When purchasing a property in Mexico it is important to protect yourself in the event of possible legal disputes over ownership rights to a home or piece of land. One of the ways to insure against potential financial loss is to obtain title insurance. I spoke to Ivan Castillo at Stewart Title Latin America´s Playa del Carmen office so he could explain what it is and what they provide clients who have it.
What is title insurance?
Ivan: Title insurance is an agreement of indemnity between the purchaser and the insurance company, so through a title insurance policy you will be protected in the event that there is any claim in title because somebody has a better right to the property. This is a consequence of fraud, forgery of documents, lost heirs and overlaps of property.
Why is it important?
Ivan: Because it is the only financial vehicle through which you can obtain your money back if there is a claim in title and you lose the property. In Mexico it is the only vehicle through which you can be protected that will give you a guarantee that if you lose the property because of fraud or any claim in title that causes you to actually lose the property, you can get your money back. No-one will do that. Not the attorneys, not the notary public, not the government, public registry- no-one.
So let´s say that you don´t have title insurance and there is a claim in title then you are on your own. In a sense that you would have to fight off any litigation if that is necessary and protect your property.
If you do have the title insurance policy in place, what are the legal effects?
Ivan: If there is a claim in title the insurance policy would pay every single amount of money necessary to protect the title. Because prior to us insuring the property we have to verify that the property is free and clear of any liens, and that the seller was the rightful owner. Through the title research we have to verify that everything is in order. That is why through the title research we will obtain a complete chain of title from beginning to end. Even though we have to go back until the time of the revolution and verify that all the conveyance in title through every single transfer of title or modification of the property was done appropriately. Based on the underwriting process we will determine if the property is insurable or not. If we find that there is something wrong the insurance policy could have an exception of coverage or we can deny the granting of the insurance policy.
Give me an example of how this work.
Ivan: Let´s say that I already gave you the title insurance policy and 5 years from now somebody comes up knocking on your door letting you now that particular property is theirs. And they show you legal documents to prove they are the owners. Now, if you have the insurance policy we would go back, review the documents, and see why there is a claim in title. If there is a valid claim in title we would fight it off in court and if you do suffer the loss we would indemnify you. And the indemnity means paying you the amount of money you spent on the property, meaning the purchase price recorded in the title. Through the insurance policy you would be fully protected for any claim in title. The insurance policy is different from other types of insurance through which you have to pay on a monthly or annual basis here. It´s a one time payment and you are the beneficiary of the insurance policy for as long as you are the owner, even if it´s 100 years. Obviously it would expire the moment you transfer title to a 3rd party. That´s why it´s divided into 2 parts. The underwriting part where we conduct the title research and the final part is when the closing takes place. And I issue the insurance policy once you are recognised as the owner. That is the complete process of title insurance.
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