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Title Insurance 101: Back to the Fundamental Principles

By Richard F. Bales
Chicago Title Insurance Company

The Old Days

In the late-eighteenth and early nineteenth centuries, attorneys began hiring abstractors to perform title work.  Abstractors would compile a history of the land, sometimes from the original land patent forward.  (A land patent is a land grant or deed from a sovereign entity.  In Illinois the examiner will sometimes see a land patent from the United States of America for a section of land or more.)  These abstractors would then issue this compiled history, together with an abstractor’s certificate.  The certificate would inform the proposed purchaser and the attorney as to the matters purported to be covered by the abstract.

Abstracts have not been used in the Chicago area for many years. Until a few years ago, though, they were occasionally prepared in the central and southern parts of the state.

But relying on an abstract had its disadvantages.  Consider the case of Watson v. Muirhead, 57 Pa. 161 (1868).   Watson wanted to buy some property in Philadelphia.  He hired Muirhead to abstract the public records.  Muirhead discovered an unsatisfied judgment.  Relying on a previous opinion from a local lawyer who felt that the judgment was not final and that therefore did not affect the land, Muirhead omitted the judgment from his report.

After Watson purchased the land, the judgment creditor successfully enforced his judgment, and Watson lost the property at a judicial sale.  Watson sued Muirhead for his damages.  The court ruled, however, that Muirhead had exercised due care and therefore decided that Muirhead should not be held liable for an error that was not due to his negligence.

It was clear that something better was needed.

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Easements 101

To download the article, click HERE.

Easements may burden or benefit a parcel of real estate. In either event, easements may affect the value and use of the land. For this reason, it is important to consider whether the property is either burdened or benefitted by an easement. This article will discuss the different types of easements and the ways in which easements can be created and terminated; it will also discuss title company requirements for insuring easements.

An easement is a right acquired by a landowner to use the land of another for a special purpose.  This right may be for such purposes as access, driveway, party wall, drainage, public utilities and other purposes. Easements are divided into 2 general categories: an appurtenant easement or an easement in gross.

An appurtenant easement operates for the benefit of one tract of land and burdens another, usually adjoining tract. Thus, there must be two tracts of land owned by different parties, that is, a separation of title. The benefitted parcel is referred to as the dominant estate (or dominant tenement), and the burdened parcel is referred to as the servient estate (or servient tenement). Because an appurtenant easement is regarded as being so closely connected to the dominant tenement, it is regarded as “running with the land”. This means that once the easement has been properly created, the easement will pass upon a conveyance of the dominant tenement to the grantee of the deed, even if the deed does not mention it.

An easement in gross does not specifically benefit another parcel of land. It runs in favor of a party who does not own the property adjoining the easement. A utility easement given to a utility company such as the phone, gas, cable or electrical company is the most common type of easement in gross. Easements in gross may not be considered interests in real property; they are generally not insured by title companies.

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Karlen’s Korner Special Edition: A Bleachers Story

By Douglas M. Karlen, Regional Counsel, Chicago Title Insurance Company

If at first you don’t succeed (in the courts), try, try again (in the legislature). This is the story of the Crystal Lake South bleachers. The question decided in this story is: do municipal zoning ordinances govern a school district’s construction of football stadium bleachers on school property? The courts said “yes;” the General Assembly subsequently said “yes, but . . .”

The campus of the Crystal Lake South High School occupies land that adjoins residential properties in the home rule city of Crystal Lake. The residences and the campus are zoned R-2 Single Family Residences. The school constitutes a nonconforming use permitted to continue under Crystal Lake’s zoning ordinances.

In 2013, the Board of Education that operates the high school decided to replace the bleachers at the football stadium. The Board’s plan placed the new home bleachers adjacent to the neighboring residential properties and called for the new bleachers to be larger, higher, and closer to the residences than the existing bleachers. The Board obtained approval and a building permit from the McHenry County Regional Superintendant of Schools and began work on the project without notifying Crystal Lake or seeking a building permit or zoning approval. Crystal Lake ordered the Board to stop construction until it obtained a special use permit and zoning variances. The Board ignored the order and completed the bleachers project.

