COMMERCIAL GUIDE BOOK TO TITLE & ESCROW IN CALIFORNIA

[Pages:51]COMMERCIAL GUIDE BOOK TO TITLE & ESCROW IN CALIFORNIA

PACIFIC COAST

TITLE COMPANY

Contact Information

COMMERCIAL TITLE UNIT

4637 Chabot Drive, Suite 105 Pleasanton, CA 94588 925.251.1060

Mark Holderbein ? Advisory Title Officer Email: mholderbein@

IPX 1031 EXCHANGE

455 Market St. Ste. 2100 San Francisco, CA 94105

415.291.5181 James Callejas, Vice President, Certified Exchange Specialist

Email: james.callejas@

Pacific Coast Title Customer Service Department

4637 Chabot Drive, Suite 105 Pleasanton, CA 94588 925.251.1060

Rebecca Schulman ? Customer Service Representative Email: rschulman@

PACIFIC COAST TITLE COMPANY

Commercial Guide Book

Pg. 1

Introduction to Pacific Coast Title Company

We at Pacific Coast Title Company are proud to be able to provide this helpful guide to understanding the escrow and title process when buying, selling or completing a commerical loan transaction California.

With over 30 years of history in the title industry, Pacific Coast Title Company and our FNF family of title companies offer you the financial strength, experience and expertise needed to close your transactions with confidence and peace of mind.

This booklet has been prepared to give you an overview of the general process involved during the purchase/sale of a commercial loan transaction and explain the various roles that we will play in helping to close your transaction.

We hope you find this information beneficial in making your transaction and experience a smooth and positive one!

PACIFIC COAST TITLE COMPANY

Commercial Guide Book

Pg. 2

What is Title Insurance?

What is Title insurance? Title Insurance is a contract of indemnity which guarantees that the property is as reported. We will reimburse the buyers for actual loss or damage under the condition specified in the policy. The title policy covers the insured for their loss up to the amount of the policy.

Title Insurance assures owners that they are acquiring marketable title. Title Insurance is designed to eliminate risk or loss caused be defects in title from the past. Title Insurance provides coverage only for title problems which were already in existence at the time the policy was issued.

A Preliminary Report contains vital information which can affect the close of escrow: ownership of the subject property, the current owners hold title, matters of record that specifically affects the subject property or the owners of the property, a legal description of the property and an informational plat map.

What does a Title Policy cover? Not all risks can be determined by a title search since certain things such as: forgeries, identity of persons, incompetence, failures to comply with the law, or incapacity cannot be disclosed by an examination of the public records.

The preliminary report is an offer to insure certain situations. The title policy is a contract that gives coverage against such problems.

The California Land Title Association (CLTA) is a standard policy of Title Insurance in California.

What Does CLTA Cover?

? A forged signature on the deed

? lmpersonation of the real owner.

? Mistakes in the interpretation of wills or other legal documents.

? Deeds delivered without the consent of the grantor.

? Deeds and mortgages signed by persons not of the sound mind, by minors or by someone listed as single but in fact, married.

? Errors in copying or indexing. ? Falsification of records. ? Undisclosed or missing heirs. ? Recording mistakes.

? With regard to lenders coverage it covers:

PACIFIC COAST TITLE COMPANY

Commercial Guide Book

Pg. 3

Concurrent, Co-Ownership Interests

Community Property

PARTIES Only husband and wife.

DIVISION OF INTERESTS

Ownership and managerial interests are equal (except control of business is solely with managing spouse)

TITLE

Title is in the "community." Each interest is separate but management is unified

POSSESSION Both co-owners have equal management

and control

CONVEYANCE

Personal property (except "necessaries") may be conveyed for valuable consideration without consent of other spouse; real property requires written consent of other spouse; separate interest cannot be conveyed except upon death

PURCHASERS Purchaser can only acquire STATUS whole title of community; can-

not acquire a part of it

DEATH

On co-owner's death, 1/2 belongs to survivor in severalty. 1/2 goes by will to descendant's devisee or by succession to survivor

SUCCESSORS STATUS

If passing by will, tenancy in common between devisee and survivor results

Joint Tenancy

Any number of persons. Can be husband and wife or registered domestic partners. Ownership interest must be equal

Sale or encumbrance by joint tenant severs joint tenancy Equal right of possession

Conveyance by one co-owner without the others breaks the joint tenancy

Purchaser will become a tenant in common with the other coowners in the property

On co-owner's death, his/her interest ends and cannot be disposed of by will. Survivor owns property by survivorship

Last survivor owns property

Tenancy Common Any number of persons. Can be husband and wife or registered domestic partners. Ownership can be divided into any number of interests equal or unequal

