What is Property Title?

• Property title is a legal construct representing all the possible rights related to ownership of land. These various rights can be bundled together for an exclusive owner, divided into equity shares or separated and owned separately. Possession of the land itself is a right under the title, but not necessarily proof of title. Other rights contained in a title are exclusive use, development, conveyance, easement, partition, tenancy, water, air and mineral rights, farming, hunting and grazing rights and hypothecation, which means using the property as collateral. It is the right to hypothecation that creates most of the title-related work in real estate transactions.
  
  

Property Title in the U.S.

• Unlike other countries where ownership of property is determined and registered by a central government agency, title in the U.S. is left to determination by the private sector during the course of property transactions, and occasionally adjudicated in courts. As a result, there can be gaps in the history of a given piece of property, mistakes are occasionally made and sometimes fraudulent documents appear in the record. If a legitimate lien against a piece of property or a claim to some of the property rights arises, the possessor and assumed owner may lose some or all of their title rights, even if the original debt was not theirs! If a lender helped to finance the purchase of the property, they could lose the collateral against their secured loan. Before financial institutions will lend money for a mortgage or the transfer of property, an owner first has to verify they are lawfully in possession of these rights and identify any claims, called encumbrances, against the property which might exist.
  
  

Title Insurance

• Verifying a seller's title claims is the work of title companies and often involves title insurance. An attorney working for a title company checks the history of the title, identifying any liens or other encumbrances on the property going back at least 50 years. The title company then issues a "commitment" containing all this information and provides it to the buyers, who can make their mortgage conditional upon any claims against the property. Even with a good bill of health on the property from the title company, a mortgage lender could require the buyer to obtain title insurance, protecting both themselves and the buyer in case a defect in the title should arise, even if older than the 50-year period verified by the title company.