What Happens to The Title Policy?: Discussing the Owner’s Policy and Transferring Coverage

8551939166_b6e07e612cTransferring property after acquisition often sparks questions about the transfer of title insurance coverage. Typical scenarios are ones that involve one person buying a piece of property and receiving an owner’s title insurance policy to protect personal interests. The property owner  may feel the desire to transfer the property following acquisition for any number of reasons, including investment, family purposes, or estate planning. Then the question, “What happens to the title policy?” becomes relevant.

There is a number of hypothetical situation Assured Title Agency would like to address in order to better clarify how to transfer home title insurance after an acquisition of property may affect your title insurance policy.   Scenario A

Property owner Sally Smith wants to quitclaim the property to her LLC. Does the transfer invalidate Sally’s title insurance policy?

Answer A

No, if Sally Smith quitclaims the property into an LLC that’s wholly-owned by her then the title policy continues in full force and Form 107.9 endorsement is not required.  However, if Sally quitclaims the property into an LLC that she doesn’t own, then a Form 107.9 endorsement would be required to name an additional insured. 

Additionally, a similar result will occur when dealing with a corporation. If memberships, stocks, shares and other equity interests are wholly owned by Sally or another property owner then the title policy continues in full force, and a Form 107.9 endorsement is not required. However, if Sally quitclaims the property into a corporation where shares, stock, membership, or equity interests aren’t wholly-owned by the owners, then a Form 107.9 endorsement would be required to name an additional insured.

 

Scenario B

Brian B., owner of property, wants to quitclaim the property that he trusts, does this transfer invalidate his title insurance policy?

Answer B

No. If the trust is created by a written instrument, such as a Trust Agreement, and Brian B. is the settlor of the trust, then the policy will continue in full force and a Form 107.9 endorsement is not required. However, if Brian B. quitclaims the property into a trust where he isn’t the settlor of a trust, then a Form 107.9 endorsement would be required to name an additional insured.

 

Scenario C

Stan and Jasmine Harris, a married couple, own property together as joint tenants. Stan wants to quitclaim his interest in the property to Jasmine. Does this transfer invalidate the title policy?

Answer C

No. The property is owned by both Stan and Jasmine in this situation. Removing one the owners of the property would not affect the remaining owner’s title policy.

 

Scenario D

Shawn Sale purchases a property and subsequently got married to Mary Title-Sale. Shawn wants to add his new wife to the title, does this transfer invalidate his title policy?

Answer D

No. Shawn Sale can either quitclaim to himself and his wife or use a warranty deed (special or general) to do so. For Mary’s interest, however, he would need to obtain a Form 107.9 endorsement that would name an additional insured to the policy. The effective date of the policy wouldn’t be updated to the new conveyance. Also, any  title defects that may be on record after the title purchased by Shawn, and before his transfer to himself and Mary, would not be covered.

 

As a side note, most title insurance policies contain language substantially similar to the content below:

The coverage of this policy shall continue in force as of the Date of Policy in favor of an Insured, but only so long as the Insured retains an estate or interest in the Land or holds an obligation secured by a purchase money mortgage given by the purchase from the insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the title.

What this means: It’s better to deed with a warranty deed (special or general) than to transfer the interest via quitclaim deed.

The aforementioned scenarios listed are specific ones, and you should absolutely consult with an attorney to determine the appropriate steps to protect yourself and your property investment.


Glossary of Terms

Form 107.9 Endorsement: Title insurance endorsement that amends the existing title insurance policy by adding an additional insured to the coverage.

Quitclaim or Quitclaim Deed: A deed and/or conveyance that is effective in passing title. It conveys only the grantor’s present interest, if any, but does not constitute a representation that the grantor has any interest in the land, or valid title, or any title, to the property conveyed.

Settlor: The individual who places property (real and persona) into a trust for the benefit of the trustee.


Assured Title Agency is a Denver, Colorado-based title insurance company dedication to provided the highest quality customer service and peace of mind when conducting complex real estate transactions. Be sure to visit our websites: http://beassurednow.com and AssuredTitleAgency.com. #titleinsurance #Denver #BeAssuredNow