TITLE INSURANCE

Overview

Title- Simply stated, the title to a piece of property is the evidence that the owner is in lawful possession of that property. Title insurance is a form of indemnity insurance that protects lenders and home-buyers from financial loss sustained from defects in a title to a property. The most common type of title insurance is the lender’s title insurance, which the borrower purchases to protect the lender.

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WHAT IS CLEAR TITLE OF THE PROPERTY?

A clear title is a title without any type of lien or levy from creditors or other parties that would pose a question as to legal ownership. For example, an owner of a home with a clear title is the sole undisputed owner, and no other party can make any kind of legal claim to its ownership. A clear title is also called a “clean title,” a “just title,” and a “free and clear title”. A clear title is necessary for any real estate transaction because it firmly establishes who is the property owner.

A clear title is a title without any type of lien or levy from creditors or other parties that would pose the question as to legal ownership.

The presence of liens can create a cloud on title, meaning that a claim or an unreleased lien invalidates or impairs the owner’s title to the property.

Title issues can arise in situations of separation, divorce, and heirs not being properly documented.

WHAT IS TITLE INSURANCE?

Title insurance is a form of indemnity insurance that protects lenders and home-buyers from financial loss sustained from defects in a title to a property. The most common type of title insurance is the lender’s title insurance, which the borrower purchases to protect the lender. The other type is owner’s title insurance, which is often paid for by the seller to protect the buyer’s equity in the property.

Title insurance protects lenders and buyers from financial loss due to defects in a title to a property.

The most common claims filed against a title are back taxes, liens, and conflicting wills.

A one-time fee paid for title insurance covers pricey administrative fees for deep searches of title data to protect against claims for past occurrences.

WHAT IS THE NEED OF TITLE INSURANCE?

Every time a property is sold, there is a change in the title also. During this process of transmission, issues related to the title may arise at any point. Defective titles can give rise to financial downfalls for parties involved. This is where title insurance policy’s role comes into play. Title insurance is necessary for the following reasons:

Title insurance protects the investment in the real estate market and provides financial protection against losses arising out of the defective title.

Title insurance reduces the risk involved in real estate transactions.

Real estate investment will be accelerated with a clear process and protection offered by the title insurance.

Legal damages and costs are covered by title insurance.

RERA COMPLIANCE

“The Promoter shall obtain insurance in respect of … title of land and building ”
“The Promoter is liable to pay the premium and charges in respect of the insurance” …….. “and shall pay the same before transferring the insurance to the association of allottees”

Transfer of benefit to Allottees-

–Insurance shall stand transferred to the benefit of the allottee at the time of promoter entering into an agreement for sale with allottee.

Transfer of benefit to Association of the Allottees-

–On formation of the association of the allottees, all documents relating to the insurance shall be handed over to the association of allottees.

Phased handover-

-Phase may consist of a building or a wing of the building in case of building with multiple wings or a defined number of floors in a multi-storeyed building. Where the real estate project is to be developed in phases, every such phase shall be considered a standalone real estate project, and the promoter shall obtain registration under this Act for each phase.

Duration of cover and responsibility-

Under the act, the promoter is required to compensate the allottee for any loss caused to him on account of defective title of the land in the manner provided under the act and such claim for compensation is not barred by limitation under any law.

WHAT IS COVERED?

A. Defect in, or Lien on the Title at the Date of Cover including but not limited to, indemnification of loss from a defect in the Title caused by:

Forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation.
Failure of any person or entity to have authorized a transfer or conveyance.
Document affecting Title not properly created, executed, witnessed, sealed, stamped, acknowledged, notarized or delivered.
Document affecting Title executed under a falsified, expired or otherwise invalid power of attorney.

B. Defense Costs

C. Out of Court Settlement

D. Court verdicts including AO/ Tribunal under RERA

WHAT IS EXCLUDED?

  • Risks created, allowed or agreed by the insured
  • Pending Litigation
  • Sovereign ownership claims. Ex: Expropriation
  • Claim to Natural resources: water, minerals etc.
  • Consequential Damage. Ex: Loss of future profits
  • Actions of the Government

FREQUENTLY ASKED QUESTIONS –

What is the tenure of the Policy?

Approx. 7 years (Alternate options upto 15 years).

Which projects are covered under the title insurance?

New Projects and Projects under construction.

Which Parties get insured?

Promoter, Allottees, Association of Allottees.

What is the sum insured under the Title Insurance?

Gross Development Value of the project (GDV)

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