The Legal Brief
The Impact of COVID-19 on the Ability to Procure Title Insurance for Real Property Transactions
March 19, 2020
COVID-19 has put the world and its businesses in turmoil. The title insurance industry is not an exception and innovation is needed. Title insurance companies have extensive contingency and business plans to keep transactions moving forward despite the physical restrictions necessary to protect the American people from the virus.
With the physical restrictions in the US due to COVID-19, title insurance companies are working with agents, lawyers, lenders, and underwriters to provide guidance amid of sea of closures and physical barriers. Title Insurance insures owners of real property and lenders against loss arising out of invalid or defective titles, and against liens or other claims affecting real property. It is often a requirement of lenders to procure title insurance for a financing to close.
Where physical closings are available, safe, and desirable in a real estate transaction, attendance should be limited to only those necessary to sign documents. Individual pens should be given to each signer of a document. Hand soap and sanitizer must be present at the closing, with the agent closing the transaction sanitizing the room before and after the transaction. If an office is closed, many title insurance agencies are offering to hold closings in the title insurance office. Where electronic signatures are permitted by local recording offices, this may be a viable solution to physical barriers.
The fact that many governmental and non-governmental offices are closed or plan to close creates major impacts on managing real estate closings. Local recording offices are closed or may only be accepting documents for recording without the ability to search the records prior to recordation. Title insurance may still be available if certain conditions are met. The parties usually must acknowledge that the title insurance company has no control over when documents will be able to be recorded. Hold Harmless, indemnity, and affidavits may need to be signed by one or both parties to the transaction. A bank, state tax office, or federal tax office may be unable to provide lien payoff amounts needed for closings. Underwriting practices may be affected and certain new exceptions may be present on the policy that should be read closely and understood prior to closing.
Many title insurance companies are assisting in different ways to weather the impact of COVID-19 on commercial transactions. Title insurance is still available for real estate transactions during this uncertain time.