About Title Insurance

Q&A

The information posted herein is of a general nature and is not intended to be legal advice nor to establish an attorney-client relationship. Any answers or information about case results are not misleading, depend upon a variety of factors, and the answers or results do not guarantee or predict a similar result. If you need legal advice, you should engage an attorney that practices in the jurisdiction and in the field related to your particular need.

What is title?

Simply stated, a title is the right to ownership, possession and enjoyment of a home or property.

What is title insurance?

An insured statement of the condition of the title or of the ownership of real property, at the time the policy is issued
A unique form of indemnity – it promises that if the state of the title is other than as represented in the policy, and if the insured suffers a loss as a result of the difference, the insurer will reimburse the insured for the loss and related expenses, up to the face amount of the policy
A means of protecting against the risks inherent in the uncertainty of land titles by delineating some defects of title and by insuring against potential losses from others
Protection from title defects, liens, encumbrances and other matters existing as of the date of the policy and not specifically excepted from coverage
Looks back at the history of a title from the current owner to at least a good root of title; not forward to some event
Onetime payment of premium at completion / closing
Does not insure against a certain loss by spreading liability to many

What is the difference from an opinion of title from my attorney?

Title deeds and other documents are reviewed not just for strict legality, but to assess the risk to insurance company
Can insure over known defects based on its assessment of risk
Guarantees the title is good notwithstanding defects (multibillion dollar company backs the guarantee)
Liability for the insurance company is based on the contractual obligation of the insurer and not on a finding of negligence

What does title insurance cover?

Insures against record and off-record (“hidden”) risks such as:

Forged documents
Undisclosed/missing heirs
Mistaken legal interpretation of will
Misfiled/lodged documents
Undisclosed dower interests
Confusion from similarity of names
Mental incompetence
Survey errors

What are the advantages to clients?

Supplements an attorney’s opinion by eliminating attorney opinion qualifications
No concern about limits to attorney’s liability insurance
Shifts risk from client (attorney) to the deep pocket of the insurance company
Onetime payment of premium at closing/ completion
Protection continues to heirs
Protection continues after sale of property by guarantees of Vendor’s implied covenants of title (e.g., quiet enjoyment)

What are the advantages to lenders?

Assuring priority by requiring prompt recording of loan documents
Insurance cover for the period between execution of documents and the recording of documents
Extension of coverage to any assignee of an insured mortgage
Expansion of real property pool that can serve as collateral
Guarantee of priority regardless of state of Registry

What are the advantages to attorneys?

Even when an attorney does not want to opine (due to known defect or complexity of title) one can obtain insurance for client and still complete the transaction
Reduced costs of liability insurance (insurer can rely on attorney’s opinion to issue policy and will not sue you unless attorney was grossly negligent or committed misconduct)

Are there different types of policies of title insurance?

Yes. Generally speaking, there are two that are the most common. They are the Owner’s Policy and the Loan Policy. As the names imply, each of these policies provides protection for the owner and the lender, respectively. Although there are differences between the two types of policies, the differences are based on the (ownership) interest each insured has in the land and the type of loss each would suffer.

Why do title insurance companies take exceptions to risks in policies?

All insurance companies must include exceptions to risks in their policies to limit their exposure to claims. Otherwise, they would have to pay so much for claims that they could not be a viable business. If exceptions were not taken, insurance companies could not exist. One significant difference between title insurance and other types of insurance (e.g., casualty insurance) is that before committing to insure, title insurance companies search the title to find problems. The companies limit or eliminate their risk by finding, and when possible, resolving problems before issuing a policy. When a title problem cannot be resolved, and is an unacceptable risk to the insurance company, the policy will include the problem as an exception to coverage.

What is the cost of title insurance?

The cost of title insurance varies based on the value of your property, but is well worth the peace of mind and protection it provides. The higher the value, the higher the premium. Specifically, the cost will be a certain dollar amount per every $1,000 of protection. For example:- If you want protection for a $200,000 property and the risk premium per $1,000 is $5.00, then the cost would be $1,000.

How often are premiums paid for title insurance?

Unlike other types of insurance that require monthly premium payments, you pay only once for a title insurance policy.

Is the land title insurance in The Bahamas the same as in the U.S. and other countries?

Yes, land title insurance available in the U.S. (and required by international banks), is similarly available in The Bahamas.

Why is title insurance needed and how does it provide protection?

Title insurance provides several levels of protection. When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, for the property to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security/collateral for a loan. Title insurance is designed to cover these rights you bargain for.

Title insurance protects against hidden defects in title that may have existed before you purchased your property and which even the most carefully conducted title search could not reveal. Without it, you may be liable for judgments or claims brought against your new property. However, your Owner’s Policy will pay the legal cost of defending all covered claims and, should the claim prove valid, reimburse you for your actual loss up to the face value of the Policy.

An additional and valuable benefit of title insurance that should be considered in the context of unmarketable title, is that a client would not have to pay legal costs associated with defending a challenge to the client’s title to the property. Title insurance policies require payment by the title insurance companies for “costs, attorneys’ fees and expenses incurred in defense of the title.”

What does a title search reveal?

A title search should reveal everything that is deposited in a nation’s public record and can be found, retrieved and viewed using the nation’s recording system. Recording systems vary and some have more limitations than others. Generally speaking, among the numerous documents that can be recorded and information that will be posted by the government, the following documents and/or information should be revealed by research in the public records of The Bahamas:

Deeds
Conveyances
Mortgages debentures, charges or other liens against the property
Satisfactions
Releases
Agreements
Affidavits
Exchanges of property and or rights
Condominium Declarations
Easements and/or rights of way
Declarations of Covenants, Conditions and Restrictions
Grants (of rights, use, possession, to navigate, to go over, upon and along, to cross over, etc.)
Actions in courts
Court judgments and orders
Information about companies
Survey Plans

Are there problems a title search will not reveal?

