Beware of Potential Disruptions for Title Due to Covid-19
3/25/2020 by David Lewis
Title companies in NY and throughout the country are starting to experience disruption in their ability to search and record documents due to the current Covid-19 situation and calls for further social distancing to slow the spread of this virus. Contributing factors to the disruption are the County and Title Company on the transaction.
Each County handles searches and recordings differently and the decision to shut down services at the County offices are made on a County by County basis. In some places, recording of documents and on-site searches have been suspended. If the County has online records these can be searched. But this is not the case for all Counties and these records are not necessarily as up to date as the information that could be searched on site.
Title companies also vary in the breadth of their search capabilities and their technological abilities. If the title company is unable to search electronically then they must rely on the County offices to be open and given the current situation that is becoming more and more of an issue.
The closing of County offices also suspends the recording of documents which puts the title company at added risk when issuing a policy for a purchase/financing. The risk for the title company is that during the gap in time between the closing and the date of the recording of the documents another instrument is recorded preempting the documents the title company is required to record. The title company will most likely seek to mitigate this risk using a Gap Indemnity document. This document provides an indemnity from the seller on a purchase or the borrower on a financing to the title company against any issues rising from documents the parties would seek to record prior to the closing documents being filed, thus causing a loss to the title policy holder.
In the case of a title date down for a draw, this again is dependent on the sophistication of the title company as well as the County, if onsite searches are available, and if not whether electronic searches are available. Additionally, if title isn’t comfortable with the searches they are able to perform, they potentially won’t provide the date down. This could stall the draw process from funding until the offices are opened for searching.
In the end, the best course of action is to be as proactive as possible. If there is a closing or draw in the near future, coordinate with title as soon as possible to give yourself the best chance that the proper searches can be performed, and your transaction or draw can be completed.