On September 12, 2020 Bart Buyer and Sam Seller entered into a written contract; Mr. Buyer agreed to purchase Mr. Seller's office building (located in Indian River County) for $875,000. The closing took place on November 2, 2020. Prior to closing, a title examination was conducted; there were no apparent problems with the title and a title insurance commitment was issued prior to closing. On November 5, a title insurance policy was issued to Mr. Buyer. On November 8, 2020 the State of Florida approved a highway project that would affect Mr. Seller's office building. Most likely the building would be purchased by the state (through eminent domain) in order to complete the highway. In addition to the eminent domain issue, Mr. Buyer has discovered a construction lien (typically used when construction work was not compensated) on the property. The lien was properly recorded in Indian River County, but apparently the title examiner did not discover the lien (most likely an oversight). If Mr. Buyer makes a claim under his title insurance policy for the construction lien, will he be successful? Explain your answer.

 

Reasons why he should be compensated;

A title insurance policy is taken to protect the purchaser from problems that might have incurred before the policy's date and are later found after the policy is purchased.

At the time of purchase, the title company searches for any ownership issues, including past liens on the property, and rectifies it. An insurance policy is then issued to cover future costs for satisfying undiscovered past liens. The insurance policy also covers for costs of determining rightful ownership in case of an ownership dispute. Other costs that may be incurred for cleaning up the title covered. The policy ensures that the owner will have clear ownership of the property and not have any other issues.

The title insurance covers the following title problems;

Public record errors-Any filing or clerical errors that can affect the deed or survey of the property. Before closing, a title

examination was conducted; there were no apparent problems with the title, and a title insurance commitment was issued before closing. The lien was properly recorded in Indian River County, but the title examiner did not discover the lien is an error by the examining officer.

Unknown liens- These are liens filed before the purchase was done, and the purchaser did not know of their existence. Failure of the past owner to pay their bills and liens were filed against the property; title insurance will pay for their release. Mr. Buyer discovered a construction lien on the property after he had purchased the property. He also filed the title insurance prior to closing. Based on these facts of not knowing the existence of the construction lien before the purchase and the title

insurance commitment having been issued prior qualifies him for successful compensation.

Other title problems covered by title insurance but does not apply in this case are;

Illegal deeds- If the deed in question is illegal. The deed is illegal for the following reasons; It could have been signed by a person who does not qualify to sign. If he is an undocumented immigrant or a minor, it can call into question the chain of ownership.

Fraud- If the documents filed were fraudulent or forged, then there is calling an issue of the property's rightful owner.