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What is a Title Commitment and Why is it Important?

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Written by Sarah Micle
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Real estate transactions, whether commercial or residential, involve documents. So. Many. Documents. Among all this paperwork is usually a commitment for title insurance. With so many other documents, it can be tempting to ignore this one, but the title commitment contains valuable information about the subject property that merit both the buyer and seller’s attention.

What is a title commitment anyway? It is a legal contract between the title company issuing the commitment and the party to whom the commitment is issued, typically the buyer and/or lender, and is provided before closing. The title company commits or promises to issue a policy of title insurance according to the terms set out in the commitment after closing. In Texas, there are state-specific forms regulated by the Texas Department of Insurance, and forms generated by the American Land Title Association (ALTA) can also be used.

Let’s review a few key elements of the title commitment and how this information can impact a transaction.

  • Schedule A. This schedule provides basic information about the proposed title policy and the property itself. Both the buyer and seller should review this information for accuracy. Confirm that the proposed insured is the buyer and the policy amount is correct (usually the purchase price for an owner’s policy). Also verify that the party in which title is vested is the seller.

Why is this important? Confirming this information ensures that the title policy will be issued to the correct party and in the correct amount. If the seller is paying the title policy premium, they ensure they are not overpaying. If the party in which title is vested is not the seller, then this will need to be addressed before closing. The seller may think they own the property (“I inherited it from my mother and I’ve been paying the property taxes for 20 years!”), but the real property records may indicate otherwise.

  • Exceptions – Schedule B (TX commitment)/Schedule B-II (ALTA commitment). This is a list of items that the title policy will not cover. Some exceptions are generic and others reference specific documents recorded in the real property records in the county in which the property is located. Copies of these documents are usually provided by the title company along with the commitment. Exceptions include restrictions on use of the land, easements running across the property, mineral interests, and leases on the property. The buyer should review each exception carefully and consider how it could affect the ownership, development, and use of the property. A survey can help to identify the location of easements, building setback lines and other physical encumbrances. The contract governing the transaction may allow the buyer to object to certain exceptions. The seller should also review the exceptions to be aware of potential objections by the buyer.

Why is this important? Exceptions may reveal information about the property that could negatively impact the buyer’s ownership, development, and use of the property. Is the proposed use of the property restricted? If there is a utility easement in an area to be developed, does the easement document allow for buildings, driveways, or other improvements in the easement area? Are there existing improvements located in an easement or setback area? What rights do the owner of a mineral interest or lessee of an oil and gas lease have to the surface of the property?

  • Requirements – Schedule C (TX commitment)/Schedule B-I (ALTA commitment). These are requirements by the title company to issue the title policy and can include documents to be provided to the title company, documents to be signed, and liens and other monetary encumbrances to be paid off and released. Both the buyer and seller should review this schedule to identify requirements that apply to them. The contract governing the transaction may stipulate how these items are to be handled.

Why is this important? The title company will not close, or issue the title policy, without complete satisfaction of these requirements, which can take time. For example, an old mortgage on the property was paid off years ago, but the appropriate release document was not recorded in the property records.

This is just scratching the surface of the wealth of information contained in this important document.

So why is the title commitment important? It alerts the buyer and seller to issues affecting title to the property, exceptions that will not be covered on the title policy, and conditions that must be met prior to closing. However, the title commitment and subsequent title policy do NOT guarantee that all issues related the property are known and that there will not be issues related to the property in the future.

It is good practice to have an attorney conduct a thorough review of the title commitment and associated documents so that you, as a buyer or seller, are completely aware of the issues that affect the property and would not be covered by the title policy post-closing. We at Stibbs & Co., P.C. have the skill set and experience to handle real estate matters for both buyers and sellers. Please contact our office to schedule an appointment to discuss your real estate needs.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Real Estate
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Suit on Sworn Account: The Basics

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Written by Anne McBroom Balke
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Oftentimes, business clients come to us needing help to collect on unpaid invoices. Contrary to common belief, businesses can pursue unpaid invoices even if there is no signed contract between the parties. Although there are many ways to initiate collection efforts, including sending a demand for payment, significant debts often ultimately require a lawsuit. One claim we frequently pursue in collection litigation is called a “suit on sworn account” (“SOSA”).  

Although typically brought in conjunction with other claims such as breach of contract, SOSA claims are used as a procedural tool to overcome the lack of a formal, signed contract, such as when the debt is evidenced only by documents like purchase orders or invoices, however informal. And, as discussed below, a SOSA claim forces the debtor to swear under penalty of perjury to any denial of the claim asserted, an awkward position for honest debtors.

SOSA claims are appropriate when the claim is founded upon an open account or other claim for goods or services. Any company in the business of providing goods or services for a fee is eligible for this type of claim. So long as a “systemic record has been kept,” the account has been adjusted for “all lawful credits and offsets,” and the primary damages the company seeks are the unpaid debts, a SOSA claim is likely viable.

