Abstracts vs Commitments: Know the Important Differences

By: Colleen Sachs, Esq., Underwriting Counsel at Attorneys’ Title Fund Services, LLC, and member of the Florida Association of Realtors®/Florida Bar Joint Committee

Prior to the availability of title insurance, and for many years after, abstracts of title were key elements of real estate transactions. Although they are no longer favored, abstracts of title are mentioned in both the Florida Realtors® CRSP Contract for Residential Sale and Purchase, and the Florida Realtors®/Florida Bar Residential Contract for Sale and Purchase. Because abstracts of title are rarely used today, having been replaced by title insurance commitments, many local Realtor® boards have omitted reference to abstracts of title in the purchase and sale agreements they have promulgated. However, there are times when an abstract of title may be provided by an owner who has owned a property for many years. Also, some buyers and sellers, having learned the terminology in the past, may use the term “abstract” interchangeably with a title commitment. It is important to understand the differences and uses of each.

Abstract of Title

An abstract of title is a summary of all the recorded instruments that affect title to a piece of real property, usually accompanied by each of the documents referenced. Generally, it will reach back to the earliest public record (often the patent deed from the United States of America). Continuation abstracts are less comprehensive. They begin with a specific date, usually the certification date of a prior abstract. Abstracts contain a chronological list of all deeds, mortgages, judgments, easements, judicial proceedings, liens and encumbrances affecting title to the property. Simply put, an abstract of title provides all the documents affecting title to the researched property that are recorded in the Public Records. It provides the information necessary to determine the status of title, but it does not provide any conclusions about the status. An abstract does not insure title. Instead, to give assurances to a prospective purchaser the abstract of title was historically followed by a title opinion provided by an attorney after examining the abstract. However, it is important to note that a title opinion based on an abstract is limited because abstracts do not reveal “hidden” issues such as forgeries, lack of capacity of a grantor, and improperly indexed documents.

Abstracts of title also have a use in litigation. The Florida Statutes provide for the use of an abstract of title as evidence in trials where original documents have been destroyed by fire and the abstract was prepared in the ordinary course of business prior to the destruction of the original document.

Title Commitment

A title commitment is the promise of a title insurance underwriter to provide an indemnity contract insuring the title to real property. Unlike the abstract of title, the title commitment is an examined document. It is the result of a title search and title examination. It is presented in three schedules that govern the issuance of a final policy of title insurance.

Schedule A of the title commitment provides the name of the party to be insured, the name of the current owner of the property to be insured, the proposed policy amount, and a description of the property to be insured.

Schedule B-I of the title commitment lists the requirements that must be met prior to insuring the transaction. These include execution and recordation of documents creating the interest to be insured, as well as satisfaction of liens of mortgages and judgments. It may also address requirements concerning clearing of bankruptcy and probate issues, and documentation necessary to confirm the authority of business entities and trustees.

Schedule B-II of the title commitment lists the exceptions that will apply to the policy of insurance. Standard exceptions, many of which may be cleared by certain actions at or prior to closing, include taxes and assessments for the year of closing and subsequent years, claims of parties in possession not recorded in the Public Records, encroachments that would be disclosed by an accurate survey, easements not recorded in the Public Records, and liens for services, labor or materials not recorded in the Public Records. Other Schedule B-II exceptions may include matters contained on plats, declarations of condominium, covenants and restrictions, and agreements recorded in the Public Records affecting the property to be insured.

While most types of insurance, such as automobile or hazard insurance, protect the insured against loss from something that may happen in the future, title insurance protects against something that happened prior to the effective date of the policy.  That coverage includes the “hidden” issues mentioned above, as well as errors made in the examination of title and in clearing title requirements.

Abstracts of title and title insurance commitments are fundamentally different in the information they provide and in their uses. A title commitment provides the foundation for the issuance of an indemnity contract, while an abstract provides documents that affect title to property in chronological order. Both are useful in different situations, and an understanding of those situations is a beneficial tool when dealing with real estate.