Published on:

Is the Title Company Liable? You Get What You Pay For with Abstracts and Preliminary Reports.

An a foreclosure sale investor had an oral arrangement with an agent at a California title company. He would ask the agent if the loan being foreclosed was the senior loan; he only wanted a yes or no answer. He asked about an Encino property, was told ‘yes’, and so bid and bought the property for one million dollars. Turned out the answer was no, and the investor ended up losing a million.

He sued the title company for “abstractor” liability. An abstract of title describes all documents in the chain of title. The investor only wanted to know about one lien, but he thought it was in the nature of an abstract.

The court disagreed. Under California law, An abstract of title is a written representation as to documents affecting title. This investor never paid for an abstract; he just sought quick one-word answers.

Nor could there be liability based on a claim of a faulty “preliminary report.”
A preliminary report is merely an inducement to purchase a title policy, which in California shall not be construed as a representation as to the condition of title. Liability only attaches if one buys title insurance, and the condition of title is not a represented.

You get what you pay for with title companies, and if you have not paid for anything, you rely on their information at your own risk.
Soifer v Chicago Title Company
(2010) 187 Cal.App. 4th 365