When you buy real property it is customary for the purchase agreement to require that a seller also provide (as a condition for sale) a policy insuring title. What exactly is covered however by the policy that the seller provides the buyer? And, more importantly, why should you, the buyer care? There are generally two kinds of policies that cover buyers of California real estate. The first is called a California Land Title Association Policy (referred to as a CLTA Policy). The second is an American Land Title Association Policy (referred to as an ALTA Policy).
The CLTA policy is more restrictive than the ALTA policy which typically includes a survey of the property's boundaries, is more expensive and takes longer to obtain. The basic difference between the two polities is that the CLTA policy primarily insures the buyer against title defects discoverable only through an examination of the public records.
An ALTA on the other hand policy extends to certain off-record title defects. These off-record title defects can include building permit violations, post–policy encroachments and forgeries. Generally a title policy will insure against defects which affect the marketability of title. Marketability of title coverage does not typically include defects which affect the market value of property. Marketability of title and market value of property two distinct concepts which buyers must understand when acquiring title insurance. In subsequent blogs, we will address these concepts as well as standard endorsements and exclusions in CLTA and ALTA policies.
Contact Laurie Murphy at mlm@vrmlaw.com
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