26 Mar Gap Insurance: Navigating Through Coronavirus Circumstances in Real Estate

Given that some County Recorder’s offices have had a reduction in services, it is important to understand the potential alternatives that may be available in the event these companies have to expand the closures of real estate document recording services.

 Things to know:

• A title insurance policy protects the buyer or lender from defects or problems with the title to the subject property when there is a transfer of property ownership and protects them up until the date of recording.
• The gap period is the period between the closing of the sale and purchase transaction and the actual recording of the seller’s deed.

• Gap insurance is a common part of the title process throughout other parts of the United States, but is not commonly used in California. 
• The usual closing method in California requires that the closing of escrow happen simultaneously with the recording of the transfer documents, therefore not requiring Gap insurance.
• Some Title companies are now looking at the possibility of offering Gap insurance in the event of further closures of the real estate document recording services.
• One thing to be aware of if the Gap method is being considered is that the default language in the most commonly used real estate contract indicates, “’Close of Escrow’ means the date the grant deed is recorded.” In the event the recording is unavailable, parties can explore redefining the close date and negotiate the costs of the additional Gap title insurance policy to ensure the buyer and lender are covered. 

If you have questions about this topic, please reach out to your escrow officer for more information on your particular transaction.