The perks? As mentioned above, once the plaintiff creditor has filed its petition, the burden is on the defendant debtor to respond with a specific sworn denial as to why the debtor doesn’t owe the funds claimed. This is a heightened burden compared to most other claims and a general denial of the claim by the debtor will not suffice. If the debtor fails to file a sworn denial stating why the debt claimed by the creditor is not legitimately owed—a technical requirement—the court is allowed to grant judgment to the creditor even if the debtor generally denies or questions the validity of the debt.

So, despite the fact that there might not be a contract between the parties, SOSA claims can be successfully asserted to obtain judgment for creditors, and can sometimes provide a technical win when the debtor is unwilling to swear to the denial of the claim, or possibly just forgets.

If your company needs to collect on unpaid invoices or any other similar claims, Stibbs & Co. is happy to help.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Commercial Litigation
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Jury Duty: The Importance of the Dreaded Letter

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Written by Lindsey Karm
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The dreaded jury summons. The majority of us – lawyers included – have opened our mailbox and found that inconvenient letter from the District Clerk’s office. Let’s face it – none of us have time for jury duty. We have work, family commitments, errands to run, and anything else to do besides going down to the courthouse for jury duty.

I admit it – I’m guilty of those thoughts too, but after ten years as a lawyer and almost eight years working in a Texas District Court, I can honestly and one hundred percent tell you that jury service is one of the most important civic duties you can perform.

That point was recently driven home for me in an unusual way. While on vacation in London, I attended a performance of Agatha Christie’s play ‘Witness for the Prosecution’. The play is the story of Leonard Vole, a man accused of murdering a wealthy widow in order to inherit her money and estate. Performed in London County Hall, a former government building in London, the play is staged in a courtroom, giving the play an intense atmosphere. Agatha’s play is based on a 1925 short story and has played to audiences around the world since 1953.
The fun twist for this play? The audience members sitting in the jury box actually vote on Leonard’s guilt and innocence after watching a thrilling trial take place. While attending the play, I had the pleasure of just that – sitting in the jury box in the courtroom and on the jury itself. Like a jury in a real trial, the jury audience members take an oath from a judge, listen to testimony from all sorts of witnesses, hear attorneys make their cases and argument, and determine Leonard’s fate with a vote of guilty or not guilty.

And while ‘Witness for the Prosecution’ is fiction and theater, the jury’s role is pivotal to the ending of the play. Like the play’s ending, our system of justice would not exist without jurors – people just like you and me. Working in the court system, I had the unique opportunity to see time and time again that our jury system only works when people take that jury summons seriously. When people don’t show up for jury duty, trials and justice are delayed. When you receive that dreaded jury summons, it’s important to remember that it was sent to you because there are individuals on the other side of the coin waiting for their chance in court and that need your assistance in resolving whatever road they find themselves on – whether that be civil, criminal, or family.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Uncategorized
2 min remaining
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Planning for the Modern Relationship-DINK

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Written by Maggie Griffin
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Many young couples in the United States are enjoying the “Dual Income No Kids” (DINK) lifestyle. A large category of DINKs are unmarried. According to the 2008 census report, there were 6.2 million unmarried partner households in the United States. Pew Research Center reports that since 1995, marriage rates have declined 7% while cohabitation has increased by 4%.[1] Each unmarried partner is typically focused on their career and building their net worth independently of their partner.  That means more assets and liabilities to consider when cohabitating with a significant other.  

Those of us that fall into the unmarried DINK category should have foundational estate planning documents in place. The reality is that your partner is not your legal spouse and neither Texas nor federal law protects us when it comes to financial decisions, medical decisions, and taxes. My recommendations for all similarly situated DINK Young Professionals out there:

  • Prepare Financial and Medical Powers of Attorney – You don’t have the right to pick up your partner from day patient surgery without a Medical Power of Attorney or consent to the plumber working on a leaky pipe in the house that does not have your name on the deed.
  • Prepare a Cohabitation Agreement – You want to make sure the fear of common law marriage does not stunt the growth of your current relationship. Prepare a Cohabitation Agreement before moving in together to ensure common law marriage is not on the table until you both want it. This simple agreement allows you to create a joint financial plan and the peace of mind in knowing a potential breakup will not be served with divorce papers. If you plan to purchase property together, you should prepare a property agreement to characterize the joint ownership as your separate property and confirm the percentage ownership.
  • Write a Will – all of the assets that you are accumulating are your separate property and will not transfer to your partner by default state law in the event of your passing.

