Title insurance when buying an apartment: issuing a policy, conditions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Today we will look at a rather interesting issue - property title insurance. What is it and what is it for?

First of all, this topic may be of interest to those people who plan to invest free funds in real estate. If in the near future you are planning to acquire ownership of an apartment, house or summer cottage - title insurance can save you from many troubles.

The thing is, when you buy a home that has changed ownership multiple times, you put yourself in a dangerous position. Your right to acquired property can be challenged at any time by one of the previous owners. There can be many reasons for that. Title insurance is designed to protect you from such risks. Let's take a closer look.

What is title insurance

So, what is meant bythe term "real estate title insurance"? What it is? This is the name of an insurance product that provides protection against the risk of losing the right to property if the transaction is challenged and invalidated. Interestingly, such a policy protects a person not from what may happen in the future, but from the possible consequences of what has already happened once. At the time of drawing up the title insurance contract, such events are not known to any of the parties and do not manifest themselves in any way.

The name of the described policy comes from the phrase " title", which means a document confirming the exclusive ownership of a particular property.

Today, such contracts are most often concluded simultaneously with a real estate insurance contract. Such property is quite often the object of long legal chains. The same apartment can be sold several times, become the object of donation, alienation in any way, inheritance and transfer from hand to hand, based on the decision of the judicial authorities. If legal inaccuracies were made at any of the listed stages, then not only this particular transaction, but all subsequent ones can be challenged and declared invalid. As a result of such actions, the current owner of the property is deprived of the rights to the purchased property. Title insurance, reviews of which are the most positive, just protects the owner from such a risk.

Why is it needed

The main result that a person gets fromof this type of service - compensation for losses received in the event of loss of ownership of the acquired apartment, house or cottage. In addition, the contract may provide for other compensation related to compensation for additional losses associated with an insured event.

An insured event is recognized as a documented fact that you have suffered real damage associated with the loss (in whole or in part) of the right to own housing. In this case, the events arose independently of your will and on the basis of a court decision that has already entered into force.

What title insurance protects against

The acquisition of any property, and especially housing, requires a balanced and responsible approach. It is important to take into account every little thing, all possible troubles. According to official statistics, slightly more than one percent of real estate transactions are declared invalid by the court. It seems to be a little, but this is if the matter did not affect you personally.

Reason for contestation may vary. For example, the interests of the child were not taken into account during privatization. This is already grounds to challenge the deal. Moreover, this can be done even after two or three years.

Since it is housing that is most often subject to fraudulent schemes, title insurance when buying an apartment will ensure that your hard-earned money does not move into the pockets of "black" re altors.

Of course, before concluding a deal, you should carefully check all the ins and outs of the purchased housing. But dothis can be very problematic. The fact is that archives most often refuse to provide data on all transactions previously made with property. They motivate their refusal by the fact that there is supposedly enough information about the last owner. In practice, this is far from the case. A much earlier owner may appear, and then the rights of all subsequent owners, no matter how many, will be declared invalid by the court. That is why title insurance makes the buying and selling process so much safer.

When a deal can be challenged and invalidated

There are several situations in which a transaction may be invalidated:

• falsified documents were provided at checkout;
• the acquired object was seized due to the presence of outstanding debts of one of the previous owners;
• the apartment was not bought from the true owner;
• the seller kept silent about the disagreement of his "second half" to the transaction;
• heirs of one of the former owners claim the purchased housing.

In some other cases, apartment title insurance can also protect the new owner from loss or loss of ownership:

1. At the time of the transaction, the seller was a minor, had a mental disorder, or was legally restricted.
2. The documents were drawn up in violation of applicable law.
3. Repealed rightsauthorized representative, in cases where the transaction was not made by the seller personally.
4. The deal was made fraudulently or through violence or threats.

How much does it cost

So you've decided to take out title insurance. How much does such a policy cost, and what does its cost depend on? The amount insured is accepted on the basis of an agreement between the parties. Most often, it corresponds to one of these parameters:

• market (actual) cost of housing at the time of signing the contract;
• cost of acquiring similar housing (replacement cost);
• replacement cost, that is, the amount needed to build the same object;
• the amount specified in the loan agreement (if any);
• value of housing under the contract under which ownership was obtained.

