On April 25th the U.S. Seventh Circuit appellate court ruled in favor of a title agent in a $3M failed development. The lawsuit was based on an allegation of a breach of fiduciary duty by Belco Title and Escrow by a group of real estate investors. The ruling is available here.
The real estate investors alleged that they believed they were closing a senior mortgage on the property in question when in fact there had been prior investors and their position was junior. When the project went south they sued the Escrow/Closing agent, which was Belco. The court found that Belco was acting as a closing agent for the plaintiff and owed a duty to act only according to the terms of the escrow instructions. There was no expectation that they should have clarified the details of the transaction with the investors. Interestingly, so far no claims are being pursued against the lawyers or investment managers involved in the project.
Title agents and title insurers continue to be dragged into real estate ventures gone wrong, driving up defense costs and premiums. Working with an expert title agent insurance broker ensures you are getting the best deal possible for your organization.