Portfolio Product Applications
The History of 'Good Title' cover
This type of product was originally born in the US over 140 years ago.. During the mid to late 1800's especially around the time of the gold rush in California there was a huge influx of people buying land. This caused many problems, the lawyers made mistakes, and issues like boundary disputes and fraud were common place. It came to head a few years later when one individual in Pennsylvania tried to sue his lawyer (Watson v Muirhead) in 1868 for financial losses incurred due to liens (a security interest) imposed on the property that his lawyer overlooked. This case went to the Supreme Court who ruled that there was no negligence on the conveyancer's part and dismissed the case. As a result of this decision it was recognised that there was a need to protect purchasers of real property ensuring they did not suffer financial loss as a result of unforeseen problems. It was also useful for very early commercial lenders, as reports of title were not standardised at the time. Title insurance meant they could set a level of requirement and insure up to that level.
To this day title insurance plays a major part in every transaction in the US and Canada, providing the security of having 'good and marketable title' to property. The First American corporation, the owner of First Title Insurance plc in the UK has been around for over 120 years and is the worlds largest and one of the most financially secure insurers in this field. It is involved with nearly one in every four transactions in North America. Click here to read more.
In many countries in Western Europe there are very established methods of conveyancing and national record keeping like the Land Registry system in the UK. It has often been deemed unnecessary to provide an additional insurance policy to provide 'good and marketable title'. There are however some major aspects of the cover that provides far more comprehensive protection than traditional methods. A title policy owner only has to prove financial loss to claim and not have to prove negligence or fault as they would if they were to try to obtain compensation from the Land Registry's indemnity fund or a lawyers PI cover. It also protects against problems that no matter how well the due diligence process is done could arise, problems such as fraud, forgery or boundary disputes.
The main benefit of this type of insurance here in the UK is for use in situations when the traditional due diligence process cannot be fully undertaken. In transactions of multiple property assets when timescales are tight and it is not possible to carry out a full investigation of each title. Also in situations where it is difficult to obtain historic information about the property, this could be from the result of insolvency in which case the previous owner is very unlikely to divulge details about his period of ownership. In each case protection also extends to the lender so providing additional security, something extremely important in the current financial climate. The articles below describe how this type of policy can be used in different situations.
Corporate Debt Recovery / Insolvency
In an insolvent situation a purchaser could be walking into many problems with the title they are purchasing. Traditionally an Administrator would never give any guarantees but what if insurance could be used to provide warranties to title? Find out how BDO used a First Title Insurance plc policy in the Dawnay Day deal to aid the process and ensure the deal went smoothly.
We can help package a portfolio for sale ensuring a smooth transaction and helping to minimalise the 'price chipping' if title problems arise further down the line. We can also help with Vulture funds or any buyers of distressed property assets purchase faster than their competition and with additional security that could help with finance.
[Insolvency Practitioners click here to find out how this could benefit your business.]
Bulk Property Transfer
When dealing with multiple property asset transactions especially those of smaller individual value but high volume like residential or ground-rent portfolios it is often uneconomical to provide full due diligence on each individual title. In the past law firms have reported on a sample of properties and took a view on the rest. It is becoming increasingly difficult for lenders to take a view on anything at the moment so title insurance can provide valuable additional security in this situation. It is a flexible product and can provide a level of protection particular to each deal. From full 'good title' cover and a complete replacement for the due diligence process at one end to covering specified defects or insurance negating the need to do any searches at the other.
[Full portfolio proposal and process here.].
AB Indemnity
Solutions Ltd is an appointed representative of First Title Insurance Plc which is
authorised and regulated by the Financial Services Authority