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A statement of opinion prepared by a title company, licensed abstracter, or an attorney on the status of a title to a parcel of real property, based on an examination of specified public records. This certificate of title should not be confused with the certificate of title that is issued to a titleholder of land registered under the Torrens system, or with a title insurance policy.

A certificate of title does not guarantee title, but it does certify the condition of title as of the date the certificate is issued, on the basis of an examination of the public records maintained by the recorder of deeds, the county clerk, the county treasurer, the city clerk and collector, and clerks of various courts of record. The certificate also may include records involving taxes, special assessments, ordinances, zoning, and building codes.

A certificate of title does not offer protection against “off-the-record” matters such as undisclosed liens, rights of parties in possession, and matters of survey and location. Nor does it protect against “hidden defects” in the records themselves, such as fraud, forgery, lack of competency, or lack of delivery. A title insurance policy, not a certificate of title, protects against certain off-the-record and hidden defects risks.

An owner’s certificate of title normally will not be issued for less than the sales price of the property. A mortgagee’s certificate is usually issued for the amount of the loan being certified. A new certificate must be issued with any change in ownership. Liability is usually limited to the party requesting the title evidence, such as a mortgagee, owner, or vendee.

The preparer of the certificate of title is liable only for negligence in preparing the report and this liability is usually limited to the extent of his or her personal assets or the assets of the local abstracting company by whom he or she is employed.
In many states, the seller provides a certificate of title at his or her own expense, certifying the condition of the title as of the closing date. If the buyer desires title insurance, the buyer must pay the difference between the cost of the certificate of title and the cost of the title insurance policy.
Dearborn Real Estate Education
This "Word of the day" is excerpted from The Language of Real Estate, 6th Edition by John Reilly (published by Dearborn Real Estate Education, 2006 copyright). To purchase the complete book, with over 2800 key terms and definitions, or to browse through Dearborn's hundreds of other professional real estate titles, including Real Estate Technology Guide by Klein, Barnett, Reilly, click here.