What influences the insurance rate

The payment you have to make as insurance also depends on several parameters:

• of the sum insured;
• number of risks included in the contract;
• History of house or apartment (number of previous owners);
• the availability of a franchise and its size;
• peculiarities of the regulatory framework that existed at the time of the conclusion of previous transactions or privatization;
• policy expiration date.

Depending on all these factors, the title insurance rate can be calculated in the amount of 0.1 to 5% of the amount insured. It all depends on the conditionscontracts.

Design rules

This type of insurance is relevant not only in the case of purchasing housing in the secondary market. Title insurance of real estate will also protect you when buying a home in a new building. For the correct execution of the contract, you need to prepare:

1. A document confirming ownership of an object (purchase, donation, inheritance, etc.).
2. Certificate of state registration.
3. Registration certificate of housing.
4. Extract from the house book.
5. Plan of a house or land plot (if we are talking about insurance of these objects).

What to do in the event of an insured event

If there is a situation where title insurance is still useful, you should immediately notify your IC. You need to personally arrive there and provide the following documents as soon as possible:

• civil passport or other document confirming your identity;
• current title insurance contract;
• original and copy of the court decision establishing the fact of alienation of the acquired property.

After careful study of the documents, the UK is obliged to pay you the full amount under the contract. In addition, if a clause was included in the insurance to compensate for other expenses, such as legal costs, this money will also be reimbursed to you.

Insurance Features

Unfortunately, the title insurance contract is not very popular in our country. Moreover, many people are not even aware of the existence of suchcapabilities. Therefore, when concluding an insurance contract, mistakes are often made, the presence of which leads to serious consequences in the event of an insured event.

When signing the contract, you should pay attention to the following points:

1. You should not sign a contract that contains an exhaustive list of insurance risks. There is a high probability that some situation will simply not be taken into account, which will subsequently lead to a refusal to pay. It is best if the contract states that loss of ownership is subject to compensation, regardless of the reason.
2. Some SCs offer a policy that states that refunds are due only on transactions made with your direct participation. This may also have a negative impact on your payment.
3. Quite often, when concluding a real estate transaction, a much smaller amount is prescribed in the contract than it is in reality. This is done in order to minimize the amount of tax. Therefore, with title insurance, it is very important to enter into the contract exactly the real amount of the transaction, and not the one that is written in the contract of sale.

The subtleties of mortgage title insurance

Quite often, along with the mortgage, banks oblige the client to take out life and he alth insurance. This is not surprising, because the bank is interested in getting their money anyway. No one usually insists on title insurance, because it is not the bank that is interested in it, but you yourself. After all, even inif the purchase is invalidated, the bank will have to return the money to you.

By the way, mortgage title insurance is very beneficial for the buyer himself. After all, before the conclusion of the contract, the insurance agent is obliged to carefully check all the nuances of the transaction and, in which case, provide the client with the assistance of a qualified lawyer. In general, do everything possible to avoid the occurrence of an insured event.

When insuring a title on a mortgage, you need to remember that you need to enter an amount in the contract no less than you have to pay in the end. And the insurance contract itself should be concluded for the same period.

When insurance won't help?

Title insurance is not an absolute panacea. Unfortunately, there are risks under which it does not work. If, after buying a home, an encumbrance arises that is not related to the loss of property, a title policy will not help you. What does this mean?

Here is a small example. You bought an apartment, and three years later it turned out that another person was registered in it (without ownership rights). At the time of the transaction, he was absent (for example, he was in prison or was working abroad), and now he has returned. If he has nowhere else to live, then in accordance with the fortieth article of the Constitution of the Russian Federation, he will have the right to live in your house. In this context, the situation will not be recognized as an insured event, since no one claims ownership at all.

So do not count on title insurance as a panacea for all ills. To avoid unpleasant situations, you need to apply yourselfthe maximum amount of effort to protect yourself from all risks.