The second section of the preliminary title report is called “Schedule B.” Schedule B is also obtained from the title company and indicates any encumbrances (liens) on the property. An exception to this rule is an Abstract of Judgment. An Abstract of Judgment is an encumbrance on a property but will not appear on the preliminary title report. An Abstract of Judgment is a brief summary of a final decree from the court in which a Plaintiff has a claim to the sale of a property. An Abstract of Judgment allows the Plaintiff to collect money from a debtor for 10 years, and can be renewed again for an additional 10 years.

Schedule B often describes in detail the order the senior and junior loans of the property. The senior lien is often the purchase money loan, or the loan the owner used to purchase the property. The junior loan may be the second mortgage, an equity line of credit loan, or a refinance. Other liens and encumbrances that may appear on the Schedule B are as follows:

• Mechanic’s Lien – Anyone that supply materials and/or services to the owner to improve the real property, and did not get paid, may file a Mechanic’s Lien on the property. A Mechanic’s lien is also a secured lien on the property and should be clearly stated in Schedule B.
  
  
• Deed of Trust - The deed of trust is an instrument that identifies the original loan amount, legal description of the property being used as security for the mortgage, the parties, inception and maturity date of the loan, provisions of the mortgage and requirements, late fees, legal procedures, acceleration and alienation clauses, and riders, if any, regarding such clauses as prepayment penalties or terms of an adjustable rate mortgage.
  
  
• Easements – Ingress and Egress to and from the property.

NOTE: It is important to remember that a Preliminary Title Report is NOT a legal document. There may be matters that affect the title that are not recorded. It is NOT an insurance policy and cannot be relied on as a representation of the condition of title to the property. It is simply a statement of terms and conditions in which the title company is willing to issue a title policy if the offer is accepted. In addition, the map that may be attached to the report does NOT assure the client that property is exactly the same as the property the client wishes to buy or sell.

With regards to the Title Insurance Policy, the Attorney should review a need for a survey, including easements, encroachments, location, and the boundaries. The attorney should also review a need for inspections and advise clients about an American Land Title Association (ALTA) policy verses a California Title Policy Association (CLTA) policy. The survey should conform to an ALTA’s policy for the property to be covered. A CLTA assures the street address of the property and its dimensions are correct as surveyed. A CLTA title policy will only insure you the easements and/or encumbrances that can be found visibly or by public record. An ALTA policy is more extensive and will provide insurance protection for the buyer from all easements that are discoverable by inspection of the property, including easements by deeds, implications (owner’s previous use or by necessity), and by Prescription. It would also cover any discoverable encumbrances, such as liens on the title (Tax liens, Mechanic liens, Mortgages or Deeds of Trust), unclear title of more than one owner, easement(s), and restrictive covenants.

Should you have any questions or concerns, please contact our experienced real estate attorneys at Smith & Garg, LLC. The experienced real estate transaction and litigation attorneys at Smith & Garg, LLC can help.

Call Smith & Garg, LLC today at 1-877-517-4275 or complete our Contact Form and let us assist you.