Title insurance of the real estate

Main article: Insurance (market of Russia)

Why to insure a title

In real life it is difficult to check the past of the apartment and its owners: there can be several sales, inheritance, privatization, etc. Any lawyer or bank are not capable of 100% to guarantee legal purity of the apartment.

At each stage of history of housing there could be violations — conscious or not — who will become known in several years that will lead to loss of the property right to the apartment. Even if you fair acquirer.

When it is possible to insure a title

It can be done at any time — and before the apartment carried over, for example, when receiving the credit in bank, and after that. The main thing — to sign the insurance contract before there came the insured event.

Usually title insurance — the requirement of bank which issues the credit for the apartment. In this case, as a rule, loss of a title is insured for benefit of bank: if the purchase and sale agreement for any reason is nullified, the insurance company will return to bank an unpaid part of the credit, and the remained amount will be received by the owner who lost the apartment. As a rule, the companies offer all-inclusive insurance in these cases: in one agreement insure both a title, and the apartment, and life and health of the owner.

But it is possible to insure a title and most if you doubt legal purity of the apartment. In these situations you not only reduce risk to be left without apartment and money, but also receive legal aid: insurance companies, as a rule, are involved in lawsuits on the party of the victim.

Risks of title insurance

Determination of title insurance in the legislation for 2015 is absent. In a general sense this term is meant as risk of loss by the fair acquirer of an insured object of the real estate owing to deprivation of the property right for the reasons which are not depending on the insurer on the basis of the court's decision which took legal effect, including:

• owing to recognition of the invalid transaction as a result of which the insurer acquired the property right;

• owing to reclamation of an insured object of the real estate from others adverse possession (the satisfaction with court of the vindicatory claim), including because of recognition invalid any transactions preceding that transaction as a result of which the insurer acquired the property right.

According to provisions of the Civil code, the transaction can be nullified on the bases provided by the law owing to recognition her like that court (voidable transaction) or irrespective of such recognition (void transaction). Proceeding from the judicial practice connected with the termination of the property right to real estate among the main risks it is possible to select:

• violation of the rights of the persons which are not parties of the transaction (minor children, previous owners, successors);

• incorrect documentation on a real estate (mismatch of the data specified in title and other documents a real estate);

• factual determination of fraud in the last or the previous transactions;

• recognition incapacitated one of participants of the transaction;

• transaction under the influence of deception, violence, threat or as a result of the malicious agreement of the parties.

• judgment on the basis of which the apartment was transferred to the possession was reversed.

• the registrar of Rosreestr was mistaken when entering data into base.

Problems can arise with any housing — inherited, built, purchased and privatized. At each stage before registration of the property right there can be errors or to be violated the rights of other people who becomes known later. It threatens the owner with loss of the rights to the real estate.

On the basis of Article 167 of the Civil Code of the Russian Federation in case of recognition of the transaction invalid each of the parties is obliged to return another everything received, and in case of impossibility of return to compensate its cost. According to Article 181 of the Civil Code of the Russian Federation, the term of limitation period according to requirements about recognition of the void transaction invalid is three years. And in case of presentation of the claim by the person which is not the party of the transaction, the maximum term of limitation period is up to ten years from the date of transaction.

For consideration of a question of acceptance of any object on insurance the staff of the insurer tries to consider in detail title history of an object and the seller of the real estate. But thoroughly to check earlier issued transactions impracticablly. The agreement of title insurance is not public therefore insurance companies can refuse to you insurance with too high risk on an object^[1].

What to pay attention in title insurance to

In the theory title insurance looks as the reliable tool providing to the buyer of the real estate financial protection. But, unfortunately, in practice many insurance companies for minimization of the losses make rules of insurance in such a way that the most probable insured events do not become covered by the agreement. If you decided to insure a title on the purchased real estate, it is necessary to approach very carefully the choice of the insurer and to attentively study insurance documentation.

The first, and the main what it is necessary to pay attention, this existence in the insurance contract of the fact of recognition by an insured event of satisfaction with court of the vindicatory claim to. It is possible to call it the main risk in title insurance. The vindicatory claim is a claim of reclamation of property from others adverse possession. If with property several transactions as a result of which it passed from one owner to another were made, the situation when the vindicatory claim is made to the last owner of property is possible. It happens if during one of transactions the rights of owners were violated. The vindicatory claim can be made even to the fair acquirer. The legal owner can request disputable property, in cases if the property left ownership in spite of himself. Often in rules of insurers it appears that this risk becomes covered, only if it is directly specified in the agreement. And such companies by default, naturally, do not enter it to the agreement.

