The Title Commitment

Schedule A

A title Commitment consists of Schedule A, Schedule B-I, and Schedule B-II. Schedule A consists of the effective date, the type of policy being issued, the fee simple owner of the property, and the land being insured.

The effective date is set by the Register of Deeds in the county where the land sits. The effective date marks the date that all documents submitted by a particular date have been recorded. For instance, on May 1, 2019, the effective may be April 1, 2019. This Register of Deeds is stating that all documents submitted by April 1 have been recorded. The dates subsequent to April 1 have not been fully accounted for. With this fact, the effective date is almost always prior to the current date.

The type of policy will either be an Owner’s Policy or Loan Policy, or both. The Owner’s Policy insures the new buyers that they are the rightful owner, while the Loan Policy insures the lender of first lien position, which first lien position is critical should foreclosure become necessary.

Fee simple is synonymous with owner. In this example, Michael and Pamela McFarland are the record owners of this land (the fee owners).

The legal description (land being insured) finishes Schedule A. The legal description recites the land that is the subject of the transaction. This is the land the buyers are purchasing, and this is the land the lender is receiving a mortgage on. Very important to all parties that the information on Schedule A is correct.

Schedule A is the informative Schedule. It informs the reader of the effective date; it informs the reader of the insurance policies are sought; it informs the reader as to who owns the land; and it informs the reader of the legal description of the property.

Schedule B-I

Schedule B-I is the worksheet of the title Commitment. This is where title issues and raised and dealt with. Schedule B-I represents the heavy lifting. A title Policy will not be issued until the B-I requirements are fulfilled to the satisfaction of the underwriter. Clearing of the B-I requirements is commonly referred to as the processing stage. Title agency processors are very busy during this stage of a transaction.

The start of Schedule B-I will commonly dispose of the easy requirements first. There will typically be a requirement for a deed from seller to buyer, along with a mortgage to be executed by the new buyers. The deed and mortgage act concurrently. The deed transfers to the land to the new buyers, while the mortgage secures the lender’s loan to the land.

The middle portion of Schedule B-I will begin to ask for releases of liens attaching to the land. A lien can be defined as any official claim or charge against property. For a lien to be official, it must materialize in one of three ways: 1) by consent; 2) by judicial determination; or 3) by statute. By far, the most common lien is the mortgage. A mortgage is a grant of the owner’s land as collateral for an underlying loan. The mortgage secures the lender’s loan to the land. The mortgage is considered a consensual lien, as the owner consents to the lender’s lien.

This portion of B-I will ask for releases of the existing mortgages.

The Federal Tax Lien is valid for 10 years from its date of assessment. The Federal Tax Lien is a statutory lien that arises without the consent of the taxpayer. Once filed, this lien will attach to all property of the taxpayer. However, this lien must be filed in the county where the land sits for it to attach to such land.

The State Tax Lien is valid for 7 years from its recording date. Like the Federal Lien, the State Tax Lien is a statutory lien that arises without consent of the taxpayer. Once filed, this lien will attach to all property of the taxpayer. However, this lien must be filed in the county where the land sits for it to attach to such land.

The Notice of Judgment Lien is valid for 5 years from its recording date. The Notice of Judgment Lien is a statutory lien that arises subsequent to a successful civil claim against the debtor. Like the other statutory liens, this lien must be filed in the county where the land sits for it to attach to such land.

The Certificate of Forfeiture is filed by the county when taxes become severely delinquent. This Certificate is a pre-cursor to foreclosure. At this stage, if taxes are not timely paid, the home may be lost to tax foreclosure. If the homeowner makes good, the county files its Certificate of Redemption and the owner is granted a clean slate.

Taxes are due twice per year in Michigan (July 1 & December 1). This portion of the Commitment simply sets forth the taxes due and/or paid. Any special assessments will also be reflected here.

The tax schedule will typically be place at the end of Schedule B-I.

Schedule B-II

Schedule B-II is the portion of the Commitment that discloses issues the insurer will not be covering. This portion, being the exclusions from coverage portion, is often the area of attack for an attorney representing a buyer. And this makes sense, because successfully arguing and removing an exception affords more coverage in the resulting Owner’s Policy.

The grouping above represents the “Standard Exceptions” portion of a title Commitment. These are boilerplate exceptions which may be removed if the seller fulfills certain obligations set forth by the underwriter. When the buyer requests an Owner’s Policy “without standard exceptions,” it is often referred to as an Extended Owner’s Policy, as the coverage afforded is extended beyond that of the standard Owner’s Policy.

The grouping above represents the “Specific Exceptions” portion of the title Commitment. The specific exceptions are matters that directly touch and concern the land in question. These exceptions will be shown on the subsequent policy. Specific exceptions typically consist of building and use restrictions, utility easements, and platted easements.

Summary

The title Commitment consists of Schedule A, Schedule B-I, and Schedule B-II.

Schedule A is the informative schedule, setting the parameters of the transaction.

Schedule B-I is the heavy lifting schedule, setting forth the requirements that must be fulfilled before the underwriter will insure.

Schedule B-II is the exclusions to coverage schedule, setting forth the exceptions to coverage, both standard and specific. And remember, standard exceptions are commonly removed, resulting the Extended Owner’s Policy.

Keep learning and keep pushing yourself!

Dave Phillips