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Understanding the UCCPlus Insurance Policy

An interview with Gary Zimmerman, Senior Vice President and Chief Underwriting Counsel of Fidelity National Title Group’s UCCPlus Division

A UCCPlus Insurance Policy (UCCPlus Policy) is a title insurance product that insures most personal property taken as collateral for a loan. Similar to a lender’s real estate title insurance policy that insures a mortgage or deed of trust is a first priority lien on real property, a lender’s UCCPlus Policy insures that the personal property pledged to the lender as collateral for a loan is a first priority lien. The UCCPlus Policy shifts all of the risk from the insured lender to the title company by insuring proper validity, enforceability, attachment, perfection and priority relating to the lender’s security interest or lien on the personal property. Secured lenders value this as a risk management tool that decreases their operational risk by shifting the documentation, perfection and fraud risk to the title company. Leading commercial law firms and lending institutions recognize the use of a UCCPlus Policy as a best practice.

Are there other ways that a UCCPlus Policy shifts risk?

Yes. A UCCPlus Policy shifts the risk from the insured lender to the title insurance company for loan documentation defects, fraud and forgery, search office errors and omissions, indexing inconsistencies and financing statement irregularities and defects. The attorneys and paralegals who underwrite and issue the UCCPlus Policy are highly-trained professionals with commercial transaction expertise as well as specific knowledge of Articles 8 and 9 of the Uniform Commercial Code.

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Karlen’s Korner Special Edition: A Revised Limited Liability Act

By Douglas M. Karlen, Regional Counsel, Chicago Title Insurance Company

On July 28, 2016, Governor Rauner signed into law a massive re-write of the Limited Liability Company Act, 805 ILCS 180/1-1 et seq. See Public Act 99-637 (HB 4361), effective July 1, 2017.  This comprehensive revision of the Limited Liability Company Act (LLC Act) is based in large part on the Revised Uniform Limited Liability Company Act, a model act written by the National Conference of Commissioners on Uniform State Laws.  Although P.A. 99-637 amends many sections of the LLC Act merely to match the language of the model act, the new law makes some substantive changes and adds some new concepts.  Attorneys who intend to form limited liability companies and draft operating agreements and related documents should study all 112 pages of P.A. 99-637.  For a starting point in analyzing the new law, practitioners may consult M. Hector, Proposed legislation makes sweeping changes to the Illinois LLC Act, July 2016 Illinois Bar Journal, Vol. 104., pp. 12-13.  The following provisions of the new law should be of interest to real estate practitioners.

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Construction Issues at Closing: A Title Company’s Perspective

Introduction

One of the more complex and confusing issues that can rear its ugly head at a real estate closing is that of the existence of past, present, or, in some cases, future contracts for construction on the land. These contracts can create headaches for owners, purchasers, lenders, attorneys, and title insurers if the issues surrounding these contracts are not dealt with prior to closing. This article will identify construction issues that arise at closing and discuss how Chicago Title Insurance Company deals with these issues. The scope of this discussion will be limited to acquisition and refinance transactions rather than construction loan closings.

Illinois Mechanics Lien Law

Before one can start the process of determining if there is a construction issue at closing, a basic understanding of applicable Illinois mechanics lien law is necessary. To accomplish this, a review of the “Mechanics Lien Act” (hereafter referred to as the Act) found at 770 ILCS 60/1 et seq., is imperative. What follows is a brief synopsis of some of the pertinent parts of the Act.

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Company Fact Sheet: Mid Year 2016

Performance that highlights the financial strength of our title insurance business

This was a strong quarter for our title operations, as our title operations again led the title industry with a 16.5% adjusted pre-tax title margin.  Our adjusted pre-tax title earnings of $300 million were a $17 million increase over the strong second quarter of 2015.  The mix of business towards purchase transactions was approximately 57% and 58%, respectively, for open and closed orders during the quarter.

