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.

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/

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/

An Introduction to the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys

DOWNLOAD THE ARTICLE HERE.

Introduction

The ALTA/NSPS Liaison Committee (consisting of both the American Land Title Association and the National Society of Professional Surveyors) has approved modifications to the 2011 version of the Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys. The new version will be referred to as the 2016 Standards.

These standards will be effective on February 23, 2016. Why was this date chosen? In ancient Roman religion, Terminus was the god who protected boundary markers. The name “Terminus” was the Latin word for a boundary marker. On February 23rd, Roman landowners celebrated a festival called the “Terminalia” in honor of Terminus.

This article is intended to provide a broad overview of those changes to the land title survey standards that will be of the most significance to the title insurance industry and real estate practitioners.

A complete copy of the 2016 Standards can be found HERE.

It is suggested that you print out a copy and follow along as the sections are discussed below:

Section 5 Fieldwork

Section 5 of the 2016 Standards generally concerns the fieldwork of the surveyor.

Section 5.B.ii. Rights of Way and Access

Section 5.B.ii. of the 2011 Standards imposed a duty on the surveyor to show the “width and location of the traveled way.” Under the 2016 Standards, this amended section now requires the land surveyor to also show “the location of each edge of the traveled way” unless there is no access from the land to said traveled way. In addition, the 2016 Standards include a reference to divided streets and highways.

The term “traveled way” is a term of art, used in many court decisions. It has been defined as “the portion of the roadway used for movement of through traffic.”

In other words, although a plat of a residential subdivision may indicate that the dedicated roads have a width of 50 feet, the distance from one edge of the surface of the asphalt to the opposite edge of the asphalt may be only 29 feet. The land surveyor will have to show both widths—the width of the dedicated road and also the width of the asphalt—on the plat of survey.

This additional information should be helpful to those trying to determine access to a particular parcel of land, including curb cuts.

Section 5.B.ii. of the 2016 Standards is as follows. The italicized words are new.

The name of any street, highway or other public or private way abutting the surveyed property, together with the width of the traveled way and the location of each edge of the traveled way including on divided streets and highways. If the documents provided to or obtained by the surveyor pursuant to Section 4 indicate no access from the surveyed property to the abutting street or highway, the width and location of the traveled way need not be located.

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Company Fact Sheet: Full Year 2015

A strong finish to another successful year, on record revenue from commercial business

Chicago Title Insurance Company is the nation's largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York - that collectively issue more title insurance policies than any other title insurance company in the United States.

The fourth quarter was a strong finish to 2015 for our title business, as we again led the title industry with a 13.8% pre-tax title margin.  The purchase market showed continued growth, as our open and closed purchase orders grew by approximately 9% for the fourth quarter and full-year 2015.

We had a record quarter in our commercial business, generating $303 million in total commercial revenue, an 11% increase over the fourth quarter of 2014.  For full-year 2015, total commercial revenue was more than $1 billion, a 20% increase over full-year 2014.

Download our full year 2015 Company Fact Sheet HERE.

Chicago Trivia

Chicago Title Ad - Bisnow Chicago Morning Brief: February 29, 2016 to March 4, 2016.

Trivia Source:
Chicago Magazine. (2012, October 22).  How Well Do You Know Chicago? Retrieved from http://www.chicagomag.com/Chicago-Magazine/November-2012/How-Well-Do-You-Know-Chicago/

Ask the Experts: Closing & Escrow

TRUE OR FALSE: A loan statement showing the amounts deducted from the face amount of the loan, received from the lender to a transaction, is all that is necessary for the closer to disburse the lender's funds when they are deposited.

FALSE!  The closer must also have written closing instructions detailing:

  • The documents that are to be recorded
  • Any other documents the closer is to collect from the borrower
  • The type and amount of the loan policy to be issued (or a statement that a policy is not required, if that is the case, which it sometimes is!)
  • Any required endorsements
  • Any conditions to be met prior to closing
  • Delivery instructions for the recordable documents and loan policy

In addition the closer must have (usually received by email):

  • Lender's approval of the disbursement statement
  • Final approval to close

Ask the Experts: Construction

TRUE OR FALSE: Title companies analyze three different points when a lender is seeking construction coverage: (1) contracts let prior to closing; (2) contracts which will be let subsequent to the closing but paid for out of the proceeds of the insured mortgage; and (3) how much of the loan will be disbursed at closing.

TRUE!  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. Check out our article, "Construction Issues at Closing: A Title Company's Perspective" which will help identify construction issues that arise at closing and how Chicago Title Insurance Company deals with these issues.