Tax records are the quickest place to look, but these records are not reliable for confirming the rightful owner of property for any transaction. Tax records may be inaccurate, so beware!
- Don’t tax records show names on deeds? They are supposed to. The recorder’s office is where deeds are recorded, and it sends deed data to the tax office periodically – some send it annually, others quarterly, and others monthly. This means tax records will always lag behind the actual deed recordings by as much as 12 months, so examining a deed chain is the primary source for determining ownership of a property.
- Tax records also incur & reflect human error. Tax offices also make edits for their own clarification efforts, which can lead you in a completely wrong direction.
- Official ownership verification – To find out who owns a property can only be done with a title search. A search of the recorder’s office documents on the property, and finding all deeds back for a specific period of time, a deed chain. For purchase transactions, any state’s statute of limitations determines this period of time, and in New Jersey, it is 60 years.
- A professional title searcher will get on the recorder’s computer and start their search just beyond 60 years for good measure, then start scrolling through all recorded documents to the present day. They make notes of all recorded deeds and other documents that can affect the property, like mortgages, liens, easements, etc. They carefully look for evidence in subsequent deeds & documents to confirm each party who took an interest in the property, and later released that interest.
- If any party to a deed is found to have not later released/conveyed/sold their interests, then this is known as a gap in the deed chain, and until that gap is fixed, all owners (persons on deeds) recorded after the date of that gap are in question as to whether they have valid ownership. Gaps can be fixed, but some fixes are costlier and more time-consuming than others.
- Interests created in a property by mortgages, liens, easements, or other documents that have not been released/expired/sold/conveyed are still valid. These give persons rights to some financial interest in, or use of, the property. While technically not ownership interests, these often must be paid off and/or released before the sale of a property.
- Click here to learn how to do a title search.
- In the U.S., a perfect search of a property’s record may still not be reliable because one or more of the documents may have been improperly prepared, signed, or even improperly recorded under another property’s record. Improper recording does not necessarily make a document invalid.
- Misrecording is referred to as an index error and is very common. Improper language in documents affects validity. So does the way documents are signed, by whom, and under what circumstances (duress, forgery, and many other defects.)
- This is why, after performing a perfect title search, attorneys can only issue what is called a “Title Opinion Letter,” stating only their opinion of a property’s ownership, rights, and other interests.
- Defects in the record and defects in documents
Since all documents are prepared, executed, delivered, and recorded by humans, errors are made (defects). Defects may cause lawsuits. To prevent costly legal battles and the resulting loss of the property or financial investment, title searches are typically required prior to transactions by the parties to a transaction: Buyers, sellers, lenders, insurance providers, etc. They want to make sure all valid liens are identified (as much as possible) so they can pay them off in the transaction, and to make sure the selling party is, in fact, the true owner and not a fraudster or well-meaning but misguided heir who has no authority to sign the sales documents.
- Title Insurance
Lenders know about title defects, so they almost always require a lender’s title insurance policy for each transaction. Owner’s title insurance is optional for any buyer at any time – best to buy it at the time of purchase. Title insurance protects the insureds from financial loss due to lawsuits from title defects that are discovered – defects that may have occurred way back in history or at any point in the future. Title claims are far more frequent than the public is aware. Click here for the blog on title insurance and the 5 circumstances when owners’ title insurance is a “must”.
