by John Frederick “Fred” Kempf, Jr.
When we are ready to sell our real estate, we typically enter into a contract, let the buyer check out the property, let the buyer obtain a “title policy commitment” showing that if they buy the property, they will not have any title issues, and set a time for closing. At that closing, we expect to deed the property to the buyer, and expect the buyer to pay us. Nothing is more frustrating than to learn that we cannot close on the sale because there is a title defect, and until that is eliminated, no money will change hands. Then we are told that unless the problem can be cleared up immediately with proper documentation in the land records, the buyer and the title company will insist on the seller eliminating the problem with a quiet title suit, or the buyer may back out of the deal. That is the point where my office often receives a call. The reality is that in today’s real estate market, if a buyer is going to buy the property, and a lender is going to loan money against it and obtain a mortgage against that property, they both want to know that they have “good and marketable title” to the property, and that there are no title defects that would detract from the owner’s potential ownership and enjoyment of the land, or deprive the mortgage lender of a first priority mortgage against the property. They typically get that by having a title insurance company examine the title, issue a “title insurance policy commitment” showing what the current state of title is, and which lists any title requirements to be met before closing on the sale. That is where a title company would typically identify any “title requirements” designed to eliminate any title defects, if there are any. With the possible exceptions of prior mineral conveyances or reservations, or existing easements, most buyers want “marketable title”, defined in Oklahoma as “one free from apparent defects, grave doubts and litigious uncertainty, and consists of both legal and equitable title fairly deducible of record.” Once the seller delivers a property with marketable title, the title company will issue its “title insurance policy” in favor of both the buyer and its lender, and insure that they will have good title incident to the sale.
What is a quiet title suit? It is a lawsuit filed by a party claiming ownership of property to eliminate a claim or possible claim another party has or may have against that same property. The source of the adverse claim or “cloud on my title” can be from a wide variety of circumstances. Sometimes it can be as a result of the acts of another party claiming to have better title to this property than you, and that your interest should be subject to their claim. In other cases, it may be because the person or persons we thought were the owners are not shown as those owners in the land records. It can also arise due to defects in the descriptions of the property in recorded deeds or other instruments, or as a result of deaths, heirship and/or probates. Often times, a problem can arise due to an unreleased lien or mortgage, or sale of the land in a tax sale. In Oklahoma, a quiet title suit and the laws relating to real property title issues will be governed by the laws of the State of Oklahoma. Each state has their own laws governing such matters for lands located in that state. In my own practice, I usually try to determine if there is any chance of avoiding a quiet title suit by addressing the title requirement in other ways, such as with a quit claim deed or an overdue release of a mortgage. If those efforts fail, then there may be no other choice but to bring a quiet title suit.
To file a quiet title suit, an owner must rely on and prove the strength of their own title to the property, and prove their claim is better than the claims of the parties they are going against. A quiet title suit is not a mere “turn on the switch” where one could file such a suit, claim they own the property and expect to automatically end up with the property. It is not enough to claim the other side has a weak title claim if the party bringing the suit does not have a strong title claim of their own to justify the suit. The owner must show that they have a good basis for claiming to be the owner (such as based on a deed from the prior record owner of the property), and why their claim is better than the potential claims of the other parties.
How long does it take, and how much will it cost? The answer is that there is no one-size fits all, or “how long is the piece of string?” Since there are typically a number of factors that go into such a suit, and the different types of issues that may need to be addressed, it is impossible to say how much will be required to address this particular title problem. The next question is whether or not the persons on the other side of the suit can be easily located and served in the case. Are there only one or two other parties, or, as in a case I have recently handled, dozens of people claiming adverse interests in the subject property? Another time and cost factor is whether or not there will be cooperation or opposition from the other side. If all parties agree, and will sign agreed documents going into the lawsuit, it can be a “friendly suit”, where costs are minimized. Some contested cases will last longer than a year, and even longer if there is an appeal. Cost will vary with all of these types of factors as well. In the best of circumstances, a minimum of 30 days from the date of filing would be required IF all parties were fully cooperative and signed documents promptly to evidence same, or if all parties were served with summons, but no one objected to the suit. From our experience, minimum cost could typically be not less than $3,000-$4,000, assuming there were few simple title issues and there is no real opposition or all parties were in total agreement. Beyond these simple circumstances, the costs and legal expense could go up. We sometimes encounter sellers who do not have the ready funds to pay for such a suit out of pocket, but want to keep their pending sale alive. At times, our firm has entered into agreements to allow the seller to pay the court costs up front, but let the attorney fees be paid at the closing out of the Seller’s sale proceeds.
If faced with a title defect situation which requires a quiet title suit, one would be wise to get help from a real estate attorney experienced in both real estate title law as well as civil litigation. Often, they can work with the title company and the buyer to explore best options for keeping the sale and closing on track, even if there has to be a delay while the quiet title suit is completed.
This is a regular part of my practice. If you need assistance with such a title requirement, we would be happy to assist.
For more information, please contact Fred Kempf at 272-9241 or firstname.lastname@example.org.
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Posted on Tue, November 22, 2016
by Andrews Davis filed under