Also it is necessary to consider that all insurance companies enter the compulsory provision about conscientiousness of the acquirer. In the legislation the one who paid purchased property at the person which had no right to alienate it is considered the fair acquirer what the acquirer did not know about and could not know. Such condition is unconditional fairly, but in certain cases the conscientiousness can peculiar be treated by court.

Also special attention should be paid to exceptions of an insurance coverage. The main risk of loss of the property right at real estate acquisition which is impracticable for tracing is recognition of the transaction invalid for a cause of infringement of the property rights of the third parties in earlier made real estate transactions. Insurers try to fence off whenever possible themselves from this risk and state an exception in the insurance contract: the case is not recognized as insurance if it arose before insurance signing of the contract, and effects came during validity (a retrospective covering). Today the judicial practice recognizing this exception insignificant was created.

In case of pronouncement by court of the decision on invalidity of the transaction, the court will oblige the person acting as the seller according to your purchase and sale agreement to return you the received money. Probability that other party of the transaction will voluntarily want to return money is extremely small. In case of lack of material benefits which as enforcement proceeding it is possible to seize for further implementation of property at biddings from the debtor citizen no more than fifty interests from official income can be deducted. Thus, return of a debt can drag on for very long term. Therefore it is worth avoiding in rules of insurance of conditions that from the amount of an insurance indemnity the amount which according to court's decision other persons are obliged to return to the insurer keeps. Fair insurance companies enter the condition meeting standard of the Civil Code of the Russian Federation about transition to the insurer who performed insurance payment, rights to claim against the person responsible for losses. In that case at full or partial compensation of a loss other party of the transaction, the insurer is obliged to return a respective share of an insurance indemnity to the insurer.

If you could find the insurer which offers you acceptable conditions and intend to sign the agreement of title insurance, it is worth paying attention to term. The maximum term during which the vindicatory claim can be made in certain cases is up to 10 years. It is better to sign the insurance contract for this term with annual payment of insurance premiums. As date of an insured event is the effective date court's decision, and courts on the disputed real estate can last not one year if at the time of the termination of the one-year policy it is known of submission of the claim, the insurer can just refuse to you prolongation.

For 2015 title insurance is developed practically only within insurance when receiving a mortgage loan. The insurance companies which are engaged in title insurance of not mortgage real estate – unit. If in case of refusal the insurer in payment for the mortgage apartment the bank can come to the aid of insurer, in case of "voluntary" title insurance to the insurer to have to expect only the forces.

As failure in an insurance indemnity not only the lack of the happened event can serve in the list of insured risks, but also failure to follow of the obligations by the insurer at a loss occurrence provided by rules of insurance. Or if the insurance company considers that at execution of the agreement the client provided false information. As insured events on this type of insurance are not mass, and the product is connected with many legal niceties, as practice shows, often the issue of receiving an insurance indemnity is resolved only through court.

How to insure a title

If the title requires to insure bank, it both will designate conditions and will give the list of insurance companies in which it can be done.

If you decided to insure a title, study different offers. Pay attention not only to the size of an insurance premium, but also to other conditions: whether the bonus level in the next years what cases are not recognized as insurance whether participates insurance in court decreases if with the apartment there are problems.

What documents will be necessary

At everyone insurance the requirements to documents, depending on that, how in details their specialists check each apartment.

In addition to the passport, the questionnaire and the loan agreement will ask real estate documents for you. Usually enter this list:

• the fresh statement from the Uniform State Real Estate Register (USRER). Degree of freshness of the statement defines itself insurance, but normally it is 30 days;
• the purchase and sale agreement of the apartment or other document according to which the apartment carried over. It can be the gift agreement, the evidence on the right to inheritance, the agreement of exchange, etc.;
• technical documents on the apartment: technical data sheet, floor-by-floor plan, explication or etc. In different regions they can be called differently. Such documents have too the validity period therefore it is better to specify requirements to them in insurance;
• valuation report of market value of the real estate. If title insurance — a part of all-inclusive mortgage insurance, then the valuation report already is, and it is not necessary to order it in addition;

the statement from the house register;

• financial personal account or card of accounting of the owner.

