Also known as: title assurances · assurance of title
Written by attorneys · grounded in primary & secondary sources — see below
A system of legal mechanisms that protects purchasers of real property by providing constructive notice of recorded interests and by indemnifying against loss from title defects or liens not excepted from coverage. Recording statutes establish priority rules that charge subsequent buyers with notice of instruments in the chain of title. Title insurance contracts shift the risk of undiscovered defects to the insurer after a title search.
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Trevor Tate contracted to sell land to True North Logistics but never recorded the contract. Two months later Tate conveyed the same parcel by warranty deed to Tidal Energy, which paid value and promptly recorded its deed. When True North Logistics later recorded its contract and sued Tidal Energy to quiet title, the court awarded priority to Tidal Energy because it took without notice of the prior unrecorded interest and recorded first.
Terra Financial purchased an office building from Thaddeus Tran and obtained an owner's title policy from Twin Rivers Bank after the insurer searched the records. Months later a judgment lien recorded years earlier under a prior legal description surfaced and was not listed as an exception. Terra Financial tendered the claim. The insurer must indemnify Terra Financial for the loss because the policy covers defects and liens not excepted at the time of issuance.
Recording acts allocate priority among competing interests by giving constructive notice to subsequent purchasers. Title insurance is a private indemnity contract that pays for loss from defects or liens that exist at policy issuance and are not excepted, regardless of whether the recording act would protect the insured.
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The purchaser must take for value, without actual or constructive notice of prior unrecorded interests, and must record. Instruments outside the chain of title or recorded after the purchase do not provide constructive notice to that purchaser.
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Yes. Under the merger doctrine the contract merges into the deed, discharging title-related promises not carried forward in the deed unless fraud, mutual mistake, or a collateral undertaking applies. The buyer must then rely on any covenants in the deed or on title insurance.
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The duty arises when the insured suffers loss from a title defect or lien that existed at policy issuance and was not listed as an exception. The insurer must defend the title or pay covered loss even if the defect was discoverable only through a more granular search than the one performed.
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