When buying a home, many buyers assume that once a purchase and sale contract is signed, the transaction is simply a matter of obtaining financing and attending the closing. However, one of the most important steps in any Vermont real estate transaction takes place behind the scenes: the title search.

A title search is conducted to verify ownership of the property and identify any issues that could affect a buyer's ownership rights. While most Vermont real estate transactions proceed smoothly, title searches occasionally uncover problems that must be addressed before closing.

The good news is that most title issues can be resolved with the assistance of experienced real estate attorneys. In Vermont, real estate closings are typically attorney-driven rather than handled by title agencies, allowing the attorneys for the buyer and seller to work together to identify solutions and keep the transaction on track.

What Is a Title Search?

A title search is a review of the public land records to determine the history of ownership of a property and identify any matters that may affect title.

The purpose of a title search is to answer important questions, including:

• Does the seller actually own the property?
• Are there any outstanding mortgages or liens?
• Were prior transfers properly completed?
• Are there easements, rights of way, or restrictions affecting the property?
• Are there any legal issues that could interfere with the buyer's ownership?

Before a buyer invests hundreds of thousands of dollars in a property, it is important to confirm that the seller can deliver marketable title.

What Types of Problems Are Commonly Found During a Vermont Title Search?

Many buyers are surprised to learn that title issues are not uncommon. Fortunately, most can be resolved before closing.

Some of the more common title problems encountered in Vermont include:

Undischarged Mortgages

One of the most common title issues occurs when a mortgage was paid off years ago, but the lender never recorded a discharge in the land records.

Even though the loan has been satisfied, the mortgage may still appear as an active lien against the property.

In many cases, attorneys can work with the lender or its successor institution to obtain and record the appropriate discharge documentation.

Tax Liens and Judgment Liens

A title search may reveal unpaid property taxes, state tax liens, federal tax liens, or court judgments against a property owner.

These liens often must be addressed before a clear title can be conveyed to the buyer.

Defective Deeds

Sometimes a prior deed was not properly executed, acknowledged or recorded.

In other cases, a deed may have been signed by an individual who lacked proper authority to act on behalf of an estate, trust, corporation, or another party.

Correcting these issues often requires additional documentation and legal analysis.

Missing or Defective Powers of Attorney

If a prior conveyance was completed using a power of attorney, the title search may reveal that the power of attorney was defective, expired, improperly recorded, missing or otherwise insufficient.

Additional corrective actions may be necessary to resolve the issue.

Probate and Estate Issues

If a prior owner was deceased, questions may arise regarding whether the property was properly transferred through probate or whether the personal representative had the necessary authority to sell the property.

Missing probate documents can often be located or corrected with the assistance of counsel.

Trust and Corporate Authority Issues

When property is owned by a trust, corporation, LLC, or other entity, title examinations sometimes uncover missing trust certificates, corporate resolutions, member consents, or other evidence of authority.

Obtaining the appropriate documentation can often resolve the concern.

Marital Interest Issues

Occasionally a title examination reveals that a spouse may have retained an interest in the property that was not properly addressed during a prior conveyance.

Additional documentation or corrective deeds may be required.

Life Estates and Rights of First Refusal

Certain properties are subject to life estates, rights of first refusal, or similar interests that can affect a buyer's ownership rights.

These issues require careful review to determine whether they have been properly addressed or released.

What Happens After a Title Problem Is Found?

Finding a title issue does not necessarily mean the transaction is in jeopardy.

In fact, most title issues are resolved before closing.

Once a problem is identified, the attorneys for the buyer and seller typically work together to determine the nature of the issue and develop a solution.

Depending on the circumstances, this may involve:

• Obtaining missing documents
• Recording corrective instruments
• Securing mortgage discharges
• Resolving liens
• Confirming authority of trustees, personal representatives, or agents
• Obtaining affidavits or additional evidence

Many issues can be corrected relatively quickly. Others may require additional investigation and documentation.

Vermont's Attorney-Based Closing System Helps Resolve Problems

Vermont differs from many states because real estate transactions are generally handled by attorneys rather than title agencies.

This attorney-driven process often benefits buyers and sellers when title issues arise.

Rather than simply identifying a problem and stopping the process, the attorneys involved typically work collaboratively to determine whether the issue can be cured and what steps are needed to move the transaction forward.

Because title matters frequently involve legal questions, experienced Vermont real estate attorneys are often well positioned to evaluate potential solutions and coordinate with lenders, title insurance companies, and other parties involved in the transaction.

Can the Closing Date Be Extended to Resolve a Title Issue?

Often, yes.

Many Vermont purchase and sale contracts contain provisions that allow additional time to resolve title defects.

When a title issue is discovered, the closing date may be automatically extended for a period of time to allow the seller an opportunity to cure the defect.

This additional time can be valuable because many title issues are ultimately resolved through obtaining missing documentation, recording corrective instruments, or addressing outstanding liens.

An extension can often save a transaction that might otherwise be delayed or disrupted.

What Role Does Title Insurance Play?

In some situations, a title insurance company may determine that a title issue presents a very low risk.

When that occurs, the title insurance company may be willing to provide coverage despite the identified issue.

Whether a title insurer is willing to insure over a particular matter depends on the specific facts and circumstances involved.

This can sometimes provide an additional path to closing when the legal risk is minimal and acceptable to the title insurer.

What If the Title Problem Cannot Be Resolved?

While most title issues can be corrected, there are occasions when a significant issue cannot be resolved within a reasonable period of time.

When that occurs, the buyer generally has options.

Depending on the terms of the purchase and sale contract, the buyer may be entitled to terminate the transaction and receive a return of the deposit if the seller cannot provide marketable title.

Alternatively, a buyer may choose to proceed with the purchase despite the issue if the buyer, lender, and title insurer are comfortable doing so.

Every situation is different, which is why legal advice is important when significant title concerns arise.

The Bottom Line

A title problem does not automatically mean a real estate transaction will fail.

Most title issues uncovered during Vermont title searches can be resolved with the assistance of experienced real estate attorneys. Whether the issue involves an undischarged mortgage, a lien, a defective deed, probate concerns, trust documentation, or another title defect, there are often practical solutions available.

The purpose of a title search is not simply to identify problems. It is to identify problems before closing, when they can often be addressed and resolved.

At Peet Law Group, our attorneys assist buyers, sellers, lenders, and real estate professionals throughout Vermont with title searches, title examinations, title insurance, contract review, and real estate closings. By identifying and addressing title issues early in the transaction process, we help clients move toward a successful closing with confidence.

If you are buying or selling Vermont real estate, Peet Law Group can assist with title searches, title examinations, title insurance, contract review, and real estate closings throughout Vermont.