Reviewing the Preliminary Title Report in LA Luxury Deals

What the Preliminary Title Report Is

The preliminary title report, commonly called the prelim, is a report issued by a title company early in the transaction that discloses the recorded matters affecting a property's title. It identifies the current owner of record, any liens or encumbrances, easements, restrictions, and other exceptions that the title company has found in the public records. It also sets out the conditions under which the title company would issue title insurance.

The prelim is, in effect, a snapshot of what the public record says about the property's title. It is the basis for the title insurance policy the buyer will ultimately receive, and it gives the buyer the opportunity to review and address recorded matters before closing, as we discuss in our broader coverage of title insurance and escrow. Reviewing it carefully is a critical step in due diligence.

What It Reveals

The prelim reveals several categories of recorded matter. Liens — including mortgages, tax liens, judgment liens, and mechanics' liens — represent claims against the property that typically must be addressed before or at closing. Easements grant others rights to use portions of the property, such as utility or access easements, which can affect use and value. Restrictions, including recorded covenants and conditions, may limit how the property can be used or modified.

Other exceptions may include rights of way, encroachments, and various recorded agreements affecting the property. Each of these can have implications for the buyer's use, enjoyment, and value of the property, which is why careful review is essential. Some matters are routine and expected; others may be significant and warrant investigation or resolution before the buyer commits.

Easements and Their Implications

Easements deserve particular attention because they can meaningfully affect a property. A utility easement crossing the property may restrict where structures can be built; an access easement may grant a neighbor the right to cross the land; a shared driveway easement creates mutual rights and obligations. For luxury properties, where privacy, buildable area, and exclusive use are often central to value, easements can be consequential, a theme we develop in our coverage of easements and title contingencies.

Buyers should understand each easement disclosed in the prelim — its nature, location, and implications for the property's use and any planned improvements. An easement that conflicts with a buyer's intended use of the property is a significant issue that must be identified before closing, not discovered afterward. Careful review of easements is among the most important aspects of the prelim review.

Liens and Clearing Title

Liens disclosed in the prelim represent claims that generally must be resolved to deliver clear title to the buyer. Existing mortgages are typically paid off from the sale proceeds at closing. Other liens — tax liens, judgment liens, mechanics' liens — must be addressed, and their presence can complicate or delay a transaction if not handled. The prelim surfaces these so they can be resolved before the buyer takes title.

Buyers should ensure that all liens that should be cleared will be cleared at or before closing, and that the title policy will insure against them. Unresolved liens or clouds on title are serious matters, and the prelim review is the opportunity to identify and address them. The chain of title and any irregularities, as we discuss in our coverage of chain-of-title diligence, warrant particular scrutiny in complex transactions.

How to Review the Prelim

Reviewing the prelim is a careful, item-by-item process. The buyer, with their agent and, where appropriate, legal counsel, should examine each exception and recorded matter, understand its nature and implications, and determine whether it is acceptable or requires resolution or investigation. Routine matters can be noted and accepted; significant or unclear ones warrant deeper inquiry, including obtaining and reading the underlying recorded documents where necessary.

The review should be completed within the transaction's contingency period, allowing the buyer to raise issues, seek resolution, or, if necessary, exit the transaction if a serious title problem cannot be resolved. Treating the prelim review as a substantive due-diligence step, rather than a formality, is what allows the buyer to take title with confidence.

The Link to Title Insurance

The prelim is the foundation of the title insurance the buyer will receive. The title policy insures the buyer against covered title defects, subject to the exceptions listed — many of which appear in the prelim. Understanding which matters the policy will insure against, and which are excepted, is part of a thorough review, as we explain in our guide to owner's title insurance.

Buyers should understand the coverage their policy provides and the exceptions it carries, and should discuss with the title company any exceptions they wish to have removed or addressed. The prelim review and the title insurance work together to protect the buyer's ownership, and understanding both is essential to a well-protected purchase.

Outlook

The preliminary title report will remain a cornerstone of due diligence in every luxury transaction, revealing the recorded matters that affect a property's title and the buyer's rights. Careful, substantive review — of liens, easements, restrictions, and exceptions — protects the buyer from surprises that could affect use, value, or insurability. It is a step no buyer should treat as a formality.

Elite Collective ensures our buyer clients understand the preliminary title report and its implications, coordinating with title professionals and legal counsel to identify and resolve issues before closing, so clients take title with confidence.

Frequently Asked Questions