It is important to have these documents in place because you never know what life will throw your way. In the case of any financial, medical or relationship matters, you want to have a plan arranged before a problem arises.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


[1] The state of marriage and cohabitation in the U.S. | Pew Research Center

 

Topic: Probate and Estate Planning
4 min remaining
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The Secrets to Online Safety

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Written by Michael D. Ellis
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Cybersecurity and other online threats to businesses are, unfortunately, an increasingly common occurrence. In addition to phishing, spoofing, and other well-known email scams, cyber criminals are deploying increasingly sophisticated attacks. In recent months, our office has been contacted by many clients who have been victims or attempted victims of numerous cybersecurity attacks. Below are some tips and points to help prevent or address a cyberattack or other online threats.

 

  • Pay Careful Attention To The Sender’s Email Address: While seemingly obvious, failing to take this precaution can have a significant harmful impact on your company. Employees should always check to make sure the name displayed matches — exactly — the actual email address. A nefarious sender can change the display name to whatever is expected to most likely get a response, including a manager’s or coworker’s name. In addition, make sure that the actual email address is from the expected sender and not just a similar domain. For example, if the expected sender was Acme, Inc., which had a web domain of acme.com, any emails from Acme, Inc. would likely come from @acme.com email addresses. A client in this situation started receiving emails from an @acmeinc.com email address, which turned out to be fraudulent.  
  • Buy Your Business’s Domain Name, as well as adjacent names: Domain squatting or cybersquatting—where a third-party registers the domain name for your company and offers to sell it for a (sometimes exorbitant) price—is a practice as old as the Internet itself. Depending on what trademark rights you have in your business’s name, you may have options to challenge the cybersquatter under trademark law, the Anticybersquatting Consumer Protection Act, or the Internet Corporation of Assigned Names and Numbers (“ICANN”) dispute resolution procedures. While these options can end with a positive result, the procedures are often cost- and time- intensive. A better approach is to take preventative measures. It is generally a good idea to obtain the domain name for your business, as well as any “adjacent” names. These adjacent names include abbreviations, confusingly similar variations, and the corporate structure for your business. Using the Acme, Inc. example from above, the business owner should consider obtaining acme.com, www.acmeinc.com, www.acmecorp.com, and, potentially, www.akme.com. A business should also consider the “.net,” “.biz,” and,”.info” domain names for their business as well. Cost is always a consideration, but registering your business’s domain name early could be important to preventing more costly litigation or dispute-resolution procedures in the future. Another benefit is that you will preempt the ability for a cybercriminal to impersonate your business by using your business’s domain name to defraud third parties.
  • Get A Trademark Registration: Many businesses—particularly start-ups and early stage companies—overlook the importance of trademarks. A trademark registration protects your business or product name in your industry and provides mechanisms to help ensure that a competitor or fraudster does not benefit from your business’ goodwill. Addressing trademarks early—including both a clearance search and an application for registration—can help mitigate future and more expensive issues. It can be devastating for a young business to spend years building up their brand, only to then receive a cease-and-desist letter from a prior user of that name. Rebranding (or defending a trademark suit) is an expensive and arduous process that can often be avoided by taking early steps to protect your trademark(s). While often not thought about in the context of “cybersecurity,” ensuring that your business properly protects its name and related trademarks can be very important when fighting cybersquatters or fraudsters.  
  • Be Wary Of Third-Party Escrow Or Holding Companies: Online marketplaces, such as eBay, Craigslist, and Facebook Marketplace, are popular platforms for both individuals and businesses to sell goods. A business will setup a virtual storefront that allows users to browse and purchase goods. But consumers can sometimes be skeptical that the online storefront is “real,” and are understandably concerned that the purchased good will never be received. Third-party escrow or holding companies offer services in which a buyer’s payment is held in escrow until delivery of the purchased good is confirmed. In theory, this practice protects both parties to the transaction because the seller does not ship the good until the escrow company confirms receipt of the purchase funds. Unfortunately, scammers will pretend to be an escrow service and buyers will purchase fake goods by sending the money to the fake escrow company. To make matter worse, the scammers will list a real company for the contact info, so the real company begins receiving angry calls demanding delivery of the goods. For businesses, following some of the other tips in this article—such as purchasing the proper domain names—can help mitigate this risk. For buyers, it is important to take the extra step of verifying that the escrow company is legitimate and has a relationship with the seller. Often, a simple telephone call to the escrow company can prevent fraud before it happens.
  • Cybersecurity Or Cyber Liability Insurance: Often offered by the same providers of other business insurance, a cyber liability insurance policy can provide coverage events and incidents that are not covered by typical E&O, CGL, or other business liability insurance. Because this is an emerging industry, costs and coverage can vary greatly. However, there can be third-party coverage, such as the loss of customer data, as well as first-party coverage, such as losses caused by a business’s internal network being taken down. Cyber liability insurance can also help with remediation costs, such as legal, investigative, and communications.   

These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: IP