$10 and Other Consideration?

Ever wonder what "10 Dollars and other consideration" means? Well, it has to do with the basic contract law notion of "consideration": if something is being given to one party, something needs to be given to the other party in exchange. For example, if one party is being given an easement and the other party is not receiving anything in exchange, then that transaction could potentially be challenged by the other party for lack of "consideration". In an effort to alleviate this, attorneys recite in the document that some minimum amount was paid (e.g. $10) in exchange for whatever was given to the other party (an easement, in our example). If the other party tries to challenge the transaction, the party receiving the easement will say "No, you signed something stating that you received $10. So, you cannot now say that you did not receive anything." Over time, the language became more and more common, even in situations where both parties have received something, such as in a sale where one party is receiving property and the other is receiving $150,000 (for example), but the phrase "$10 and other consideration" is used in the deed rather than "$150,000" because that would publicly disclose to the taxing authorities an amount for which to assess the property, and no buyer wants that.

Bankruptcy Chapters 7, 11 and 13 and What It Means for You

In very simple terms, Chapter 11 and Chapter 13 bankruptcies are sought by businesses (11) and individuals (13) whose cash flows are insufficient to service their existing debt.  The goal of a Chapter 11 or 13 bankruptcy is for a business or individual to re-organize their debt, such that all or most of the debt is repaid according to a schedule set by a judge, which schedule gives the debtor more time to catch-up on its debt.  A Chapter 7 bankruptcy is used to eliminate all of the debt in the case where a debtor is far too insolvent to ever realistically catch-up.  In this case, the debtor is liquidated (all but a few protected assets are sold), and creditors generally only collect a fraction of the amounts owed to them.  Please keep in mind that this is an oversimplified explanation and that bankruptcy law is extremely complex and often undergoes substantial change.

As a title company representative, finding out that a seller is involved in a bankruptcy often raises concerns about insurability.  Regardless of the type of bankruptcy, property CAN be sold out of a bankruptcy upon approval of the court.  In that respect, the bankruptcy court is not much different than a lienholder whose release needs to be coordinated with closing; however, the approval of the court could take as long as 90 days to obtain, which will delay a closing much beyond that of a non-bankruptcy sale. 

The T-19 Endorsement

We have all likely reviewed the T-19 Endorsement, but few of us really understand it.  In general, the T-19 Endorsement insures the lender for certain restrictions, encroachments and mineral situations that would otherwise be exceptions to the title policy.  Whether any particular matter is covered by the T-19 Endorsement would need to be determined on a case-by-case basis.  From a very practical and general perspective, however, I believe that the T-19 Endorsement is designed to allow a title insurance underwriter to insure certain matters based on a surveyor's assertions, thereby passing on liability under a policy to the surveyor.  For example, if a home was built five feet over a building set-back line, that would normally be an exception to the title policy.  However, with a survey showing that there is no building set-back violation (and a T-19 Endorsement), the title company will insure the set-back violation.  If a claim is later made regarding the set-back violation, the title company likely has recourse against the surveyor (or his errors and omissions insurance policy).

Deceased Person (with a Will) in Title

When an individual in title is deceased, the first determination to make is whether that person left a Will.  If a valid Will does exist, a standard probate of the Will (often a lengthy process) is not always the only option to clear title.  Oftentimes, the Will can be probated "as muniment of title".  This is a shortened probate process (approximately 3 weeks or less) in which the Will is filed as evidence of the conveyance of the subject property.  In such a case, a deed does not even need to be filed, as the filed Will serves as the conveyance document.  A second (and perhaps even shorter) method by which to clear title is an affidavit of heirship.  This can only be accomplished if the beneficiaries under the Will are the same as the heirs of the deceased would have been had there been no Will at all.

The HOA Lien

As most of you know, home owners associations (HOAs) have a recurring lien against the homes in their subdivision.  That lien secures the payment of assessments.  Most of the time, the declarations for the subdivision expressly subordinate that lien to a first mortgage; otherwise, it would be difficult to motivate home lenders to make a loan on a home (e.g. the lenders would be competing with with HOAs for first lien priorty).  However, occasionally the lien is not subordinated by the HOA.  This will usually be reflected on Schedule B.  If that is the case, you should notify the lender, and the lender will likely request that the HOA provide a subordination document.

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.