HELP- title insurance

[NY Annie]

In some states, there are approved title attorneys - that office is responsible for hiring/doing a title search; the attorney is responsible for reviewing the results of the search (examining the title) and then orders a policy from the title insurance company. That insurance policy becomes valid on the day of closing and is to the purchaser - only. (A rundown is performed on the day of closing before the documents are recorded to insure nothing has caused a problem with the title.) It is a process similar to purchasing homeowner's insurance which becomes valid on the day of the closing.

I spent many years as a title searcher - later an examiner. Generally the bank ordered the search just a few days before closing. The bank/mortgage company (also referred to as mortgagor) requires a title policy; the homeowner/mortgagee has an option.

I am not sure how your sale is structured - and that would determine whether a new title policy is required. IF, in fact, you are not selling the property but are selling your LLC, then the existing policy may continue to be in effect because it was issued to the LLC and not to you. That is the issue you need to discuss with the attorney handling the legal aspects of selling your LLC. On the other hand, if it is structured so that your sister will not be the "owner" of the LLC but will take direct ownership of the property, then a new title policy is required.

I am not an attorney and this is not legal advice. For legal advice, you need to contact a real estate lawyer.

[jackmichigan]

Originally Posted by NY Annie

IF, in fact, you are not selling the property but are selling your LLC, then the existing policy may continue to be in effect because it was issued to the LLC and not to you. That is the issue you need to discuss with the attorney handling the legal aspects of selling your LLC. On the other hand, if it is structured so that your sister will not be the "owner" of the LLC but will take direct ownership of the property, then a new title policy is required.

I am not an attorney and this is not legal advice. For legal advice, you need to contact a real estate lawyer.

^^^^
This. Especially the part about contacting an attorney.

While your question seems to be a simple one, there may be elements of state law--or title company policy--which would have a bearing on the answer. In Michigan, for example, if someone sells a corporate entity which owns real estate (except through the normal public trading of shares of stock), even though the entity remains the same the state considers it a transfer of real estate. This has implications upon transfer taxes and future property taxes.

The title company, as a matter of policy, may also treat the transfer as a new ownership. You may need to contact the title company for your answer...or consult with the attorney who will be handling your LLC transfer.

[NY Annie]

Good point, Jackmichigan, about the transfer taxes. If "tax stamps" must be bought, there is a change in ownership.

If the "transfer of ownership" is by sale of shares of the LLC, it is likely there is no change in ownership of the property. Meaning the title policy held in the name of Joe Schmoe, LLC remains in "full force and effect". However, if there is a change in the name of the LLC, now called Jane Schmoe, LLC then it is most likely a sale of property as well.

OP, whoever is drafting the corporation changes should have the answers to your questions. If not, you need to find someone who does have those answers - i.e. lawyer and/or title insurance company.

[jackmichigan]

Originally Posted by NY Annie

If the "transfer of ownership" is by sale of shares of the LLC, it is likely there is no change in ownership of the property.

This, too, may depend upon state law. Michigan distinguishes between the sale of privately-held stock and the sale of shares of stock which are normally publicly traded. Only the latter does not trigger a "transfer of ownership" relative to corporate-held real estate.

Of course, this is geared mostly towards the collection of transfer taxes (otherwise people could set up corporations merely to avoid real estate transfer taxes)...but it's likely that a title company would find guidance in state law, if not through their own internal policies.

[staywarm2]

Originally Posted by jackmichigan

In every transaction I've been involved with the title company has done the title search prior to closing. What they find about the title is spelled out in the title commitment. If the title search discovers problems with the title, the closing could be delayed to resolve the issues...or the title company could exclude those problems from what they will cover in their title insurance policy.

(Remember, unless specifically contracted otherwise, a title company and the title company attorney are NOT representing you in the transaction--even if the closing takes place at the title company!)

Payment to the title company is usually made at closing--at which time the title insurance policy should become effective.

So if I purchase a home for cash and there is no bank involved in the purchase, who does the title company and the title company attorney represent at the closing?

Thanks for the info.

[jackmichigan]

Originally Posted by staywarm2

So if I purchase a home for cash and there is no bank involved in the purchase, who does the title company and the title company attorney represent at the closing?

Thanks for the info.

Simple: they represent the title company.

[NY Annie]

At the firm I worked for, the attorney doing the closing (this was in the days before non-attorneys were permitted to be closing agents) represented the buyer, even though we completed the title search and purchased the title policies for the bank and buyers.