- July 27, 2005
- All issuing offices in West Virginia
- Insuring Tax Deeds (Non-Judicial Foreclosure)
This bulletin has been partially replaced by MU2016005.
This bulletin advises you of a new option for insuring title to real property acquired by a non-judicial tax foreclosure sale.
Insuring title to property that has a tax foreclosure in the immediate chain of title presents unique risks. We generally do not insure title to property acquired by a non-judicial foreclosure proceeding unless: (A) the tax deed holder obtains quitclaim deeds from the original owner and releases/waivers from all foreclosed lienholders (e.g., lenders), or (B) the tax deed holder undertakes a quiet title action, or (C) the agent or affiliate undertakes an inquiry into all aspects of the tax foreclosure proceeding, and confirms that all required procedures were satisfied. This undertaking requires a thorough understanding of the relevant statutes and proceedings, and a potentially time-consuming verification of compliance with all statutory and procedural requirements, including, for example, determination that:
- the necessary parties (taxpayer, lienholders, etc.) were named as defendants, and properly served;
- the proceedings and the sale were consummated in strict compliance with the statutory requirements;
- the right of redemption has not been exercised by any defendant;
- the time in which to exercise the right of redemption has expired;
- the former owner has surrendered possession of the property; and
- the prior liens and encumbrances have been extinguished.
Due to the amount of time and effort required to confirm compliance with all applicable statutory and procedural requirements, the "off-record" nature of much of this inquiry, the increased liability to the Company, and lower relative values of the properties involved, insuring non-judicial tax foreclosed properties is often less attractive than insuring other types of property.
This bulletin advises you of an additional alternative to quiet title actions and/or quitclaim deeds and releases, offered by Tax Title Services.
Tax Title Services ("TTS") is an independent company that investigates and certifies the accuracy and completeness of the tax lien foreclosure process. Upon completion of its investigation, TTS issues a Certification confirming that all affected parties received notice and that all statutory requirements relating to notification, publication, redemption, etc. were satisfied in accordance with applicable state tax lien/tax deed foreclosure statutes. TTS' services are ordered and paid for by the customer (usually the tax deed holder), in the same manner that the cost of bringing a quiet title action or obtaining quitclaim deeds would be borne by the customer.
The following describes the general procedures for insuring title to property which was acquired by a non-judicial tax foreclosure sale if TTS' Certification will be relied upon:
A. Ordering and paying for the Stewart title report
1. The following procedures generally apply to all potential customers who seek title insurance for tax deeds.
2. If the customer is an existing client of TTS, the customer will make its initial contact with TTS. In that situation, TTS will order a title report from you, on behalf of the TTS customer. If TTS orders a title report, TTS will pay the cost of the title search, whether a title policy is issued or not. Notwithstanding the foregoing, the name of the proposed insured will always be the customer, not TTS.
3. If TTS previously ordered a search for this property from another title insurer, TTS will provide you with a copy of the non-Stewart title report at the time TTS places the order with you. You are not obligated to rely upon any title search that is not performed by you. However, on a case-by-case basis, in your discretion, you may use a search from another title company as a starter for your title report.
4. A percentage of these tax foreclosure files won't receive TTS' Certification, and therefore probably won't need title insurance. For example, the properties are sometimes reacquired by the original foreclosed owner. You should expect to be paid for each search, whether or not the property is ultimately suitable for TTS' Certification and/or title insurance. Therefore, when you receive an order for this type of property - whether from a customer or from TTS on behalf of its client - you should advise the customer/TTS of the cost of the search and clarify that there will be a charge for the title report, whether or not a policy is ultimately issued. You should generate a bill for the search when the title report is sent out. You should follow your customary practices if the property is ultimately insured (e.g., if the cost of the search is ordinarily absorbed into the cost of the policy).
B. The Title Report
1. You should perform a title search and produce a title commitment or preliminary report ("Title Report") based upon your standard practices.
2. Your Title Report should show title vested pursuant to the tax deed. You should search and examine all aspects of the tax title in the usual manner.
3. Your Title Report should contain the revised "Tax Deed Requirements" (requiring quiet title action, quitclaim deeds and releases from affected parties, or certification of due process). See revised form of TAXR05 STGC: Tax Deed - Administrative (Nonjudicial) Tax Foreclosure or Potential Defect in Judicial Proceeding, "available through the references section at the end of this bulletin ". Your Title Report may also contain any additional tax foreclosure requirements consistent with local underwriting practices, as you determine to be appropriate.
