those rights terminated, a buyer will take title subject to those terms.
- Building restrictions– Any building restrictions, including setback requirements for pools and accessory structures, as well as a timeframe to commence construction when purchasing vacant land, may be important considerations for a buyer who has a specific plan for a property.
As you can see there are a number of potential objections, with varying degree of difficulty to resolve that can come up on the Commitment. A detailed review of the Commitment to ensure any items of concern are addressed early in the process will ensure a smooth closing, with no unexpected delays or surprises at the closing table.
As always, should you have any questions on this or any other real estate topic we encourage you to reach out to your trusted local real estate attorney.
Natasha Selvaraj, Esq. email@example.com
Berlin Patten Ebling