TITLE REVIEW DOESN’T STOP WITH REVIEW
OF A PRELIMINARY TITLE REPORT

By Mary J. Drury , Esq.

Just like an offer and acceptance agreement executed solely by a buyer is not binding on a seller, a preliminary title report is merely an offer to sell a title insurance policy and is not binding on the title company.

“Preliminary report of title” (“PTR”) means a report furnished in connection with an application for title insurance which constitutes an offer to issue a policy of title insurance subject to the terms, conditions, and exceptions stated in the report, but which does not constitute a representation as to the condition of the title to real property.

The PTR is a report prepared by the title insurer upon application for a title insurance policy. See Nev. Rev. Stat. (“NRS”) § 692A.023 (1999). It “constitutes an offer to issue a policy of title insurance subject to the terms, conditions and exceptions stated in the report.” Id . The PTR is not an abstract of the complete title history of a parcel of real property, and by issuing it, the title insurer does not assume liability for the condition of title or the accuracy of information contained in the report. See Id . The title company's purpose in preparing a PTR is to identify the risks it is willing to accept in issuing a policy of title insurance.

A commitment for title insurance is similar to a preliminary report but the issuer expressly “commits” to issue a policy for a specified period of time. However, like a PTR, it is an offer (NRS 692A.023) and the title insurer is not bound until the premium for the insurance is paid.

In the industry, it appears that property profiles or preliminary title reports are pulled for nearly every real estate transaction. However, absent receipt of a policy of title insurance, the preliminary title report gives no insurance to the recipient and there is no recourse against the preparer. Therefore, it is always critical to follow through on a transaction and obtain the policy of title insurance.

A “Policy of Title Insurance” is an insurance contract between the issuer (title company) and named insured (owner, lender, tenant, etc.). A policy of title insurance means a written instrument or contract by which title insurance liability is assumed. The term does not include an abstract of title, binder, commitment to insure or preliminary report of title. NRS 692A.035.

The basic form of title insurance is called a CLTA (California Land Title Association) Policy of Title Insurance. A CLTA Policy is based on a search of all public records to confirm ownership of the property (clean title) as well as the existence of any liens or encumbrances against the property (such as existing mortgages or deeds of trust, grants of right of way, easements for utilities, and CC&R's [Conditions, Covenants and Restrictions, commonly found in residential or commercial developments]).

One of the most under-utilized type of title insurance is the upgrade, an ALTA (American Land Title Association) Title Insurance Policy. The additional coverage provided by an ALTA Policy includes, at a minimum, confirmation that the legal description in the public records matches an actual land survey prepared by licensed professional land surveyors. Additionally, the survey confirms whether there are any encroachments onto your property, which could later give rise to boundary disputes and litigation. By obtaining an ALTA Policy, a great number of additional endorsements are also available from the title insurance company that are not available with a CLTA policy, including confirmation of access to a public street and zoning information.

While there are additional costs associated with obtaining an ALTA Policy of Title Insurance, including the cost of a land survey, the additional endorsements may give you significant comfort that your property is free from boundary disputes, that you will be able to use your property for its intended use, and that you have access to a public street.

It is important to remember that you have no insurance or assurance of good title merely by review of a preliminary title report or a property profile.

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Mary J. Drury heads the Commercial Real Estate Department for Marquis & Aurbach. Sh e can be reached at (702) 382-0711 or visit the firm's web site at www marquisaurbach.com