Arizona State University

W.P. Carey School of Business

Real Estate Law – February 16, 2017

Recording/Title Insurance/
Title Review

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Recording Statutes
– Protects Third Persons by giving constructive notice that a
prior transaction has occurred (Chapter 18, page 438).
– Arizona Recording Statutes
• A.R.S. §33-401; Formal Requirements of Conveyance
• A.R.S. §33-411; Invalidity of unrecorded instrument
• A.R.S. §11-480; Requirements for form of instruments
• A.R.S. §33-506; Short Forms of Acknowledgments (Notary)
– Types of Notice (Chapter 18, page 439/440)
• Actual (Buyer and Seller)
• Implied (Quit Claim Deed) should be aware of
• Constructive (Recording Statutes)
– Types of Recording Statutes
• Race Statutes (DE, NC, and LA) first come first serve
• Notice Statutes
• Race-Notice Statutes
– Recording Taxes
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Title Industry Overview and Recent
Changes/Consolidations
• Consolidation of Publicly-Traded Underwriters
– Fidelity National Title Group – 32.0% share Q1 2016
• 46% share in 2008 after LandAmerica acquisition
• 12 underwriters in 2009; now 5 effective July 2010:
– Fidelity National Title (includes Lawyers Title)
– Chicago Title (includes Security Union Title and Ticor
Title)
– Commonwealth Land Title
– National Title of NY
– Alamo Title

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Title Industry Overview and Recent
Changes/Consolidations, cont.
• Consolidation of Publicly-Traded Underwriters
– First American Title Ins. Co. – 27.36% share
– Old Republic Nat’l Title Ins. Co. – 15.18% share
– Stewart Title Guaranty Co. – 11.54% share
• Emergence of Regional Underwriters – 13.92%
share
• Current Arizona Market Conditions: FATCO
(32.6%), Fidelity (31.0%), Old Rep (15.0%),
Stewart (6.7%)

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Title Industry Overview and Recent
Changes/Consolidations, cont.
• Direct vs. Agency Operations
– Agents sell majority of policies (First Arizona Title, Bill
McCalmont)
• Non-affiliated agencies – 59%
• Affiliated agencies – 26%
• Directs – 15%
• Centralized Claims Processing
• Changes in Underwriting Guidelines
– Creditors’ Rights
– Mechanics’ Liens
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Title Insurance
• Purpose – protects real estate owners and
lenders against any property loss or damage
they might experience because of liens,
encumbrances or defects in the title to the
property
• How does it differ from other types of insurance?
– Coverage is for future claims or losses due to title
defects created by some past event (no prospective
coverage)
– One-time cost

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Title Insurance, cont.
• Contracts of Indemnity – coverage is for loss or
damage and is limited to face amount of policy
• If claim is made, title company defends the
insured’s title and bears the cost of settling the
case

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Title vs. Escrow
• Title – review legal descriptions, search public
records and access risk, prepare title
commitments and policies, interface with
surveyors, etc.
• Escrow – review contract, coordinate funds and
closing documents, prepare settlement
statements, pay off liens, liaison with title,
interface with principals and attorneys

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Title Insurance Policies – Standard vs.
Extended Coverage; Policy Exclusions
• Standard Coverage – generally covers defects,
liens and encumbrances shown in the public
records, and protects against:
– Title being vested other than as described in the
policy
– Any defect in or a lien or encumbrance on title
– Unmarketability of title
– Lack of a right of access to and from the land

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• Extended Coverage – broadens the scope of
coverage to include the following off-the-record
matters:
– Taxes or assessments not shown in the public record
– Facts, right, interests or claims which could be
discovered by a thorough inspection
– Easements, claims of easements or encumbrances
not shown in the public record
– Discrepancies or conflicts in boundary lines,
shortages in area, encroachments which a correct
survey would disclose
– Unpatented mining claims, patent reservations, and
water rights
– Unrecorded mechanics’ liens
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• Policy Exclusions (applies to both standard and
extended coverage policies)
– Limitations imposed by zoning and land use laws and
building codes
– Rights of eminent domain and police power (unless of
public record at date of policy)
– Matters created, assumed or agreed to by insured
– Matters not known to insurer and not shown by the
public records, but known to insured
– Matters which may result in no loss to insured
– Matters arising after the date of the policy
– Matters arising from transaction based on operation
of federal bankruptcy or similar creditors’ rights laws

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Owner’s Policy vs. Lenders’ Policy
• Owner’s Policy
– Protects against title loss
– Interest being Insured – deed or easement
– Successors and Assigns – coverage applies to those
who succeed to title by operation of law, but not to
purchasers of the property
– Effective immediately – riskier to insurer than lender’s
policy

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• Lender’s Policy
– Protects lender against certain title problems
– Interest being Insured – mortgage/deed of trust
– Successors and Assigns
• Coverage applies to one whose interest to the insured
mortgage was acquired by operation of law or purchase
• Coverage does not insure to benefit of a purchaser at a
foreclosure sale unless purchaser owns the debt
» Same as owner’s policy
• Coverage does not insure to benefit of the grantee in a deed
in lieu transaction
– Reduction in Coverage – coverage reduces dollar for
dollar as loan is paid down
– Generally not used until a default (lender has to show
loss) – less risky to insurer than owner’s policy
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Title Commitment
• Legally binding contract
• Schedule A
– Effective Date
– Order Number
– Policy Type
– Policy Amount
– Proposed Insured
– Estate or Interest in Real Property
– Owner Identification and Vesting Information
– Legal Description

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Title Commitment, cont.
• Schedule B, Part 1 – Requirements
– Reflects the title company’s underwriting criteria for
issuance of a title policy
– All requirements must be satisfied before the title
company will issue the policy
• Schedule B, Part II – Exceptions
– Commonly referred to as “Schedule B” items
– Unacceptable risk for title company
– These are items the title company does not insure
and generally includes any matter that encumbers the
real property
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Title Review
• Title Review – allows the buyer to analyze the
status of title and then eliminate or minimize risk
before acquiring the property
• What to consider in reviewing title:
– Timing
– Restrictions
– Costs
– Obligations

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Practice Pointers
• The title company should provide the buyer with a copy
of all Schedule B documents(requirements&exceptions)
• The Schedule B documents should be compared with
the Schedule B exceptions to determine both the
accuracy of the listed exceptions and the impact those
documents have on the real property. If they do not
apply, ask title company to remove them.
• The Schedule B documents should also be compared,
when possible, to a current ALTA/ACSM certified survey
to determine how exceptions impact the real property

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Title Insurance Endorsements
• Definition: Riders attached to and made part of
the title insurance policies to expand policy
coverage
• Sometimes used to “insure over” Schedule B
exceptions
• Endorsements are negotiable and should be
discussed with the title insurer early in the
negotiations for title insurance

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