Our title operations had another strong quarter in our commercial business, generating $244 million in total commercial revenue.  National commercial revenue accounted for $144 million of all commercial revenue during the quarter.  The commercial market remained strong during the first half of 2016 and we also expect good commercial performance in the back half of year.

Download our the Mid Year 2016 Company Fact Sheet HERE.

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Chicago Trivia

Chicago Title Ad - Bisnow Chicago Morning Brief: April 18, 2016 to April 22, 2016.

Trivia Source:

Wilson, Caitlin.  "100 Historical Chicago Fun Facts." Web post.  Reboot Illinois, 10 Aug. 2015.  Retrieved from http://www.rebootillinois.com/2015/08/10/editors-picks/caitlinwilson/100-historical-chicago-fun-facts/35305/

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Certification of Trust: A New Title Clearance Document

By Douglas M. Karlen
Vice President and Regional Counsel 
Chicago Title Insurance Company

DOWNLOAD THE ARTICLE HERE.

Since August 10, 2015, trustees of personal trusts have enjoyed the benefits of a new statute that protects the privacy of trust information. An amendment to the Trusts and Trustees Act reduces, or even eliminates, the need for a trustee to deliver a copy of a personal trust agreement to anyone other than a beneficiary. See Public Act 99-337 (SB 1877), effective August 10, 2015, codified at new 760 ILCS 5/8.5. The new section creates a Certification of Trust upon which third parties may rely. In doing so, Illinois joins several other states that protect the privacy of trust information and documents.

New Section 8.5 applies to personal trusts (revocable, irrevocable, living, etc.). It does not apply to Illinois land trusts. For example, it does not apply if title to real estate is vested in an institutional trustee, such as the Chicago Title Land Trust Company.

Title companies have adjusted title examining and clearance practices to accommodate the new Certification of Trust.

THE CERTIFICATION OF TRUST

Instead of furnishing a copy of the trust instrument to a person other than the beneficiary, the trustee may furnish to the person a Certification of Trust. A Certification of Trust form is set out at 760 ILCS 5/8.5(j), but use of this statutory form is not mandatory. Like the statutory form, however, a non-statutory Certification of Trust must contain the following information:

  1. A statement that the trust exists and the date the trust instrument was executed;
  2. The identity of the settlor;
  3. The identity and address of the currently acting trustee;
  4. The powers of the trustee;
  5. The revocability or irrevocability of the trust, whether the trust is amendable or unamendable, and the identity of any person holding a power to revoke or amend the trust;
  6. The authority of co-trustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee;
  7. The trust’s taxpayer identification number; and
  8. The manner of taking title to trust property.

See 760 ILCS 5/8.5(a).

A Certification of Trust need not include the dispositive terms of the trust, 760 ILCS 5/8.5(d), but it must include a statement that the trust has not been revoked, modified, or amended “in any manner that would cause the representations contained in the certification of trust to be incorrect.” 760 ILCS 5/8.5(c). One or more of the trustees must sign the Certification, and the recipient (third party) may require an acknowledgement. 760 ILCS 5/8.5(b).

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Chicago Trivia

Chicago Title Ad - Bisnow Chicago Morning Brief: March 28, 2016 to April 1, 2016.

Trivia Sources:
Parker, Lara.  "50 Things You Probably Didn't Know About Chicago." Web post.  BuzzFeed Life, 25 Mar. 2014.  Retrieved from http://www.buzzfeed.com/laraparker/things-you-didnt-know-about-chicago#.fw2kawe8D

Wilson, Caitlin.  "100 Historical Chicago Fun Facts." Web post.  Reboot Illinois, 10 Aug. 2015.  Retrieved from http://www.rebootillinois.com/2015/08/10/editors-picks/caitlinwilson/100-historical-chicago-fun-facts/35305/