When purchasing, selling or refinancing a property, the Preliminary Title Report (Prelim) shows critical elements of a Properties Chain of Title that must be verified and or cleared to transact.  A Preliminary Title Report can be obtained from a Title Company with a local County presence where the property resides.  While managing the prelim is critical to a transaction it is important to recognize that the Prelim is not a written representation as to the condition of title and may not list all liens, defects and encumbrances affecting title to the land.  This report (and any supplements or amendments hereto) is issued solely for the purpose of facilitating the issuance of a Policy or Policies of Title Insurance.   Similarly, the Title Insurance Policy does not “Guarantee” a clean Title, it is just an Insurance Policy.

The Prelim documents important information about the ownership of a property, but it does not stop there. It also reveals any items that have been recorded against the real estate being purchased or refinanced. This can include items like liens, easements and encroachments.  This Blog highlights nice to know items about a Prelim.

Why Is A Preliminary Title Report (Prelim) Required? The Prelim reveals Title Record details that may or may not need to be addressed before a seller can convey a Title that is both clear and marketable. Addressing these issues will allow for a Title Insurance policy to be issued. Reading the report can help a lender or buyer or borrower spot potential issues before consummating the transaction, which can mean avoiding costly mistakes. While it’s suggested that the transaction stakeholders review the entire Preliminary Title Report, there are a few sections that should be given a more thorough once-over.

Must-Review Sections of the Preliminary Title Report:

  • Schedule A: Typically, Schedule A includes Vesting (Ownership Name), Legal Description and the APN Number. The Legal Description clearly defines the boundaries of the property, how those boundaries relate to nearby intersections and roadways, the easements that apply and parking, storage and interest in any common areas. This part of the report helps to ensure that both buyer and seller are on the same page when it comes to what is and is not included with a property.
  • Schedule B: Includes exceptions to coverage. Unless these items are cleared and removed, these items remain on Title and will not be eligible for Title Insurance coverage should a claim arise.  The Property Tax section contains information regarding the status of property tax payments. If there are outstanding amounts, a transfer of the property will not be able to occur. Outstanding amounts include those owed to all forms of locations a property is located within, whether it is in a county, town or city. Mortgage, Mechanics, Judgment and other types of Liens are included in Schedule B and need to be paid off if the new Lien is meant to be a Senior Lien.  If the new Lien is a junior lien, then lien priority should be established.   Some items in Schedule B are for information only including historic oversights, restrictions, covenants, conditions, and easements.
  • Notes and Requirements: This section describes what the Title Company will require to clear or clarify and issue.  One example might be requiring an Affidavit on an uninsured Grant Deed or request for a Reconveyance on a previous lien that is still listed.     

Whether you are a Buyer, Seller, Borrower or Lender, you should review, scrutinize and thoroughly understand the Prelim.  Large dollars are at stake and addressing any discrepancies in the Prelim can ensure that the Title is delivered as efficiently as possible.