4. Exceptions and Requirements:
a. Your Title Report should show as exceptions ALL ownership interests and liens that can be extinguished by a properly-conducted non-judicial foreclosure (e.g., the interest of the prior taxpayer, mortgages, judgment liens, etc.). If TTS issues its Certification, you will not need to make a determination as to whether or not these interests have been extinguished. TTS will indicate the status of these interests (i.e., whether they have been extinguished by the tax foreclosure proceedings) when it reviews your Title Report.
b. Your Title Report should also except any additional matters - for example, city and county liens and charges, such as water, sewer, code enforcement, demolition, pest control, etc - that must be satisfied or excepted in order to insure the title. Municipal charges are generally not extinguished by a tax foreclosure. They must be paid (sometimes at discounted rates) and/or released; otherwise they should remain as exceptions.
c. Your Title Report should start with the premise that the tax foreclosure does not extinguish other matters of record (e.g., easements, covenants and restrictions, etc.) unless you can confirm that specific state law provides for their extinguishment. For example, in some states, e.g. Florida, a tax sale does not extinguish public service easements that are recorded or that are visible. Therefore, in those states, recorded easements must be raised as exceptions. In addition, in some states, e.g., Florida, recorded covenants and restrictions survive, so these must be raised as exceptions as well.
d. The standard exceptions must also appear in the commitment, until modified in your customary manner, unless specific state law provides otherwise.
e. You must confirm that all taxes and assessments that are liens on the property are satisfied or excepted (by general or specific exception).
5. Property Description:
a. The property description in the Title Report should be based upon the tax deed. This is the property description that was the subject of the tax foreclosure. This description may differ from the property description contained in the prior deed chain. If there are discrepancies between the tax deed and the prior deed chain, the property description in the tax deed should govern.
b. You may clarify and restate the tax deed's property description, but you should not modify it or add to it. For example, if the tax deed uses an abbreviated description - "SW" instead of "Southwest," it is permissible to clarify the property description by putting it into the customary form for the jurisdiction. In contrast, you should not modify the property description. For example, if a metes and bounds description does not appear in the tax deed, you should not add metes and bounds, even if metes and bounds appeared in the prior deed chain. As a further example, the deed chain may describe appurtenant easements. However, if these easements are not recited in the tax deed, they generally should not be insured.
c. The amount of acreage should not appear in the property description, even if the tax deed included a reference to the amount of acreage. If an acreage amount appears in the property description, please delete it, if reasonably practicable. In the alternative, please add an exception to your policy: "The Company does not insure the area, square footage, or acreage of the land."
d. You should determine that the property description sufficiently describes the property such that it is insurable. In some circumstances, it may be necessary to require a survey in order to create an adequate property description. In most situations a new survey will not be required in order to insure the property. However, your Title Report should always include the standard survey exceptions unless and until the customer obtains a current survey.
6. You should obtain complete copies of:
a. the last deed of record into the foreclosed taxpayer;
b. the tax deed;
c. all unsatisfied mortgages, judgments and liens;
d. all unreleased land contracts, options, rights of first refusal, etc.
C. Sending the Title Report
1. If TTS ordered the Title Report on behalf of an existing customer of TTS, you should send the Title Report to TTS together with the recorded documents described above.
2. If a customer ordered the title search, you should send the Title Report to the customer. You may advise the customer that there is an independent company that can eliminate the need for quitclaim deeds and/or a quiet title action described in the Tax Deed Requirements, by investigating and certifying the accuracy and completeness of the tax foreclosure. If the customer elects to use this option, you should advise the customer to contact TTS and request it to perform its investigation and certification. You should advise the customer that TTS will charge the customer a fee for its service, which will be independent of and in addition to your fees. Therefore, to avoid confusion, you should not order TTS's services on behalf of the customer. At the request of the customer, you may send a copy of your Title Report to TTS together with the recorded documents described above.
D. Tax Title Services' Foreclosure Due Process Certification Affidavit
1. TTS will use your Title Report to perform its investigation, analysis, cure (if necessary) and certification as to the due process compliance of the procedures leading up to the Tax Deed.
2. TTS will deliver to you the following:
a. an original Foreclosure Due Process Certification Affidavit ("Certification"). See form of Foreclosure Due Process Certification Affidavit "available through the references section at the end of this bulletin ". The Certification will run to and benefit Stewart. The Certification should be in recordable form, satisfying the requirements of each jurisdiction where it will be recorded. If the Certification is not in recordable form, please contact TTS, advise them of the applicable form requirements, and obtain a Certification in recordable form;
b. a copy of TTS' Post-Foreclosure Due Process Review Curative Report. The Curative Report shows what actions, if any, were required in order for TTS to issue the Certification;
c. a copy of your Title Report, marked by TTS to indicate the requirements and exceptions that have been extinguished by the tax foreclosure procedure and any that remain outstanding (and must remain as exceptions on the Title Policy);
d. all deed(s), waiver(s), release(s), etc., in recordable form, that were obtained by TTS to cure potential defects in the tax foreclosure process;
e. to assist in orienting you and your employees, TTS may also include a copy of this Bulletin.
