Title Insurance Claim Questions

4 Replies

Hello, 

Has anyone had to make a title insurance claim for an "Incomplete Title"? I recently went to sell my townhouse and a couple days before closing I was informed that I had an incomplete title. I bought a townhouse, that was once a condominum, many years ago and during the closing they are telling me it isn't either a townhouse or a condo. It was marketed to me as a townhouse and sold to me as one. There has never been an HOA or COA and all other owners agree. The title company stating this is say the dissolution was incomplete and the lots under the units must be subdivided and approved by the local gov't. Do I have a valid title claim here? I have filed one, but I do not know what to expect and the communication is lacking, to say the least. The sale fell through. I am hoping to be made whole because it seems that my only recourse is to sell to a cash buyer at a big discount.

Any advice on the claim process is greatly appreciated. 

I handled title claims for various underwriters for a number of years and have never heard of an incomplete title but based on your description I can make a guess as to what the problem may be.  I'm not an attorney and this is just my opinion.

First, it appears you may be confused as to some terms.  A townhouse is a form of construction as is a single family detached home or an apartment.  A condominium is a form of ownership wherein an owner has fee simple title to everything inside the walls and roof of the unit and everything else is a limited common element or a common element with each unit owner having and undivided proportional interest in them.

When a condo is being formed the land being submitted to the condo form of ownership is is described in the Declaration of Condo.  The Dec also sets out the description of the units and the rights and responsibilities of the unit owners.  If at some point the owners of the units decide to terminate the condo there generally are state statutes which provide the steps to be taken to do so.  You don't mention what state the property is in but it's those statutes which describe the steps.  Based on your description those steps may not have been followed which may mean the condo still exists even though it has not been properly run.

I've seen this happen before most commonly it's when someone builds a building with two or three units and intends on selling them out and thinks doing a condo is the way to go.  Since the same owner owns all the units a Condo board is never established and run according to the statutes.  The the owner decides to sell the units and the buyers don't realize they bought a condo.

It's not possible to say if you have a covered title claim without seeing you policy.  For example, if the legal description on Schedule A reads Unit 1, XYZ condominium it may not be covered because you own what's insured.  In any case it's good you submitted a claim.  The worst the insurer can do is deny liability.  Most states have statutes that provide the insurer must communicate the status of it's investigation and it's coverage decision within a set to frame.  Follow up with them regularly until they provide an adequate response.

I hope this helps.


Peter, 

Thanks for the response. The property is located in Baton Rouge, LA. 

My apologies for the vagueness, I am in no way a real estate professional. I was sold a townhouse, that appears was previously a condo that had been dissolved 10 or so years before I purchased. 

I reviewed my Title Insurance and it does appear to state it is a condominium. My frustrated question to that is why do all my other documents (i.e. closing docs, mortgage docs and sale docs) state it is a townhouse? How can it be marketed and sold as a Townhouse and then a clause place in the Title Insurance Docs that it is a condominium? This seems extremely unethical. Do you think I have a claim against the Title Attorney or Agent? I've owned the property for 7 years. Do you know if they are protected by a statute of limitation?

No word yet on if it will be covered. 

Thanks again for the feedback.

No apologies necessary Courtney, you're not the first person to be confused by the terms.

The fact is you own a townhouse, it's just that it appears the townhouse also happens to be a condominium.  If your buyer is willing, absent some other problem with the title, you should be able to sell the condo/townhouse to them.  If they don't want to own a condo, and your title insurer denies liability for the claim, you, and the other condo owners may need to review LA Statute §1122.112 which is the statute that appears to cover the termination of a condo.  I don't know if the procedure is one the members can perform or if you'll need to retain an attorney to help.  Let me know if you have any questions I might be able to answer.  

Microsoft Word - Louisiana.doc (ncsl.org)



A condo was sold and a condo was insured. 

This comes up periodically and I can only assume there is a lender involved who requires the condo to be disbanded officially before they will fund.

The Declaration identified as a special exception in the owners policy would specifically address that process, the % of unit owners required to approve that, etc.

Backing out due to this would be an odd action for a cash buyer to take given that there are no dues to pay and currently no rules enforcement mechanism  in place. Perhaps they are just strong arming an innocent seller. If it were me I wouldn’t budge and would find another buyer, preferably cash.