Prior to selling a house in Louisiana (and in order to issue title insurance), an attorney should conduct a thorough examination of the chain of title. This will go back at least thirty years. The research is done in the mortgage and conveyance office and the tax collector’s office for the parish where the property is located. The title exam is broken down into three parts: the actual chain of title, the mortgage records and the tax records.
Chain of Title
An attorney will look at every transfer of the property that has taken place over the last 30 years. Property can be transferred many different ways.
- Act of Sale
- Judgment of Possession
- Sheriff’s Sale
- Dation en Paiment, and others.
Each of these transfers has its own requirements as to form, witnesses, notaries, etc. The attorney is looking to see each was done in the correct manner. The individual sections of each transfer are:
This can be an issue where an owner has passed away and it is necessary that all of their heirs transfer their interests. If a minor inherits an interest in a property, was the proper court authority obtained to sell their interest? If a purchaser was married at the time of the purchase is it community property, even if the spouse doesn’t sign the purchase such that both of them have to sign the sale.
Is the property description the same throughout the chain or was the property resubdivided with a portion being added or taken away.
Are there any restrictions on the use of the property either by restrictive covenants or servitudes recorded or contained in individual sales regarding reservation of rights, restrictions on resale, Road Home or NORA.
These records are checked for all owners during the time for the exam. The mortgage records contain more than just mortgages. They also reflect if there are any judgments, bond forfeitures, tax liens, etc. against the present or past owners of the property. If any are found they can be handled in one of several different ways:
- Current mortgages, judgments or liens must be paid and are usually paid from the seller’s proceeds at the time of closing.
- Judgments or tax liens may appear but are actually against another individual with the same name. In this case the title company has to verify with the creditor that it is not the same person and will file an affidavit of distinction.
- Mortgages, judgments and liens may still appear of record if they have been paid if formal steps have not been taken with the Clerk of Court to have them cancelled. When this is the case, the title company will get a release from the creditor and file a request for the Clerk to cancel the encumbrance.
- Mortgages, judgments and liens can also be cancelled due to their age. How much time must pass before they can be canceled varies based on the type of instrument filed.
The buyers name is also checked at the courthouse for liens and judgments. If a judgment or lien has been filed against the purchaser prior to their acquisition of the property, it will act as a lien against that property as soon as the sale to them is recorded.
The title company will also check with the tax collector for the parish in which the property is located to determine if the taxes are current. If taxes are due, they collect the necessary taxes with interest from the seller’s proceeds at the closing to pay them. If the property has been sold for taxes, they will take the necessary steps to redeem any tax sales.
Once the title exam is complete the attorney prepares a report setting forth, the owners of the property, any encumbrances that must be taken care of prior to transferring clear title to the property to a new owner, and any exceptions, such as restrictive covenants, servitudes, etc., that will also be binding on the new owner once the title is transferred.
The title company will work to clear up any title issues before an act of sale of sale can take place. Sometimes this can delay when a closing can occur. The standard Louisiana Real Estate Commission purchase agreement, and many others, include a clause allowing for an extension of time for the closing to occur should it is necessary to cure any problems that may arise in the title exam.
Fairview Home Buyers can help you navigate the home selling process. If you have questions regarding a title examination or the closing process, you can contact us.