Owning a house of your own is a great dream to have. It takes a great deal of decision making and execution to finally purchase the house of your dreams. A property transaction involves a number of elements that can send buyers into a tizzy. From the search for potential homes to registering the property in your name, you may have to deal with several parties who will exact a great deal of time and money from you. And once you have zeroed in on a house, you need to ensure that there are no defects in the title to the property for the defect is passed on along with the title from the previous owner to the subsequent one.
It is for this reason that the buyer may find it beneficial to use an attorney or a title company to understand and deal with the legal matters related to the property transaction and ensure the legitimacy of the title of the property. Title Insurance was introduced under the Real Estate (Regulation and Development) Act, 2016 to protect owners and investors from any defects in the title of the property.
There are several legislative statutes that apply to a property transaction like the Registration Act, 1908, Transfer of Property Act, 1882, Indian Stamp Act, 1899, Indian Contract Act, 1872 and so on. To help a buyer navigate the legal landscape, an attorney or title company may be of great help. This article seeks to explain the role of an attorney and a title company in a property transaction and the advantages and disadvantages of availing their services.
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Should I use a title company or an attorney?
A title company is an entity that ensures the legitimacy of the title of the property and then issues the title insurance for that property. By availing title insurance, owners are protected against claims arising against their title from disputes over the title. An attorney, on the other hand, is a professional whose services you avail to navigate through the legal matters of the property transaction.
- A title company will scour through property documents to find defects in the title and outstanding mortgages, liens, loans etc if any. An attorney, on the other hand, will represent you during the course of the transaction.
- A title company will draft documents that will be used by it to issue title insurance. An attorney can prepare all the documents required for the transaction and advise you on matters relating to the transaction.
- A title company plays a limited role when it comes to property transactions and takes part in the closing process of the transaction. An attorney’s role is more active and significant when it comes to representing your side of the transaction.
Thus, it is according to your requirement that you have to choose. A title company and attorney effectively play two different roles in a property transaction. A title company is used to avail title insurance, whereas an attorney is used to represent and guide you through the legal procedures of the transaction. Also, title insurance has not caught wind yet in India.
Does the buyer or seller choose a title company?
The title company is tasked to find any defects in the title of the property and issue title insurance to protect the owner of the property from claims arising from disputes to the title. Hence, it is the ownership interest that is to be protected and there may be a presumption that buyer purchases title insurance and therefore selects the title company.
- However, there are instances where the buyer’s choice of title company does not meet the seller’s approval. Under normal circumstances, the buyer gets the preference to choose the title company.
- But, if the seller entertains a counter-opinion holding that s/he is not comfortable with the buyer’s choice, they may put forward preferences of their own and it is up to the buyer as to whether s/he wants to go ahead with the seller’s choice or stick with his/her choice.
- The buyer and seller can come to a mutual agreement to avail title insurance both from the seller’s choice and buyer’s choice. Or, they may go along with either of the choices if the opposing party can be convinced. However, if they do not arrive at the same conclusion, it could lead to the breaking of the deal.
- Either way, in case of an impasse, the buyer can approach an attorney to seek legal guidance and resolve the matter. Also, before agreeing to the seller’s choice of a title company, careful comparison between buyer and seller’ choice of title companies is advised.
Who pays the title company at closing?
The title company’s services are usually availed by the buyer. The title company handles the closing process of the transaction like undertaking the examination of title records of the property, checking for any outstanding loans or mortgages on the property, etc. A title company may take a more active role in the form of inspection for defects in the house and verifying the existence of the property.
- As such, a buyer pays the title company at the closing.
- However, the buyer need not bear all the costs relating to the title company.
- The buyer and seller can agree that certain expenses may be borne by the seller like the expenses of the realty agents employed or hired by the title company to verify the existence of the property or inspect the house for material defects.
- Thus, at closing, the buyer, or the buyer and seller together can settle the dues of the title company.
How much are title company fees?
A title company’s fees are dependent on the quantum of the loan availed for protecting the ownership interests of the owner from disputes arising over the title and the premium for title insurance is paid in one go at the closing of the deal. This payment is usually made by the buyer but an agreement can be shared by the buyer and seller.
What if the title company does not do its job perfectly?
The title company is responsible to carry out the verification of the title. The title company has to verify if the title of the property is legitimate and the ownership is authentic. They are also responsible to identify if the owner of the property has the legal capacity to contract. The reports of the title company help in avoiding any conflicts in the future. Thus the failure of the title company to perform at the best will give rise to legal complications in the future.
Title insurance can prove beneficial in India to protect ownership and investment interests in real estate from adverse claims arising over title issues. However, this measure was introduced recently in 2016 and homebuyers are not aware of this new development. As such, there is not much demand for this insurance product. It is for this reason that it is advisable for a home buyer to consult an attorney who can guide buyers through the nitty-gritty of property transactions and advise on the availing of title insurance.
Thus, on the basis of guidance, you can avail of title insurance that meets your requirements and deal with the seller accordingly. Title insurance could boost investment in real estate if investors were to receive assurance that their interests will be protected against frivolous claims and disputes arising over the title.
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