California Real Estate Lawyers Blog
A Preliminary Title Report (“Prelim”), issued by a title company before issuing title insurance, has long been held by the courts as only an offer to provide insurance. The Prelim is not a contract itself, nor is it something which can be relied on.
The Buyers were purchasing property in Solano County. The Prelim identified it by two tax assessor parcel numbers, as well as a legal description. However, the final title insurance policy identified the property by the legal description, but did not reference the parcel numbers. A map was attached to the final policy which depicted the two parcels.
The grant deed which was recorded described only one of the parcels. After the sale, the County tax Assessor assessed the new owners for both parcels. Years later, a neighbor built on one of the parcels, and the Buyers brought an action for trespass. They ultimately figured out that the Buyer did not own the 2nd parcel, so the Buyer made a claim on his title policy, which was denied. The Title Company pointed to the final Policy, which was for only one parcel.
The Court fond that the Buyers had a reasonable expectation that a title insurance policy covered two adjacent parcels rather than only one, when the preliminary report could be reasonably construed as an offer to insure both parcels, since the policy was ambiguous. The Prelim is an offer, and the Buyer can expect the Policy will be consistent with that offer.
This is the reasonable conclusion. The Buyer usually does not get a copy of the final Policy until after the sale has closed. If the Buyer was sophisticated in real estate matters, they might have spotted the problem, but they would still in the same position- making a claim, and having to sue the title company. The Buyer accepted the offer to provide title insurance, and the insurance must conform to the offer.