George purchased a condominium unit in July. A few months later, George received a letter from the condominium corporation asking for an $8,000 payment in the form of a special assessment to replace the Kitec plumbing in his unit as it is faulty. When George first signed the agreement of purchase and sale for the unit, the deal was conditional on a review of the status certificate by his lawyer, Alice. The status certificate showed this amount would be owing at a later date due to the plumbing issue, but Alice was very busy closing ten other deals that day and unfortunately forgot to notify George. She had briefly spoken with George’s real estate agent about the issue, but the agent also forgot to speak to George.
Needless to say that after receiving the special assessment, George was not happy with Alice or his real estate agent. Fortunately for Alice and George, the Transaction Protection Endorsement was purchased with their Chicago Title insurance policy. Since Alice had made an error in reviewing an agreement related to the purchase, George was able to recover the amount of the special assessment under his Chicago Title insurance policy without having to take any action against Alice and her professional insurance.
PRACTICE TIP: Always document advice to your clients in writing and as many times as possible. When reviewing lengthy documents like a status certificate with attachments, you want a record of the advice given to your clients as they are relying on it to go forward with a deal. A best practice is to outline in your retainer letter what you will be reviewing and what you expect your client to review so there is no misunderstanding. You could also consider using a template or checklist to document the items reviewed, which can easily be forwarded to your client. Later on if a problem arises, you have a written record of your advice. A final reporting letter should also disclose any adverse circumstances uncovered in your review of the agreement and title.
And finally, always obtain the Transaction Protection Endorsement from Chicago Title Insurance Company as inadvertent errors can still happen in a busy practice despite best efforts to communicate with your clients.
DISCLAIMER: The names and other identifying details in story have been changed to protect the identity of the claimants.
This blog post is intended to provide general information on title insurance. For specific details regarding policy coverages, exceptions and exclusions, please review the sample policies on our website. Known title and survey defects are subject to underwriting review and approval, and may be exceptions to coverage.