Yes, and that is one of the main reasons why you should purchase title insurance, because title insurance can protect you from such problems. There are defects in titles that cannot be found in the Public Records during a title search. They are so-called “hidden hazards” or “off-record” matters that can include the following:

A forged will or deed/document
A signature by a minor or mentally incompetent person
Duress
False affidavits
Fraud
Incorrect filing of a document by the government
Sellers who misrepresent their marital status
Undisclosed heirs
Unrecorded wills

Title insurance is a simple and relatively inexpensive way to protect yourself against such problems and others.

Are there limitations to what you can search?

Depending on the reason you need to conduct a title search or the source from which you obtain title information, you may not be able to readily find what you are looking for. For instance, if you want to learn who owns the land next to yours, you could not find that information in the Deeds and Documents Section of the records of the Registrar General of The Bahamas because their documents are only retrievable though a Grantor/Vendor – Grantee/Purchaser index. Therefore, you will have to know the name of the owner of the land to conduct your search. The problem in this instance is that that is precisely the information you are looking for.

This is one of the reasons IDM developed proprietary databases of the land records of The Bahamas; that is, to be able to search beyond the limited scope available from the public record IDM’s approach to searching title is different because of their unique databases. They do not merely rely on the government’s limited Grantor-Grantee index, but instead use unique databases, which allow searches that can discover things adverse to an owner’s interest that a search limited to the Bahamian registry system does not allow.

What is the purpose of a title search?

A title search is usually done to determine the status of the title of a property for the purpose of buying the property or when getting a loan secured by a property. Ideally, when conducting the search, the researcher will establish an unbroken chain of owners from a “good root of title” to the current owner, thereby proving the current owner’s rights to the land.

When purchasing property, the primary reason you do a search is because you want to buy land from someone who really owns it. The primary reason a bank requires a title search is because it does not want to lend money to someone who does not own the land to be used as the guarantee/security/collateral for the payment of the loan. Other examples of why a title search is done may be to find out whether your neighbor built his pool on part of your land, or whether there are restrictions on what you can do with your land, or who owns the land next to yours.

What is a title search?

A title search (also called a real property title search or a land title search) is the methodical process of obtaining documents and information from the “public record”, plus that available from private sources, about a particular piece of land which show the ownership history of that land and matters that affect the land. Such documents may include survey plans, Crown Grants, indentures/deeds of conveyance, debentures, mortgages, grants of rights of way or easements, contracts for sale, options, affidavits, assignments, etc. Also, records regarding probate, marriage, taxes and court judgments are part of the public record.

What is the title recording system in The Bahamas?

The recording system in The Bahamas is one where various government agencies, including the Registrar General, are responsible for maintaining a register or other source of information intended to put the general public on notice about documents and information relating to (among other things) rights to property and the use of property (commonly known as the “public record”). For example, the Registrar maintains indices that are searchable by the name of the Grantor/Vendor or Grantee/Purchaser. This type of system is often referred to as a “deeds registration system” or an “unregistered title” system. In many jurisdictions, including The Bahamas, there is no requirement that a deed be recorded to perfect your ownership. In those cases, interests in the land vest in the purchaser upon the delivery by the vendor and acceptance by the purchaser of a fully executed/signed Indenture of Conveyance/Deed.

Can foreign nationals own property in The Bahamas?

Under the International Persons Landholding Act, 1993, all alien land holdings must be registered. A Permit issued by the Investments Board is required for any acquisition of residential property of 2 or more contiguous acres or any commercial property by any alien person or corporation that is not Bahamian owned. A Certificate of Registration is required for smaller residential property. In addition, investments by non-Bahamians funded from a foreign source should receive approval from the Central Bank of The Bahamas.

What are the closing customs?

Real estate closings are generally conducted by Attorneys.

Are there standard form deeds?

While there are statutory form conveyances and mortgages, almost all deeds are in a form and have content specific to the transaction.

What is the document of encumbrance?

Residential transactions – Mortgage (similar to U.S. deed of trust),
Commercial transactions – Debenture and Mortgage.

What are the foreclosure procedures?

Mortgagee has statutory power of sale under which the mortgagee may convey the fee without judicial foreclosure. Foreclosure proceedings can also be used.

What are the closing costs?

Closing costs, exclusive of title insurance premium, include attorneys’ fees, applications to the Central Bank for Approved Investment Status and to the Investments Board for a Certificate of Registration or Permit, recording fees, etc.

What are the taxes in The Bahamas?

There are transfer taxes comprised of Stamp duty of 2.5% and VAT of 7.5% of the consideration; and real property taxes. However, several rules, exemptions and exceptions apply to each of these taxes. This is an area where Bahamian counsel advice should be sought.

What are the notary requirements?

The notarization of documents executed outside of the Commonwealth of The Bahamas must be proved by an Apostille in the case of countries which are signatories to The Hague Convention. In other cases, the authentication process will vary.

How are documents recorded?

All documents of transfer or encumbrance of real estate should be recorded at the Registry of Records; however, recording is not a requirement to vest ownership.

What title insurance forms are used?

International title policies as developed with our underwriters to provide cover similar to policies issued in the U.S.

What is the currency of The Bahamas?

The Bahamian dollar, which has been historically pegged to the U.S. Dollar. The use of U.S. dollars in real estate transactions requires approval from the Central Bank of The Bahamas. The Bahamian Government’s monetary policy has been to maintain adequate reserves of U.S. Dollars to ensure the Bahamian Dollar remains on par with the U.S. Dollar.