Tuesday, January 19, 2010

Lien Release v. Lien Transfer

A Lien Release is most often needed to deal with any existing lien listed in Schedule C of your Title Commitment.  Typically, a Lien Transfer is needed only when a lender is buying an existing loan from another lender (and often such inter-lender transactions do not even close through a title company).  Sometimes, however, a new lender requests a Lien Transfer in connection with a refinance.  In that case, the new lender prepares a new deed of trust, but the lender includes an addendum to the new deed of trust that calls for a transfer of the previous lien (because the lender wants the benefit of the filing priority of the older deed of trust as well).  Assuming that the title is otherwise clean, this is probably overkill by the lender (i.e. the filing priority of previous deed of trust is irrelevant because the new lender is obtaining title insurance on its new deed of trust), but it can be done; however, it is only effective under Texas law if the terms of the new loan are not materially different than the terms of the previous loan (e.g. if neither the term is extended or the loan amount is increased). 

Special Warranty vs. General Warranty

Occasionally, most often in commercial real estate transactions, sellers wish to convey by "special warranty deed", rather than by "general warranty deed".  Buyers are often confused by this.  A simple explanation is:  Under a general warranty deed, the seller warrants that the title is generally good (e.g. there are no clouds on title created by the seller or any prior owners of the subject property).  Under a special warranty deed, the seller warrants only that the seller (but not any prior owners) has not created a cloud on title.  This distinction should not generally be a concern for the buyer if the buyer is obtaining an owner's policy of title insurance.