Depending on features of the transaction according to which the apartment carried over insurance can ask also other documents: for example, the consent of the spouse to the transaction if the apartment was sold by one of them, permission of tutorship and guardianship authorities if the minor, or the reference from a psychoneurological clinic participated in the transaction if the seller of the apartment — the elderly person.

How much is title insurance

The insurance company determines the size of an insurance premium percentage of the amount of insurance. Normally it is from 0.13 to 0.3% of an insurance sum. Often the rate depends also on the past of the apartment, and on what year of insurance in a row went. Than the history of the apartment is shorter, the rate is less than subjects, and in the first years of insurance the rate is more, than in the subsequent.

The final bonus level will be told only after studying of documents for the apartment: insurance looks at the history of the real estate and can apply the raising coefficient if considers that risks in this case are higher. For example, if the apartment often and many times was on sale.

What is recognized as an insured event?

All insurance companies describe these cases directly in agreements therefore attentively read in what situations and what you will be able to expect.

Here the list of common causes because of which the transaction can be nullified (but it incomplete):

• the transaction was carried out by the minor from 14 to 18 years without the consent of the parent or the trustee;
• the transaction was carried out without the consent of the spouse;
• the transaction was made restrictedly by the capable person without the consent of the trustee;
• the bargain was concluded by the person who is able when he did not understand value of the actions;
• the transaction was made under the influence of delusion, deception, violence, threat or some adverse circumstances;
• the transaction was made by the person who had on it no powers or exceeded the authority, for example, at the representative of the seller the term of the power of attorney ended, or its power of attorney did not grant at all the right to sell the apartment;
• on the bases described in the Federal law "About Insolvency (Bankruptcy)". For example, if 1 year prior to filing of application on bankruptcy of people sold the apartment on strongly underestimated ^[2].

Except invalid transactions, title insurance covers also other risks, for example, such:

• the rights of the buyer passed to the person owning a share in the apartment as at sale his right of pre-emption was broken;
• the transaction was invalid because it was concluded by the incapacitated person.

Many insurance companies are ready to insure not only total loss of the status of the owner, but also his restriction. For example, if after purchase of the apartment there was a person having the right to live in it. The property right is not lost, but strongly limited.

Strakhov the case is recognized as invalid after entry into force of court's decision on recognition of the transaction.

From what title insurance will not help

Insurance companies list cases which are not recognized as insurance. Look at the list of not insured events of each company and estimate at what offer the biggest scope. When choosing insurance it is worth paying attention not only to the size of an insurance premium, but also to situations in which insurance simply will not pay you.

Here, for example, cases which usually are not considered as insurance:

• if the owner himself sold or presented the real estate, i.e. voluntarily refused the status. Change the mind it will not turn out;
• if the bank took away the apartment or other creditors require to take away the apartment for debts;
• in case of confiscation, requisition or withdrawal of the real estate according to the solution of the state or municipal bodies;
• if the apartment was taken away because the owner badly contained it (in the law it is called "thriftlessly");
• if the owner self-willedally made reorganization or re-planning of the apartment, etc.

The complete list of such situations can be learned only from the specific agreement from insurance, but their approximate lists are on the websites or in the general rules of insurance of some companies.

For what amount it is possible to insure a title

This amount depends on a situation and on requirements of bank if you take the credit. A minimum amount in this case — the size of the unpaid credit, therefore if you sign the insurance contract for 12 months annually, then the next year the insurance sum, i.e. the amount which to you will be paid at an insured event can decrease.

The amount of an insurance does not happen more market value of the apartment. If you bought the apartment without participation of bank and decided to insure a title voluntarily and only in own favor, then it is the most reasonable to insure on the apartment price.

What payments can be received in an insured event

If the insured event nevertheless took place, then at most which it is possible to expect — compensation of the price of the apartment. And if the apartment is bought on credit, then a part of money will go to bank for repayment of the remained amount of debt.

Insurance will not begin to compensate other expenses, usually it is enshrined directly in the agreement. So, are not compensated:

• penalties;
• moral damage;
• legal costs;
• other costs connected with judicial proceedings.

See Also

• Purchase of the apartment in Moscow

Notes