3. TTS will provide the original Certification to you, together with any supporting documentation that you may request.
4. The Certification states, among other things, that the tax foreclosure complied with:
a. all applicable laws, procedures and due process requirements; and
b. the criteria set forth in the Tax Lien Foreclosure Due Process Checklist for your state.
5. TTS considers its Tax Lien Foreclosure Due Process Checklist to be proprietary. It will not be attached to the Certification. You will not receive a copy of it. The Checklist has been reviewed and approved by your state, district or division counsel. If you have any specific questions relating to the Checklist or the procedures followed by TTS, please contact TTS or your State/District/Division Counsel.
6. The cost of TTS' services, like the cost of bringing a quiet title action or obtaining a quitclaim deed, will be borne solely by the customer. Neither you nor the Company will be responsible for collecting any fees owed by the customer to TTS for TTS' services, including but not limited to TTS' investigation and Certification. TTS will look solely to the customer for payment for TTS's services.
E. Issuing the Title Insurance Policy
1. You may rely upon the Certification and accompanying markup of your Title Report to remove the Tax Deed Requirement from your Title Report, omit the exceptions for ownership interests and liens that have been extinguished by the tax foreclosure, and issue present and/or future title policies for the property.
2. You should follow your usual practices and perform your customary rundown in anticipation of insuring the property, and raise exceptions for any additional matters disclosed.
3. If permitted in your jurisdiction, you should record the Certification with the other closing documents.
4. If any interests/matters are listed as "Exceptions" in the Certification (for example, unextinguished rights of redemption), you must show these interests/matters as exceptions in the title policy. See, for example, TAXX13 STGC: Redemption Rights. However, when the applicable time period has run without redemption having occurred, upon request, you may provide affirmative coverage by endorsement for any excepted right of redemption.
5. You should not raise an exception for unmarketability merely because the source of the title is a tax deed. If the subject property is subsequently insured by another underwriter, do not issue any indemnity letters to other insurers if they raise a general "unmarketability" exception merely because there is a tax deed in the chain.
1. In the event of a claim relating to the tax foreclosure, please follow your normal procedures. However, in addition, please contact and consult with TTS. Due to TTS' familiarity with the subject property and the parties, TTS may be able to provide an initial non-litigation response, which may eliminate and/or resolve the claim.
2. TTS will assist Claims Counsel and provide active support with respect to any claim, controversy or litigation relating to the tax foreclosure.
G. Limits and Liabilities
1. No pre-approvals are required for insured values less than $110,000.
2. With respect to properties with an insured value of $110,000 or more:
a. Prior to issuing the Certification, TTS will contact your State/District/Division Counsel (or if unavailable, a Senior Underwriter) to advise if there are any special concerns relating to the tax foreclosure, and
b. you must also contact your State/District/Division Counsel to determine if any additional requirements are applicable and to confirm that insurance is appropriate. However, a formal "Overlimits" approval will not be required, unless other aspects of the transaction require it.
A. You may rely upon TTS' Certification and accompanying markup of your Title Report to remove the general Tax Deed Requirement from your Title Report, omit the exceptions for ownership interests and liens that have been extinguished by the tax foreclosure, and issue present and/or future title policies for the property.
B. We will not require contribution or reimbursement for losses and expenses resulting from reliance on TTS' Certification provided that you comply with the requirements of this Bulletin.
C. Notwithstanding the foregoing, you are under no obligation to insure any property or to require or accept a Certification from TTS, even if TTS produces a Certification without exceptions. You may undertake your own investigation of the non-judicial tax foreclosure proceedings, without reliance upon TTS. If you choose to do so, you may require quitclaim deeds and/or a quiet title action, and/or add any other requirements that you deem appropriate in order to insure the title.
Tax Title Services Contact Information
Tax Title Services
600 Anton Blvd, 11th Floor
Costa Mesa, CA 92626
Phone: (714) 371-4041
Fax: (714) 371-4189
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.
- Bulletins Replaced:
- Related Bulletins:
- WV000013 Insuring Tax Sales
- Underwriting Manual:
- 19.00 Tax Titles
- Exceptions Manual:
- Redemption Rights
- Tax Deed - Administrative (Nonjudicial) Tax Foreclosure or Potential Defect in Judicial Proceeding