Each co-owner has a separate legal title to his/her undivided interest

Equal right of possession

Each co-owner's interest may be conveyed separately by its owner

Purchaser will become a tenant in common with the other co-owners in the property

On co-owner's death, his/her interest passes by will to devisee or heirs. No survivorship rights

Devisee or heirs become tenants in common

Tenancy In Partnership Only partners (any number)

Ownership interest is in relation to interest in partnership

Title is in partnership

Equal right of possession but only for partnership purposes Any authorized partner may convey whole partnership property for partnership purposes

Purchaser can only acquire whole title

On partner's death, his/her partnership interest passes to the surviving partner pending liquidation of the partnership. Share of deceased partner then goes to his/ her estate Heirs or devisees have rights in partnership interest but not specific property

Title Holding Trust

Individuals, groups of persons, or corporations, a living trust.

Ownership is a personal property interest and can be divided into any number of interests

Legal title is held by the trustee; beneficiary has equitable title

Community Right of Survivorship

Only husband and wife.

Ownership and managerial interests are equal

Title is in the "community." Management is unified

Registered Domestic Partners

Only partners that are registered with the California Secretary of State's Domestic Partners Registry.

Ownership and managerial interests are equal (except control of business is solely with managing domestic partner)

Title is in the "community." Each interest is separate but management is unified

Right of possession as specified in the trust provisions

Both co-owners have equal management and control

Both co-owners have equal management and control

Designated parties within the trust agreement authorize the trustee to convey property. Also, a beneficiary's interest in the trust may be transferred

Right of survivorship may be terminated pursuant to the same procedures by which a joint tenancy may be severed

Personal property (except "necessaries") may be conveyed for valuable consideration without consent of other partner; real property requires written consent of other partner; separate interest cannot be conveyed except upon death

A purchaser may obtain a beneficiaries interest by assignment or may obtain legal and equitable title from the trust

Purchaser can only acquire whole title of community; cannot acquire a part of it

Purchaser can only acquire whole title of community; cannot acquire a part of it

Successor beneficiaries may be named in the trust agreement, eliminating the need for probate

Upon the death of a spouse, his/her interest passes to the surviving spouse, without administration, subject to the same procedures as property held in joint tenancy

On co-owner's death, 1/2 belongs to survivor in severalty. 1/2 goes by will to descendant's devisee or by succession to survivor

Defined by the trust agreement, generally the successor becomes the beneficiary and the trust continues

Surviving spouse owns property

If passing by will, tenancy in common between devisee and survivor results

CREDITORS RIGHTS

Property of the community is liable for debts of either spouse, which are made before or after marriage. Whole property may be sold on execution sale to satisfy creditor

Co-owner's interest may be sold on execution sale to satisfy his/her creditor. Joint tenancy is broken. Creditor becomes a tenant in common

PRESUMPTION

Strong presumption that property acquired by husband and wife is community

Must be expressly stated

Co-owner's interest may be sold on execution sale to satisfy his/her creditor. Creditor becomes a tenant in common

Favored in doubtful cases except husband and wife

Partner's interest may be sold separately by "Charging Order" by his/her personal creditor, or his/her share of profits may be obtained by a personal creditor. Whole property may be sold on execution sale to satisfy partnership creditor

Creditor may seek an order for execution sale of the beneficial interest or may seek an order that the trust estate be liquidated and the proceeds distributed

Arise only by virtue of partnership status in property placed in partnership

A trust is expressly created by an executed trust agreement

Property of the community is liable for debts of either which are made before or after marriage. Whole property may be sold on execution sale to satisfy creditor

Must be expressly stated

Property of the community is liable for debts of either partner, which are made before or after registration as domestic partners. Whole property may be sold on execution sale to satisfy creditor

Must be expressly stated

Disclaimer: The comparisons shown below are provided for informational purposes only. This chart should NOT be used to determine you acquire your ownership in the property. It is strongly recommended that you seek professional advice from an attorney and/or your tax

advisor to determine the legal and tax consequences of how your title should be vested.

PACIFIC COAST TITLE COMPANY

Commercial Guide Book

Pg. 4

Organizational Documents and Authorized Representatives

This table lists the basic documentation that may be required for each type of entity. Be sure, however, to always look to the requirements shown on the Preliminary Report or contact your escrow officer.

Attorney-in-Fact Bankruptcy (BK) Conservatorship Corporation (Inc.)

