Lance R. Pomerantz
Attorney at Law

Land     Title     Law

“Constructive Notice”  The  Newsletter

Excerpted from the Nov. 3, 2014 mailing of "Constructive Notice":

Reliance on Title Agent Representations 

At the closing, the insured’s counsel requested an escrow agreement be drafted to protect his client from potential unpaid water charges that had not yet become liens. The title Agent’s representative assured counsel the meters identified in the preliminary report were the only meters that serviced the property and that those meters showed no additional charges. Counsel asserted he proceeded with the closing in reliance on those representations.

It turned out there was another meter servicing the property of which the Agent was unaware at the time of closing. Charges accruing from that meter totaled more than $62,000, but had not yet become a lien as of the policy date.

The trial court observed the “policy expressly provides that it is the complete agreement between the parties and that any changes or amendments to it must be made in writing, [the Agent's] oral representations, never reduced to writing, were not incorporated into the policy and provide no basis for a breach of contract claim ….”

The appellate panel upheld the lower court, noting that “title reports function to apprise title insurers of defects in title; they do not serve to warn prospective purchasers of every risk facing the property.” Timac Realty v. G & E Tremont LLC, 2014 NY Slip Op 6858 (First Dept., October 9, 2014).

(Kudos to Constructive Notice subscriber Paul Kleidman, Esq. and his team at Fidelity National Title Group on a job well done.)


The Second Dept. has previously recognized that lenders and buyers customarily rely on a title insurer's title search. That circumstance, however, does not, by itself, render the search an independent representation as to title that survives delivery of the policy and gives rise to a cause of action in negligence or misrepresentation. Counsel must take explicit steps, such as procuring affirmative insurance or establishing an adequate escrow, to protect the client from risks excluded or excepted from policy coverage.