Title Guarantee and Warranty of Title
A warranty of title is a guarantee by a seller to a buyer that the seller has the right to transfer ownership and no one else has rights to the property. It may also guarantee no other party has rights to the property, like copyrights.
Types of Title Guarantees
- Full Title Guarantee: Ensures that a seller has the legal right to sell a property and that it does not have any third-party charges or encumbrances.
- Limited Title Guarantee: Offers less assurance and is used when personal property knowledge is lacking, like with repossessed property.
Letter of Guarantee and Title
A letter of guarantee is issued by a bank to guarantee funds or securities for a client entering a contract to purchase goods. It assures all participants in a contract are covered and lets the supplier know payment is guaranteed even if the bank’s customer defaults. It is also used as proof of title insurance for insurance claims.
The difference between full and limited title guarantees lies in the extent of seller promises. Trustees often lack in-depth property knowledge to provide full guarantees, so limited guarantees are utilized in such cases. Thorough guarantee investigations are recommended to minimize buyer risks and seek legal advice for both parties involved.