Property Transactions: How Title Indemnity has evolved in the Irish Market
At some stage in their career working within property law, the solicitor will be faced with a situation where their client maybe challenged on the grounds of their right of title. The property can become an unacceptable proposition to the purchaser and lender alike, and chains collapse. Resolving such title problems can be expensive, time consuming and stressful.
Title insurance protects owners from unexpected third party challenges against any defects in title which may affect an owner’s ability to use or develop the property. The cover provided by our title insurance enables land to be developed, mortgaged and used, notwithstanding a range of title defects; for example, restrictive covenants or defects in the legal access to land.
For total flexibility and convenience, we at IFG legal Service offer solicitors a choice of policies. A simple and cost effective Known Risks policy will protect against issues identified during due diligence, while our unique Good Title cover can also protect against any unknown risks that may arise after completion. Both policies protect the policyholder and the lender.
Standard Known Risk Cover
This list is not exhaustive but some of the more common known defects that can benefit from Defective Title policy include:
- Missing deeds/Errors in deeds, missing parts
- Lack of easements
- Absent landlord, absent tenant
- Adverse possession/Possessory Title
- Qualified title, insufficient root of title
- Un-discharged mortgages/Reserved rights, exceptions
Receivers and Legal Advisers are increasingly using the strategic and tactical advantages of title insurance to help them expedite the efficient disposal of distressed properties. Our new Receiver Sale Policies can facilitate the smooth transfer of property of Distressed property sales, particularly portfolio sales, which can be delayed by missing or poor quality of title documents and other relevant information. Title Insurance policies are a cost effective solution and they also give a warranty facilitywhich enables the receiver to overcome obstacles due to lack of representations andwarranties on title.This can fortify the asking price for the properties by avoiding potential price chip and can result in earlier settlement dates. The key is putting this in place at the right time: it means being proactive in advising the client on the potential title obstacles and what can be done about them before settlement date. By judicious use of title insurance, asset values may be enhanced – you will save time and money and maximise benefits in the sale process. For the buyer and solicitor, such carefully thought-through and expertly underwritten title insurance policies are a helpful way to manage risk and provide added surety; for creditors and banks they can facilitate a clean exit; for receivers they are a valuable mechanism to improve the process and relieve some of the pain.
A Risk Management Tool
In the current economic climate our policies are driven more by "Risk Management Strategies" as Lenders and Investors are becoming more risk adverse. Many property transactions can be made more efficient in terms of risk, time and cost by introducing our insurance policies.
Typical scenarios would be -
- Credit Committees looking for additional safeguards before investments or loans are approved.
- Replace Reps & Warranties where potential buyers of distressed properties are seeking more security or further reductions in price due to absence of Warranties.
- Cheaper ways to refinance existing debt without compromising security.
Renewable Energy Projects
If you are a Solicitor with an interest in Energy projects, this specialist area of Insurance may be a useful tool for complex transactions around wind turbines and pipelines and masts. As title is not always proven by the licensor this is an area which can be fraught with title problems both known and unknown.
Our policy extends to protect against unknown risks, such a forgery and fraud; judicial review and consequential loss where, as in this type of transaction, the value of the actual real estate isn’t really the issue. Costs like annual rent, construction and dismantling costs are all part of the cover, thereby transferring the risk from the owner and lender to the insurer.
As Lenders are now more risk averse, wrapping this type of transactions with title insurance will improve security. It also adds value to the transaction if re-financing is required further down the line, obviating the need for repeated due diligence adding to the commercial aspect of the deal.
The Benefits for Solicitor & their clients
Title insurance solution is the quickest and the cheapest for facilitating an expedient sale.
Should a defect in file be enforced, the policy provides cover for the legal costs, as well as the costs of defending against a challenge to the title, or settling with a third party, as well as compensating by way of loss in the value of the land if neither of these is successful. If as an alternative to title insurance, approaches were made to and negotiations entered with a third party with a potential interest in the area which is encroached upon, there is a risk that the party which has been approached may refuse to negotiate or that negotiations may be frustrated and demanded ransom payments may be prohibitive. The policy covers all successors in title and therefore endures for the benefit of all interested parties in perpetuity.
This recent case demonstrates how adding Title Insurance to the deal can take the stress out any future claims that may arise.
Boundary Dispute : Case Study
The rear boundary of the property was clearly marked by a fence. The seller of the property stated that the boundary fence had been in its current position for many years, but in 1999 their neighbours had asserted that a triangular piece of land within the rear boundary was theirs although matters had not been taken any further and so the policy was obtained to cover any subsequent issues. Shortly after completion the neighbour's surveyor wrote a letter to the Insured contesting the position of the rear boundary fence and also confirming that steps had been taken at Land Registry to prevent the disputed area being registered in the Insured's name. Lawyers and surveyors were instructed by the Insurer in order to resolve the dispute.
The position of the rear boundary fence was confirmed to the satisfaction of all concerned and the Insured's registration of the land into their name was completed without issue, so any future sale of the property would not be prejudiced. The settlement amount and all legal costs were covered under the terms of the title insurance policy.
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Carmel Nielsen, IFG Legal Services, Booterstown Hall, Booterstown. Co Dublin