Title insurance policy for owners could help avoid sticky situation involving tax liens

02/10/2010
A recent column from the Philadelphia Daily News may show one reason why consumers should consider title insurance protection for themselves while being required to get it for lenders.

The piece from personal finance writer Harry Gross featured a letter from a reader who recently discovered that there was a lien on a property they had sold and settled on recently. The lien dated back to 1973 and totaled $2,500.

As a result of the lien, which was placed by the Western Consumer Discount Co., the reader could end up owing $5,000, including interest. One thing that put the reader in this predicament is the fact that the title insurance company did not find the lien in their search of records.

Gross said that the first thing the reader should do is figure out if the lien was placed on the property before or after they purchased the property.

"If it did, then your title insurance company missed it when you bought the property," Gross wrote. "In that case, go after them to get that lien removed."

However, if it happened after the consumer purchased the property, the reader is probably going to have to pony up and pay on the lien.

One additional wrinkle in the reader's problem was the fact that neither they, nor Gross, could find a record of the company, whether it be under its past name or current ownership. In order to amend this, Gross suggested that the reader should contact a lawyer.

"This should not be a costly or lengthy procedure," Gross said.

Another way the consumer may have been able to protect themselves is by purchasing owner's title insurance. Many mortgage lenders will require that a homeowner purchase a lender's title insurance policy, which will protect the company's investment in the person's home against things like tax liens or court decisions.

An owner's policy provides the same sort of protection for the people who are actually purchasing the home. Like a lender's policy, getting an owner's policy will involve a company searching for records to find any claims that could jeopardize a person's claim to a property.

Furthermore, the policy could provide for legal protection in the case that the homeowners gets involved in a court case involving ownership disputes related to things like liens.