A “red flag” is a signal to pay attention! Below are some of the items which may cause delays or other problems within a transaction and must be addressed well before the closing.
- Business trusts
- Clearing liens and judgments, including child or spousal support liens
- Encroachment or off record easements
- Establishing fact of death–joint tenancy Family trusts
- Physical inspection results–Encroachment, off-record easements
- Power of Attorney–Use of, proper execution
- Proper execution of documents
- Proper jurats, notary seals
- Recent construction
- Transfers or loans involving corporations or partnerships
- Last minute change in buyers
- Last minute change in type of title insurance coverage
RED FLAG EXAMPLES
These are usually standard, showing the status of the current tax year.
Red Flag: Postponed property taxes is a program put on by the state for senior citizens. It allows the owner to postpone the taxes until the property is sold or refinanced. The owner applies to the state, and the state provides “checks” that the owner uses to pay the taxes. This is a red flag because a demand will need to be ordered from the state by escrow in order to pay off the postponed taxes. It may take up to two weeks to get a demand.
CC&R’S: These are standard. The CC&R’s should be provided to the buyer by escrow. The buyers should read these thoroughly, especially if contemplating improvements to the property.
RED FLAG: Some CC&R’s prohibit certain types of improvements.
EASEMENTS: These are also standard. Most easements in newer subdivisions (20 years or less) are contained in the street. Some subdivisions have nonexclusive easements over portions of the property for such things as maintenance of side yards, access to common areas (like golf courses), etc.
RED FLAG: If improvements are contemplated (such as construction of a pool or spa), then the buyer should request the easements be plotted on a map to determine that there will not be any interference to contemplated Improvements. However, you should be aware that it is very difficult to remove easements and your client may be better off with another property if an easement interferes with his future plans for the property.
For Smooth Sailing…
If you find something on your prelim that is not listed in this series here, it is probably a red flag and you should contact your title officer. He (or she) will be happy to provide you with copies of recorded documents and advise you as to what is needed in order to remove the item (if necessary). Sometimes, though, removing an item is so time consuming, costly, or both, that it becomes a decision on the part of your buyer. We cannot advise you regarding the risk in making such a decision. You should contact your own counsel if you have these types of concerns.