Our Supreme Court has made it crystal clear that searching titles is the practice of law. For every real estate closing, the closing attorney should perform or supervise the title examination. Theoretically, all title insurance and malpractice claims caused by title search errors can be prevented. Having safe title examination practices in real estate closing offices would go a long way toward minimizing claims and protecting clients and their properties!
- Hiring title examiners who are inexperienced, who cut corners and who are not covered by errors and omissions insurance coverage.
- Failing to properly instruct title examiners as to how titles should be searched. Whether law firm employees or outside abstractors are used, the closing attorney should develop and use his or her own set of title examining procedures.
- Failing to require title examiners to pull documents. It is not sufficient to search titles using indexes. Doing so puts the lawyer and client at the mercy of the county employee who typed the index.
- Failing to review chain documents. The attorney should review chain documents. Attorneys spot issues that are missed by abstractors. If a link in the chain of title is a foreclosure or an estate, the foreclosure file or the estate file should be reviewed.
- Failing to use proper search periods. The long-standing search period standard in South Carolina is sixty years. Title insurance companies have shortened this standard to forty years, particularly for residential transactions. But some title insurance companies and sloppy practitioners are allowing for much shorter periods of time, like ten years, or “up from the developer” or “up from the deed into the borrower” without informing the client that the title has not been examined. Title examinations are the practice of law in South Carolina, and title companies do not have the power to permit a lawyer to shorten search periods without the informed consent of the attorney’s client.
- Relying on prior title insurance policies that are not worthy of reliance. In “tacking on” to prior policies, closing attorneys should use common sense and good judgment. Determine who issued the prior policy and decide whether that person’s work should be substituted for your own. Review the prior policy to determine whether it looks normal on its face. Some title insurance companies are issuing products that are not backed by title examinations or are backed by very short title examinations. Those policies are not worthy of reliance in an atmosphere where title examinations are the practice of law. As in the case of other short searches, informed consent confirmed in writing from clients should be obtained for employing a short search based on a prior policy.
- Failing to pull back title notes where a short search is used. It does not help that the attorney’s office has closed properties in the same chain of title if that prior title work is not used. Exceptions and requirements from the prior title work should be used in the current title insurance commitment and policy.
- Failing to search for a longer period of time where the shorter search does not reveal normal easements and restrictions for the type of property being searched. A search involving a residential subdivision created in the 1950’s should not stop in the 1960’s.
At least two sets of eyes should review every title examination. And one of those sets of eyes should belong to an attorney who was taught in law school to spot issues!