According to the current legislation, the right of ownership allows the owner of the property to own and dispose of it at his discretion. However, some regulatory acts provide for reasons under which this possibility may be lost or challenged. As a result, the object will be claimed from the owner. In order to avoid such a situation, the law provides for title insurance of real estate. Consider what it is.
General information
Title real estate insurance is a protection against the risk of material losses that may arise from a bona fide purchaser in connection with the loss of ownership. Such a threat appears if defects are found in the documentation. The legal title is the paper itself, confirming the exclusive right to own property.
Causes of Risk
Real estate is often the subject of a long chain of sales transactions. If it turns out that one of them was once committed in violation of legislative norms and can be disputed (for example, by heirs), then, in accordance with a court decision, the ownership of subsequent owners is canceled. This may occur if, for example, the privatization of the property did not take into account the opinion of the minor, or one of the owners was in prison. This situation is typical for secondary housing. In the primary market, the loss of ownership occurs when the developer tries to sell one apartment to several buyers.
Why protect yourself from risk?
Title insurance of real estate transactions acts as a guarantee for a bona fide purchaser if the object is claimed from the owner. The main circumstances in which this can happen are:
- The conclusion of a contract of sale with the participation of incompetent legal entities or incompetent citizens, in violation of the law.
- The ownership right after the alienation of the object remains with third parties, and so on.
Title insurance is one of the requirements of a number of banks issuing loans to individuals to purchase a home. Protection against the risk of material losses is a mandatory item when obtaining a mortgage.
Subject of the contract
Title insurance can be issued for residential or non-residential buildings, parts of structures or premises, land. In addition, it is possible to protect the property interests of the owner. The subject of insurance in such cases is the right to dispose, own and use real estate.
Invalidity of the contract
Title insurance includes several cases in which the owner is given the opportunity to protect their rights. As such an event, for example, is the adoption of a court decision. Upon its entry into force, the rights of the owner are canceled. A recognition of the invalidity of the contract of sale is one of the special cases. A transaction may be considered as such if:
- It contradicts the legislation and other normative acts.
- It is a counterbalance to the foundations of morality and the rule of law.
- Covers another deal.
- It does not imply any relevant legal consequences.
- Done by a limited or completely incompetent citizen or an incompetent legal entity.
- It is concluded by a minor, whose age is from 14 to 18 years.
- Done under the influence of error.
- It was carried out by a competent person who was not aware of his actions and unable to control them.
- Concluded under the influence of threat, violence, deceit, malicious agreement, difficult circumstances.
Title Real Estate Insurance: Cost
The amount is determined taking into account various factors. The following criteria exist for title insurance:
- The price of the object according to the contract of sale.
- Cost according to BTI.
- Market (actual) value of the area at the date of insurance.
- Other factors. These, for example, include the amount of the loan secured by living space.
The amount of insurance must not exceed the actual value of the object. During the term of the contract, its size may be changed. For example, when an owner carries out a major overhaul, it can be increased in proportion to the cost. The owner is paid compensation equal to the amount under the title insurance contract of the apartment. The value of the lost property is not the only payment that is provided upon the occurrence of the relevant circumstances. The legal costs and the payment of a lawyer representing the interests of the owner are also compensated. The size of the amount, inter alia, is affected by:
- Duration of the insurance contract.
- The level of risk that is established by legal expertise.
In accordance with the insurance period for protection against all threats, that is, in case of loss of ownership of any of the above circumstances, the tariff will be:
- For a year - 0.4-1%.
- Three years - 1.5-2%.
- Ten years - 2.2-4.0%.
Thus, the contract can be concluded for a period of 1 to 10 years. According to domestic law, the sale can be challenged for three years, and in some cases this period can be increased to ten years.
Subjects of law
Title insurance is available for legal entities, individual entrepreneurs and citizens who are property owners. Moreover, they must be registered in Russia. The first step before the direct conclusion of the insurance contract will be the collection of all necessary securities relating to the transaction. Based on these documents, the possibility of subsequently making claims to an unscrupulous new owner will be evaluated. In accordance with the level of risk, the insurer will calculate the tariff. The next step will be the selection of the company with which the contract will be concluded. In this case, it is necessary to carefully study the permissive documents of firms (licenses), their financial condition. In addition, you should first familiarize yourself with the rules and conditions for the provision of their services. From the whole list you will need to choose the most suitable company.
At the final stage, an agreement is prepared and agreed. For his conclusion, the personal presence of the owner in the office of the company is necessary. As a general rule, one copy of the document remains with the representative of the company, the second is transferred directly to the owner. In the event of an insured event, in order to receive the compensation due, it will be necessary to provide documented evidence of the events that have occurred.