Preliminary Title Report: Definition & Requirements in California

Updated on April 26, 2024

A preliminary title report, also known as a preliminary title search or preliminary title opinion, is a crucial document in real estate transactions. It provides valuable information about the ownership history and any existing liens or encumbrances on a property before a sale is finalized. Understanding its content is essential for both buyers and sellers in a real estate transaction.

What is a Preliminary Title Report?

A preliminary title report is a document prepared by a title company after conducting a thorough search of public records related to a property. The report provides a snapshot of the property’s title history, including current ownership, outstanding liens, easements, and other encumbrances that could affect the property’s title.  This is important because the buyer usually takes title subject to the items listed on the title report and does not have insurance against those claims (liens, easements, etc) that appear on the title report.

Five Important Areas of a Preliminary Title Report

1. Current Ownership: The report will list the current owner(s) of the property.

2. Legal Description: It will include a legal description of the property, which uniquely identifies its location and boundaries.

3. Encumbrances: The report will disclose any existing liens, mortgages, easements, or other restrictions that could affect the property’s title.

4. Property Tax Information: It may include information about the property’s tax status and any outstanding taxes owed.

5. Covenants, Conditions, and Restrictions (CC&Rs): If the property is subject to any CC&Rs, they will be outlined in the report.

What to Look for in a Preliminary Title Report?

• Errors: Check for any errors in the report, such as misspelled names or incorrect property descriptions.
• Liens and Encumbrances: Pay close attention to any liens or encumbrances that could affect your ability to own or use the property as intended.  Most liens and encumbrances survive the sale unless they are paid off (like a loan that is paid off through the sale).
• Easements: Review any easements that could impact your use of the property, such as utility easements or access rights.
• Title Insurance: Consider obtaining title insurance to protect yourself from any title defects not revealed in the preliminary title report.

What to Consider When Obtaining a Preliminary Title Report In California

Preliminary title reports in California share many similarities with those in other states, but there are some unique aspects to be aware of:

• Use of Title Companies: In California, title companies often play a more significant role in real estate transactions compared to some other states. They are responsible for conducting the title search and preparing the preliminary title report.  There are several companies to chose from and different types of tile policies offering different amounts of insurance coverage.
• Title Insurance Regulations: California has specific regulations regarding title insurance, which is often issued in conjunction with the preliminary title report. Title insurance helps protect the buyer and lender against any defects in the title that were not uncovered during the title search.
• Property Tax Information: California’s preliminary title reports typically include detailed information about property taxes, including the current status of taxes owed and any tax liens on the property.
• Mechanics’ Liens: California has unique laws regarding mechanics’ liens, which are liens placed on a property by contractors or suppliers who have not been paid for work performed on the property. These liens can complicate a property’s title, and the preliminary title report will typically identify any mechanics’ liens filed against the property.
• CC&Rs and Homeowners Associations: California has many planned communities and condominium developments that are subject to covenants, conditions, and restrictions (CC&Rs) enforced by homeowners associations (HOAs). The preliminary title report will usually include information about any CC&Rs or HOA fees associated with the property.
• Environmental Concerns: California’s stringent environmental laws mean that preliminary title reports often include information about environmental hazards or conditions that could affect the property, such as proximity to hazardous waste sites or flood zones.
• Water Rights: Water rights are a significant issue in California, particularly in areas where water is scarce. Preliminary title reports may include information about water rights associated with the property.

Overall, while the basic purpose remains the same in California as in other states—to provide information about the property’s title history and any potential issues—there are specific laws and regulations in California that make its preliminary title reports unique.

It’s essential for buyers and sellers in California to understand these unique aspects and work with professionals who are familiar with California real estate law.

Who is Responsible for a Preliminary Title Report?

Typically, the seller is responsible for ordering and paying for the title report as part of the due diligence process before purchasing a property. However, this can vary depending on the terms of the purchase agreement.

Why Do Buyers Need One?

Buyers need a preliminary title report to ensure that the property they are purchasing has a clear title, free of any liens or encumbrances that could affect their ownership rights.

The report helps buyers make informed decisions about the property and can reveal potential issues that may need to be addressed before closing the deal.

Usually, if you are obtaining a loan the lender will require the borrower to purchase a lender’s title policy so the lender can be assured that their secured loan is adequately secured and has a proper place in line.

What is the Benefit to Sellers?

For sellers, a preliminary title report can help identify any title issues early in the process, allowing them to resolve these issues before listing the property for sale.

This can help streamline the sale process and prevent delays or complications during escrow.

How to Obtain a Preliminary Title Report?

Buyers can obtain a preliminary title report through a title company.  Interesting, there is a rule that the title company must charge you for a preliminary title report.

The report is typically ordered during the escrow process, after an offer has been accepted but before the sale is finalized.  That said, anyone can order a report at any time on any property.

How Can an Attorney Help?

An attorney can review the preliminary title report on behalf of the buyer or seller to ensure that all relevant information is accurate and complete. They can also help interpret the report and advise their client on any legal implications of the information contained in the report.

Additionally, an attorney can help resolve any title issues that may arise, such as clearing up a disputed ownership claim or negotiating the removal of a lien.  The title company will often provided a hyperlinked version of the title report so that the attorney or the client can review the underlying encumbrances identified on the preliminary title report.

In conclusion, preliminary title reports are vital documents in the real estate transaction process. It provides valuable information about a property’s title history and can help buyers and sellers identify and resolve potential issues before closing the deal.

Working with a qualified attorney can help ensure that you fully understand the implications of the report and can navigate any legal issues that may arise. The Los Angeles Real Estate Attorneys at Schorr Law have years of experience assisting with real estate matters and are ready to help. Contact us today to see if you qualify for a free consultation. Call us at 310-954-1877 or reach out to us here.