TITLE INSURANCE or GUARANTEE OF TITLE, a term used in the United States for a policy of insurance or a guarantee of indemnity (see TITLE GUARANTEE COMPANIES), giv ing protection and safeguard to an owner of real estate, or a lender of money upon it, against any loss or damage that he might sus tain because of any defect in the title prior to the date of the policy, because of the unmarketability of the title or because of any unknown liens or encumbrances against the property, prior to the date of the policy.
There are two kinds of property that people use and own— real and personal. Real estate, land, constitutes the real property; stocks, bonds, monies and such movable and chattel holdings are the personal. Personal property can be handled almost at will and in any manner of choice. Real estate is immobile. Real property rights and how one may use, own, possess—in fact, employ and enjoy the land he owns, have been safeguarded, restricted and defined in a very prescribed way by law, and custom has also exerted a considerable influence.
In many countries, the ownership of land is restricted to the few. There is little incentive and almost no possibility for the general ownership, widespread buying and selling of land. In them, title to real estate is largely a matter of inheritance. Owner ship and the matters of title are ascertained from family records, files of title deeds of conveyance, wills and the tradition and general knowledge to be had about the title to the property. Family solicitors have usually handled such matters for genera tions, taken care of things as they appeared, and upon occasion, given the necessary details and furnished opinions about the title and rights of persons involved. In America, however, probably more than in any other country, anyone can acquire land, and the buying, selling and using of real estate as security, are every day matters.
It is absolutely necessary, however, in any real estate transac tion, whether it be a sale, settlement of an estate where there is a division of real property, the lending of money with a real estate mortgage as security, and in fact, in all cases where real estate is involved, to know the condition of the title. It should always be ascertained who owns the property and that there are no adverse claims or owners of interests other than those of the reputed owner; that all taxes are paid or discovered, because any due or unpaid taxes, whether general, State, county, township, or for special purposes such as parks, paving, public improve ments, are liens upon the lands against which they are levied; that there are no suits pending, mechanics' liens, judgments rendered in any local court or liens filed by the Federal Government for fines in violation of some Federal statute or unpaid taxes due from the provisions of the Internal Revenue Act which are liens upon the real estate involved; and also that there are no mat ters in any probate or surrogate court affecting the title. It is,
therefore, the title to real estate that one acquires or lends money upon, and not the land itself. In order to keep a history or record of the titles to the lands, the United States has what is known as the public recording system. All matters affecting the title to all parcels of land, including transfers, estates, taxes and suits, are entered and recorded in their proper offices and courts of records.
There are two principal kinds of policies, the owner's (or fee) and the mortgagee's. policy. The owner's policy guarantees the title to the property and the protection runs to the insured owner or purchaser. The mortgagee guarantees the title to be vested in the mortgagor at the time of making the mortgage; that the indebtedness secured by the mortgage or trust deed is a valid first lien on the property, and upon being transferable to an assignee, insures the validity and genuineness of the assignment of the lien. In case of loss, failure of title or attack it becomes the duty of the title company to indemnify its insured, take over the proper ty or defend the action. The protection of title insurance covers all matters and questions that might be raised about all matters disclosed of record, and in addition things not disclosed or possible to ascertain. These last mentioned include forgeries, trauds, false representations, lost deeds and wills, deeds made by infants, deeds by lunatics, invalid and revoked powers of attorney, claims of undisclosed heirs, mistakes of law, jurisdictional questions, conflict of legal decisions and opinions and many others.
Title insurance is peculiar to the United States because of the facts that the country has a public recording system, that it is not only necessary to ascertain all the minute facts and evidence about the title, but likewise arrive at and secure an opinion as to the sufficiency and legality of each step and matter. Title insurance is a guarantee and protection as to all matters of record, as to the completeness and accuracy of the compiled evidence, as to things not disclosed or ascertainable and the opinion as to their legality and validity. In order to do this, an abstract or history of title is first compiled. This evidence of title is then examined and passed upon by authorities on title law and real estate title mat ters. Physical examinations and surveys of the premises are also made and the policy then issued. (R. B. HA.)