Quick Answer
Title requirements are conditions or actions generally satisfied before the title insurer will issue the contemplated title insurance policy. They include items such as paying off existing mortgages, releasing liens, providing entity documents, and recording transaction documents.
When you receive a title commitment, you will see a list of requirements in Schedule B. These are not optional suggestions. They are conditions that must typically be met before the title company will issue the final title insurance policy. Understanding what they are and why they exist helps keep the closing process on track.
Why Do Requirements Exist
Requirements exist because the title insurer needs certain conditions satisfied before it can issue the policy. These conditions ensure that the title being insured meets underwriting standards. Requirements protect the insurer, but they also protect you by making sure the loose ends of the transaction are tied up.
Common Title Requirements
Mortgage Payoffs
If the seller has an existing mortgage, it must typically be paid off and released before the new policy can be issued. The payoff is handled through the closing, and the lender provides a payoff statement. Sometimes an old mortgage appears on title even though it was paid off long ago. Learn why an old mortgage may still show on title.
Tax Liens
Unpaid property taxes or tax liens must be paid or resolved before closing.
Judgments
If a judgment has been entered against the seller, it must typically be paid and released before the title can be transferred free of that lien.
Probate Documents
If the property was inherited, probate documents may be required to confirm the current owner's authority to sell.
Trust Documents
If the property is held in a trust, the trustee may need to provide documents proving authority to sell.
Entity Documents
If the buyer or seller is a business entity (LLC, corporation, partnership), documents such as resolutions, operating agreements, or certificates of good standing may be required.
Corrective Documents
If an error is found in a prior deed or other recorded document, a corrective document may be required to fix the record. For example, a wrong legal description may need a corrective deed.
Proper Execution
Documents must be properly signed, notarized, and witnessed according to state law.
Are Requirements Always Problems
Not necessarily. Many requirements are standard parts of any closing, such as recording the new deed. Others, such as clearing a lien or providing entity documents, are routine steps in the process. However, some requirements may indicate issues that need attention, such as an unreleased mortgage or an heirship problem.
Who Is Responsible
Responsibility depends on the requirement. The seller is typically responsible for clearing liens, paying off mortgages, and providing documents related to their ownership. The buyer may need to provide entity documents or financing information. The title company coordinates the process and advises who needs to do what.
Can Requirements Change
Yes. As the title examination continues or as new information comes to light, requirements may be added or removed. An updated commitment may be issued reflecting these changes. If something changes, your agent or attorney should notify you.
What Happens When Cleared
Once a requirement is satisfied, the title company confirms it and the transaction moves forward. For the full journey after requirements are met, read What Happens After Title Requirements Are Cleared?
For a direct comparison with the other half of Schedule B, see Requirements vs. Exceptions on a Title Commitment.
Key Takeaway
Requirements are conditions that must typically be satisfied before policy issuance. They range from routine steps (recording documents) to substantive issues (clearing liens). Understanding who is responsible for each requirement helps prevent closing delays.
FAQs
What happens if a requirement cannot be satisfied?
If a requirement cannot be met, the transaction may be delayed or may not close. In some cases, the requirement may be changed to an exception (meaning the policy will not cover that issue). Consult your title company and attorney for guidance.
Do requirements cost money to satisfy?
Some do, some do not. Paying off a mortgage costs money. Providing a trust certificate may not. The title company can provide an estimate of costs associated with satisfying requirements.