Title Insurance

What is Title Insurance?

Title Insurance is issued by an insurance company and guarantees that the title to a parcel of real property is clear of any defects.

It provides insurance against loss from flaws in the property title. Should any inaccuracy be detected on the title, the insurance company will be bound to cover the loss incurred by the new title holder or insured lender or must take steps to correct the problem.

Although a Title Insurance Policy is a type of guarantee, it only provides for resolution (by reimbursement or otherwise) if the title is not as stated in the policy.The amount recoverable can never exceed the policy amount.

In this regard, Title Insurance is no different from other types of insurance. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured party for the actual monetary loss incurred, up to the dollar amount of coverage provided by the policy.

There are two types of title insurance--Owner’s Title Insurance and Lenders Title Insurance, also called a Loan Policy.

Title Insurance was created in the United States and is now available in many other countries, such as Canada, Australia, United Kingdom, Northern Ireland, Mexico, New Zealand, China and Korea, as well as throughout Europe.

Title Insurance Stakeholders

The Borrowers

Owner’s Title Insurance, to the value of the real estate covered, is purchased for a one-time fee on closure of the sale, and lasts as long as you or your heirs have an interest in the property. Owner’s Title Insurance fully protects the buyer should a problem arise with the title that was not uncovered during the title search, and pays for any legal fees involved in defending a claim to your title.

In Jamaica, there are two systems of ownership. There is the title registration system and the deed ownership system, also called common law title.

Unlike the registered title, the deed system offers no government guarantees, so financial institutions will not issue a mortgage or accept it. Title Insurance will guarantee a deed, thereby facilitating the issuing of loan funds.

There are about 730,000 parcels of land in Jamaica and, according to government data, only 440,000, or just over 60 per cent, are registered, leaving nearly 300,000 parcels of land island-wide without titles.

Title Insurance covers both properties with titles and those without, so a whole new class of borrowers can now benefit.

At the same time, borrowers can take advantage of the accelerated loan transaction process.

Lenders

A Loan Policy is usually based on the dollar amount of the loan and protects the lender’s interests in the property against any deficiencies on the title. The policy coverage decreases each year and disappears as the loan is paid off.

Title Insurance can be used to reduce the timeframe for conveyance transactions as it allows for a more streamlined process that is consistent across practitioners and properties. This would facilitate the introduction of standard practices from as early as the sales agreement stage.

The integrated system also helps lenders protect themselves against fraud and inflated values by ensuring complete quality control throughout the loan process.

With the introduction of improved provisions, lenders should be able to expand their client base and to penetrate a new segment of the market, particularly with regard to common law titles.

Real Estate Professionals

The current system for securing a mortgage loan on a registered title in Jamaica is slow and inefficient. There is no central storage of data relating to title defects, no deadlines for completing assigned tasks, and each professional engaged in the process charges a fee based on property value.

A transaction management system makes it faster and easier for customers to submit new applications and track up-to-the-minute status on their files. It can deliver uninterrupted customer service anytime and anywhere.

Residential Real Estate Agents busy with listings, client meetings and site visits, can substantially enhance efficiency at the back-end of their business by subscribing to the computerized and streamlined transaction management system.

They can expect to improve their productivity, reduce costs, save time and expand their service offerings.

Lawyers

One of the advantages of Title Insurance is that policyholders automatically get legal protection through lawyers contracted by the insurance company to defend their interest.

Contentious real estate matters are often concluded prematurely because the property owner cannot afford a lawyer. Title Insurance will cover the cost to defend the owner’s interest in the property.

Attorneys will have an additional and more formal role to play in resolving title issues.

The Government

Emerging research suggests that property rights play a significant role in the economic and social development of nations.

“If property rights are not well-defined and enforced, the incentive to take by threat or violence increases, with the predictable results that resource owners will invest less in developing their property or even keeping it up,” Leah Kral reported in a 2006 study on property rights in Jamaica.

No country can ensure stability within its boundaries, or contribute to economic development within the wider world, unless it has a land rights policy that promotes internal confidence among its people, its commercial enterprises, and its government, Kral stated. Recognizing that land is a source of wealth lies at the heart of good government and effective public administration.

Due to its massive and poorly-planned urbanization over the past half century, Jamaica has developed a culture in which the absence of property rights is a self-perpetuating cycle for most stakeholders. Successive Governments have sought to deal with the problem, but the programmes have been expensive and have had limited impact.

The Legal Department of the Ministry of Water & Housing has more than 8,000 titles stored in its vault in relation to units in various schemes built by the Government since the 1970s, according to a 2007 Jamaica Information Service (JIS) release. Delivery of the titles depends on settlement of often small mortgage accounts with many of the schemes being over 20 years old.

According to the JIS, some $272 million has been set aside in the 2008/09 Estimates of Expenditure to continue land administration and management programmes, in order to promote sustainable development of the planned and unplanned natural environment.

The JIS states in an April 1, 2008 release that the Jamaica Land Titling Project will benefit from $11.06 million to continue to assist with the development of the Land Information and Cadastral Mapping System, which supports land registration and divestment, land valuation, and general information access for informed decision-making.