Estate General Partnership

As Attorney-in-fact for another individual Bankruptcy Trustee

Conservator (For Real Property) Corporate Officer

Personal Representative

All Partners

Current US Government is- Power of Attorney sued dentification card

Court order appointing trustee

Court order approving sale

Court order appointing Con- Court order approving sale servator

Articles of Incorporation filled Corporate Resolutions with the Corporation Commission

Letters of Appointment & Ac- Letters of Testamentary or

ceptance

Letters of Ad ministration

Certificate of Partnership re- Partnership Agreement & corded with County Recorder Amendments

Guardianship Individual

Guardian (For Personal Property or personal care)

For him/herself

Individual Retirement Account (IRA)

Custodian or Trustee of the IRA Account

Limited liability Company (llC) Manager Or Managing Member as stated in operating agreement.

limited liability Partnership Partner(s) as authorized in

(llP)

the Partnership Agreement

Limited Partnership (lP)

General Partner

Receivership

Cour Appointed Receiver

Trust

Trustee

Unincorporated Association Corporate Officer

Court order appointing Guardian Current US Government issued identification card Account Agreement

Articles of Organization filed with the Secretary of State

Certificate of Registration from the Secretary of State Certificate of Partnership filed with the Secretary of State Court order appointing receiver Trust Agreement

Bylaws or Articles of Association

Court order approving sale

N/A

Account Agreement and Amendments Operating Agreement Filed Articles of Organization

Partnership Agreement and Amendments Partnership Agreement and

Court order approving sale

Trust Agreements & Amendments Resolution of the Association approving sale or Certificate

PACIFIC COAST TITLE COMPANY

Commercial Guide Book

Pg. 5

Important Tax Dates

January 1 Assessment Date.

April 10 2nd Installment becomes delinquent at 5pm

Taxes become a lien at 12:01am. Not yet due and payable for the Fiscal Tax Year starting July 1. Thereafter title evidence must show taxes as a lien for the Fiscal Year Tax Year.

10% penalty plus $10 administrative charge attaches. If April 10th falls on a weekend or holiday, taxes are not delinquent until 5pm the next business day.

April 15 Last day to file for 100% Veterans or Homeowner's exemption. To be eligible for applicable exemptions you must own and occupy property on March 1.

July 1 Current fiscal tax year begins.

November 1 1st Installment Due (First installrnent-July 1 to December3l )

December 1 Last day to file for 80% Veterans or Homeowner exception.

June 30 Property tax may become defaulted if you fail to pay either or both installments by 5pm, property tax become defaulted and additional costs and penalties accrue. If June 30th falls on a weekend or holiday, taxes must be paid by 5pm on the preceding business day.

Reminder Property may be sold at public auction after 5 years of delinquency.

How Property Taxes are Determined Property taxes are governed by California State Law, and collected by the county. The County Assessor must first assess the value of your property to determined the amount of property tax.

10% penalty added to taxes due. If December 10th fails on a weekend or holiday, taxes are not delinquent until 5pm the next business day.

January 1 Calendar year begins

February 1 2nd Installment Due. (Second Installment - January 1 to June 30)

Generally, the assessed value is the cash or market value at the time of purchase. This value increases not more than 2% per year until the property is sold or new construction is completed.

The Auditor-Controller applies the appropriate tax rate, which include the feneral tax levy, locally voted special taxes, and any city or district direct assesments. The Tax Collector prepares property tax bills based on the Auditor-Controller's calculations, distributes the bills and then collects the taxes.

PACIFIC COAST TITLE COMPANY

Commercial Guide Book

Pg. 6

How To Read a Preliminary Report

A Preliminary Report (Prelim), is a report which shows the terms upon which the company may issue its policy. It does not constitute a policy nor a commitment to issue such a policy. Also set out in the Prelim are information items that will assist the customer in expeditiously closing the proposed transaction thus enabling Pacific Coast Title to issue its policy(s) of title insurance.

The Prelim is issued after an extensive title search has been made on the real property and all the documents affecting said property have been examined to determine their effect on the said property.

The search is made of the public record, generally including the following public offices:

?

The County Recorder of the county in which the real property is located.

?

The taxing authority(s) that levies taxes and assessments on real property.

And sometimes:

?

The clerk of the various courts of the State of California.

?

The clerk of the United States District Court.

In addition to the above mentioned public records, certain types of policies and endorsements to be issued by Pacific Coast Title require that we make a physical inspection of the property. This inspection may disclose additional encumbrances or rights of other parties in and to said property not disclosed by the public records.

Following is a brief explanation of some of the more common items shown in a Prelim, together with an explanation of some of the preprinted items shown therein. The Preliminary Report provided herein is a sample of what a customer would receive shortly after placing an order with Pacific Coast Title Company. The numbered paragraphs correspond to the numbers shown on the sample Prelim.

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