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Trouble in Paradise--What to do When it All Goes Wrong on the Islands

International Living Postcards--Saturday Edition

Saturday, June 9, 2007

I've just noticed a discrepancy on the title for the property I own on the Galapagos Islands. Nothing serious--my little piece of the islands is still within the 3% set aside for private ownership.

I noticed, though, that the title doesn't match up with the development plan. The lot described on the title is for a different lot--one adjacent to the one I own.

I contacted my attorney in Ecuador immediately, and he confirmed that the description is in fact wrong…but that the error can be fixed. He is working on it right now (at no charge to me).

Yes, this is an annoying problem…but as title issues go, it's an easy one to solve. I've been doing this--property investing--for a long time, as have the people I work with. And if it can happen to me…

Even when you have a good attorney (as I have with this Galapagos deal), mistakes can be made. Attorneys rely on other attorneys…and in this case, my guy relied on the property information sent by the seller's attorney. That's what was used to create the title; no one checked what the seller's attorney had sent.

This happens regularly in Latin America. Attorneys review only what has been given to them…what has been set before them. In my case, the error should have been caught, but in more complicated title reviews, if a document relevant to the title is missing, it is possible no one will notice. It isn't necessarily that the attorney is lazy (although you can be sure some are)…it's that the legal systems rely completely on documentation. Unfortunately, documents can be forged, lost, destroyed, and omitted (unknowingly or intentionally).

Most real estate agents and property sellers will suggest (maybe strongly) that you use their attorney. They'll say it is simpler, faster, and cheaper. When it comes to reviewing your property's title, you don't want to go with cheap and fast. Go with thorough and independent. Hire your own attorney.

Your attorney should review documents to make sure the entire chain of title is unbroken as far back as records exist. In many cases, he will go back but a few years or a few owners, to save time--and to save expense for you. If you use the seller's attorney, probably will not even review the title, as he would have done that when the seller was the buyer. He'll assume his work before was careful and complete. This is one important reason to make sure you use your own attorney rather than using the seller's. The more eyes that review a title the better.

Title insurance is a way to get a better review of your title. While title insurance companies generally rely on your attorney to provide them with all the necessary documentation, they know what questions to ask and what documents they should be reviewing. They are far more likely than the average reviewer to notice if something is missing.

Plus, you end up with the insurance. If a problem comes up, as it did for me on the Galapagos property, the title insurance company would cover you. [Ed. note: We recommend Tuey Murdock of First American Title Insurance: tmurdock@firstam.com.]

Lief Simon
For International Living

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