A 2023 case from the Court of Appeals of Georgia serves as a stark reminder of the critical role title insurance plays in purchasing real estate. In this case, the buyer learned after closing that the seller did not actually own the property conveyed. Thankfully, the buyer had a title insurance policy, which paid $66,000.00 after it was discovered that the seller did not actually own the property.

Case Details and Implications

The property at issue was originally purchased by an LLC in 2007. That LLC, however, was administratively dissolved by the Georgia Secretary of State in 2010 (administrative dissolution can happen for several reasons, including failing to file an annual registration). Seven years later, an unrelated individual created a new LLC with an almost identical name to the dissolved LLC. The new LLC was completely unrelated to the dissolved LLC and did not own the property. 

Three weeks later, the new LLC purported to sell and convey that same property to the Buyer, and in doing so, executed a deed and other documents attesting that the new LLC was the owner of the property, when in fact, the dissolved LLC was actually owner of the property. 

In 2019, the members of the dissolved LLC filed a petition to quiet title against the Buyer, claiming that the buyer was not the legal owner of the property. The trial court ruled in favor of the original LLC members, affirming their rightful ownership of the property.

Fortunately, the buyer obtained a title insurance policy insuring its interest in the property. The buyer’s title insurance company paid the buyer under the terms of the policy and then filed a lawsuit for fraud against the person that created the new LLC and sold the property to the buyer.

This case underscores the critical role of title insurance in protecting property buyers against unforeseen risks and fraudulent activities. Had the buyer not secured title insurance, they might have faced substantial financial losses and legal complications. Title insurance is an important investment for homeowners and lenders. At Angela Stewart DeLorme, P.C., Attorneys at Law, we prioritize the issuance of title insurance policies through trusted providers such as First American Title Insurance Co. and Chicago Title Insurance Co. 

Want to know more?

Contact us today to learn more about these topics, the benefits of title insurance, and how you can protect your interests in real estate.

Legal Lingo

Not sure what an LLC is?

An LLC, or Limited Liability Company, is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability protection of a corporation. LLCs offer flexibility in management and taxation while shielding owners from personal liability for the company’s debts or obligations.

Curious about the subsequent legal proceedings?

In 2019, the members of the old LLC filed a petition to quiet title against the Buyer, claiming that the new LLC had fraudulently sold the property and that the buyer was therefore not the legal owner. The trial court ruled in favor of members of the old LLC.

• A quiet title action is a legal proceeding initiated to establish a party’s clear and undisputed ownership of a property, thereby “quieting” any challenges or competing claims against the title. This action is often necessary when there are uncertainties or disputes regarding property ownership, such as conflicting deed records or unresolved liens.