Could a simple detail like title insurance really hold up millions of dollars in land deals?
According to officials at the McClellan Development Authority – the agency charged with finding uses for the 10,000-acre former military base – it certainly can.
MDA officials said they had a number of land deals in the works when three local political leaders – Anniston City Councilman Ben Little, Councilman Herbert Palmore and former councilman Stan Bennett – filed suit against the MDA, arguing that the agency was never properly formed and therefore can’t dispose of McClellan’s land. With the status of McClellan once again in limbo, MDA officials said, none of their prospective buyers could get title insurance. And without title insurance, all land deals are on hold.
The Star called four of the top title insurance companies in the nation – First American, Fidelity National Financial, Stewart and Old Republic International – to ask if there were conditions under which they might insure property sales at McClellan. All of them refused to comment.
That may be because a handful of title insurance companies do the bulk of the business in the field – making it fairly likely that one of these companies will eventually underwrite a land deal on McClellan.
What is title insurance? It’s a one-time insurance policy that you might purchase when closing on a property. It protects you from the possibility that someone might show up with an old, heretofore-unknown set of papers that says they’ve owned the property all along.
According to local lawyer Drew Senter, the first thing a title insurer does is look back into the history of the property, to see if there’s any outstanding challenge to ownership of the land.
“We usually do a 60-year title lookback to see if there’s no defect in the chain,” said Senter, of the law firm Isom & Stanko in Anniston. It’s usually a lawyer, like Senter, who acts as the agent in title insurance deals.
If the 60-year lookback comes out clean, an insurer will write a policy to defend the buyer from any new claim on the land. One reason insurers are averse to risk, Senter and other lawyers said, is that they’re insuring property for a very low price. Most people pay a one-time fee, in the hundreds of dollars, on a home.
“It’s cheap because they do not take any chances,” said Gene Rutledge, of the law firm Rutledge & Yaghmai. “The joke in law school is that it’s like selling you automobile insurance at a low rate by making a rule that you cannot operate a car.”
Rutledge is the attorney for the men who are suing the MDA. He said the lawsuit is not the real reason for the inability to get title insurance on sales at the former base. He claims that insurers are afraid of the property because the MDA’s title to the land isn’t sound, and he says the matter won’t be resolved until a court restores the Joint Powers Authority, which was in charge of the land before the MDA held it.
Jason Odom, the MDA’s attorney, said he can’t speak for the title insurance companies -- but he noted that insurers were more than willing to underwrite land deals that were underway before the latest lawsuit.
“They were ready to go,” Odom said. “Unfortunately, we didn’t have time to get sales completed before this situation occurred.”
It’s hard to get industry insiders to comment on the McClellan case specifically. But Linda Alwood says that in most cases, a buyer would have a tough time getting title insurance on a property if there’s an ongoing court case over the ownership of a property.
Alwood is executive director of the Baton Rouge-based Dixie Land Title Association, the Deep South division of the American Land Title Association, which represents the interests of the title insurance industry.
“If (a) title is disputed in court right now, it’s every unlikely that you’d get title insurance,” she said. “You don’t know who’s going to end up the winner.”
Like others interested in McClellan development, however, Gerald Willis is already feeling like he has lost a battle. Willis has been working with the Coosa Valley Resource Conservation and Development Council, an offshoot of the U. S. Department of Agriculture, to turn the former base’s old Burger King and bowling alley into an agricultural museum and convention center.
Willis says it’s painful to come so close to a putting the plan into action, only to be held up by a problem with insurance.
“We’ve been working on this for quite some time now,” he said. “It’s discouraging not to be able to move forward.”
Contact Assistant Metro Editor Tim Lockette at 256-235-3560.
