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CHAPTER V

THE EXAMINATION OF THE TITLE

HE contract of sale having once been agreed to and entered into, the next step

is the examination of the title and the taking of whatever action may be necesseary to satisfy the purchaser that the title is clear, and that the property is not subject to any encumbrances of which he has no knowledge.

The examination of the title is peculiarly a legal proposition. It is not a matter which the owner, unless he be an attorney, can possibly handle, with safety to himself or with any assurance that the title which he will receive will be clear and valid. It is possible, although highly inadvisable, for a purchaser to attend, himself, to the contract of sale. The importance of legal advice in passing on the chain of title is a much more vital proposition. The purchaser can follow one of two courses in having the title looked into. He can refer the whole question to his attorney, or he can employ a title company direct to examine the title and to act for him on

the closing. If he refers it to his attorney, his attorney can either examine the title himself or he can arrange with a title company to examine it and to report to him. In this event, the client will have the benefit both of the report of the title company and of the advice of his own counsel. In some country districts title companies are not available, and the title must be searched by the purchaser's own lawyer. As a rule, however, where the property is within reasonable distance of a town of at least moderate size, the aid of a title company can be secured. The records held by a title company, its special experience in title matters, and its organization, directed to passing on questions of title and investigating any points which require special consideration, equip it to give a service which, if possible, should be availed of.

The ideal arrangement is for the purchaser to refer the title to his own attorney and have the latter arrange for a title company to pass upon and to guarantee the title. In this way, as I have already noted, the client secures the benefit of the title company's advice and experience and, at the same time, has the benefit of the advice and attention of his own counsel. Each of these elements is important. His attorney will in all likelihood take much more interest in the

matter and give it much more personal attention than a title company organization which, in the nature of things, will be inclined to treat all title investigations in a regular routine manner. On the other hand, the title company, by reason of its facilities and experience, is in a position to give valuable advice.

In addition to this, an especially important consideration in favour of having a title company act with the personal counsel for the purchaser, is that, if this be done, a policy of title insurance can be secured from the title company for a comparatively small consideration, based upon the amount of the purchase price. This policy will guarantee the purchaser and all those claiming under him against any defects in the title, except such as may be specified in the policy, up to the amount of the face value of the policy. This is, usually, the amount of the purchase price. In case a defect in the title develops, the title company will make good the loss to the purchaser. In case the latter resells and a claim is later made against him by a subsequent purchaser, by reason of some flaw in the title, the title company will stand behind him and reimburse him for any amounts which he may be compelled to pay, up to the limits of the policy. The title company will, in all likeli

hood, desire also to join in any proceedings brought against the holder of its policy and will ordinarily defend these proceedings, at its own expense and through its own counsel.

I have before me at the present moment a case which illustrates quite aptly the advantage of title insurance. Representing a client who purchased a suburban property, I employed a title company which joined in passing on the title and gave the usual policy of title insurance. The attorneys for the seller claimed that the employment of the title company was quite superfluous, as they were conversant with all questions involved in the title. As a matter of regular policy and to protect my client against any possible future developments, which could not be discounted at the time, I insisted, however, on securing the policy. The expense was comparatively negligible in comparison with the cost of the property. My client held the property for some time and then disposed of it to others. Following his resale of the land, a question arose with respect to title which had never been raised by any one, involving a claim of an adjoining owner to a certain portion of the land. Under these conditions, I notified the title company at once of the situation and, in the event that the claim is by any chance sustained against my

client, the title company will at once reimburse him and bear the burden of any proceedings against him. In addition to this, it is cooperating in adjusting the controversy and placing at our disposal its records, in substantiation of the correctness of my client's position.

A policy of title insurance is thus a protection,, not only against possible defects in the title, but against legal proceedings involving the title and based upon unjust claims. No one can say, with assurance, that in the future some question regarding the title will not be raised, with or without reason and justice. It is very pleasant to feel that a reputable and responsible title company stands behind one, ready to assume the burden of any litigation and to reimburse one for any damages recovered by reason of title defects.

It is manifestly important that whatever title company is employed shall be a company of ample financial resources. There is a considerable difference, also, among title companies, in the broadness of their point of view. It may be given, as a general rule, that none of them will take any unnecessary chances with respect to the insurance of the title. Defects which they consider substantial will be excepted by them from the operation of the policy. For instance,