Curative Title Law: What It Is, and Why You Might Need it.
Updated: Oct 3, 2018
As a solo practitioner, one of the areas I promote is Curative Title Law. This loose term refers to any issues or situations dealing with title to real property. As you are probably aware, some of the strongest rights associated with property ownership are the abilities to sell and encumber the property freely. Since most real estate deals are based on outside financing, however, lenders require strong proof of ownership (or title) in order to "bless" the transaction. This proof usually comes in the form of a title search and the subsequent issuance of an insurance policy by a title company. As anybody who has ever sold a home can tell you, the title search is an extremely important step that can make or break the deal.
Curative Title Law describes the process of dealing with whatever problems a title company encounters during their search. These problems manifest themselves in a myriad of ways, and often incorporate several ancillary areas of law. Regardless of the problem, chances are that until the title company is satisfied, no policy will be issued, the financing will not go through, and the property is not going anywhere. For a better explanation, here are some real world title issues that come up all the time. Each of these were real cases that came across my desk. By utilizing open communication, creative approaches, and (most important) some patience and persistence, I was able to successfully address each title situation.
One source of curative title issues comes through family law matters. A real world situation occurred a while back in a county north of San Antonio. A couple had divorced, and the decree stated that the family home “shall be sold, and the proceeds be split between the parties.” After several months, one party changed her mind, deciding instead to buy out the other’s interest and keep the home for herself. Her former spouse agreed to the arrangement, and the bank even agreed to the terms of a refinanced loan to pay off the selling party. Despite the agreement, the title company still took issue with the conveyance. They cited the language of the divorce decree, which specifically stated the home would be sold, and the proceeds split. This strict language essentially blocked them from carrying out what otherwise seemed to be a very simple, reasonable plan.
After meeting and thoroughly discussing the problem, I conducted a little research to see what could be done to clear the path for them. I eventually returned to the Court that heard he divorce and filed a “Motion for Clarification". This straightforward motion, agreed to by both parties, respectfully requested that the Court reform the decree to reflect the true and correct understandings of the parties. That understanding, as evidenced by notarized affidavits, included the option for an agreed buyout between the parties. While the Judge took his time considering the motion, he ultimately had no issue signing an order reforming the decree to include the clarification. We accomplished this without ever having to go to the courthouse or have a hearing. After presenting the new order to the title company, they were satisfied with the legality of the conveyance, and the transaction was executed without issue.
When it comes to probate, curative title law is not so much an issue as it is a simple fact. When an owner of real property passes away, another individual typically cannot sell or encumber that property until it has passed through some sort of probate proceeding. There are exceptions through the establishment of trusts or certain “Transfer-on-Death Deeds,” but these are generally exceptions to the rule. Clients sometimes take major issue with the probate process, especially when they have been paying for the mortgage, taxes, and upkeep of a home they consider to be theirs. No matter how much “sweat equity” someone may have, unless title has been transferred through probate, it is still considered vested in the deceased individual.
Although probate is a necessity, it does not have to be overly complicated. A great example of that happened a couple years ago, when a client’s mother passed away with her only asset being a home. Her will left all property in equal shares to her four children. In that situation, when an individual dies with a will, owning only homestead property, a muniment of title is a great option. This method alleviates the need for the appointment of an executor and the opening of a full estate administration. Instead, an application is submitted to the Court, and an order is signed probating the will. Once that order was filed in the county records, the title was considered vested in the surviving children.
The probate umbrella also includes situations where powers of appointment are utilized. When someone signs a valid power of attorney, or when a Court appoints a guardian over another individual, the agent or guardian is given the power to act on another's behalf for his or her best interest. While these powers can be quite broad, the “power of sale” clause is not always standard language. Deals can be held up when the agent is found not to possess the specific power of sale. This can be difficult in situations where the sale is needed to pay the bills of the incapacitated individual. If you plan on utilizing powers of appointment to sell real property, check to make sure your appointment includes the power of sale. Without it, you may be unable to make the sale.
This subcategory refers to a situation where someone, without a bank, title company, or knowledgeable attorney, engages in a perilous real estate transaction. Without these guiding forces, individuals often end up paying for interests in real property without getting good title in return. The most common culprit is the quitclaim deed, in which a person conveys whatever interest they have in a certain property to someone else. The problem is that there is absolutely no warranty that they in fact own any interest at all. Think of it like this: It would be perfectly legal for me to quitclaim the Alamo to you, even though I have no interest whatsoever to the historic mission. All I have done is given you “whatever interest I have” in it. While quitclaims can be useful when transferring property in certain trust or family situations, it is not a good practice when purchasing land from an unknown party.
This situation came up recently when a client attempted to sell her small west side home in San Antonio. Although she has lived in the home and paid for the property taxes for years, a realtor informed her of some potential title problems. After reviewing the county property records, I discovered that she claimed title through a quitclaim deed from her sister, for which she paid a hefty consideration. Further investigation revealed, however, that due to a strange series of events before the quitclaim, the sister in fact did not have good title to give. This left them in an awkward situation, as the sister was not in a position to repay my client, and my client was unable to sell what she had paid for. The case is ongoing, but due to our ability to track down previous owners, there seems to be a happy ending in site. While there are ways to right these wrongs, the best solution is to ensure good title from the very start.
Hopefully these examples gives you an idea of the unexpected issues that come up when trying to convey real property. Whether you find yourself dealing with a problem now, or just want to make sure your affairs are in good order, I recommend speaking to an experienced attorney. Any time and effort involved in securing good title today will be far outweighed by the money and headaches it could save you down the line.