ADFP Legal and Closing Requirements

These are a sampling of legal terms pertinent to the easement process:

• Chain of title - refers to the succession of title ownership of real property from the present owner back to the original owner (often the Government) at some distant time. Chains of title include notations of deeds, judgments of distribution from estates, certificates of death of a joint tenant, foreclosures, judgments of quiet title (lawsuit to prove one’s right to property title), and other recorded transfers (conveyances) of title to real property.
• Closing - refers to the final exchange in the sale and purchase of real estate in which the deed is executed and delivered to the buyer. Depending on local practice, the closing is usually handled by a closing agent.
• Closing agent - refers to the person or entity preparing the title search document, providing the underlying documents, or handling the closing and legal transfer of title and ownership from the seller to the buyer. The closing agent is typically not an agent of either party, but simply the person entrusted to carry out all non-conflicting instructions from all parties.
• Exceptions and clouds on title - refers to any evidence that the landowner is not in full control of the property to be encumbered by the easement or contract. Exceptions and clouds on title can include mechanics’ liens, mortgages, judgments, divorce decrees, other conservation easements, hazardous waste risks, and squatters’ rights.
• Lien - refers to a legal claim against an asset used to secure a loan or other debt that must be paid when the property is sold. A mortgage is a common type of lien. Lien priority - refers to the order in which a lien is paid from the proceeds of a sale of property. A first lien, such as one that is recorded in the land records earlier than another lien, is considered a higher priority than a second lien, thus leading to the phrase “first in time, first in right.” A subordination agreement changes this order of priorities.
• Mortgage - refers to a loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower gives the lender a lien on the property as collateral for the loan.
• Subordination agreement - refers to a legal agreement that establishes one debt or right in property as ranking behind another debt or right in the priority for collecting repayment from a debtor or execution of rights. The priority of debts or rights is extremely important if the debtor defaults on payments or declares bankruptcy. Thus, if a preexisting mortgage on property is not subordinated at the time of the easement purchase, the lender can sell the property in foreclosure and the buyer of the property will not be subject to the terms of the easement. This is why mortgages and similar liens that are found during the title review must be paid, removed or subordinated prior to closing the easement.
• Title search documents - refers to the summaries of information regarding the documents obtained by searching the land records, court dockets, and other public records. These summaries are contained in documents entitled “Preliminary Title Report,” “Title Commitment Binder,” “Title Abstract,” and the like.