In Texas real estate transactions, title companies serve as impartial facilitators that help ensure a smooth and legally sound property transfer. One of the main duties of a title company is to perform a title search, which confirms the seller’s legal ownership and checks for any outstanding liens, defects in the title, or legal claims on the property. Then, once the title is confirmed as clear, the company issues title insurance to protect both the buyer and the lender from future ownership disputes or hidden defects.
Title companies also handle the escrow process. They do so by safeguarding funds and documents until all sale conditions are fulfilled. At closing, they coordinate the signing of paperwork, distribute funds to the appropriate parties, and record the deed and mortgage documents with the county clerk. They also prepare the closing disclosure or settlement statement, outlining all costs and fees associated with the transaction.
The regulation of title companies in Texas falls under the authority of the Texas Department of Insurance (“TDI”), and the industry is primarily governed by the Texas Insurance Code, particularly Title 11, Subtitle B. Both of these statutes dictate how title insurance is written, priced, and administered in the state.
Common Legal Issues With Texas Title Companies
Examples of common legal complications involving Texas title companies often stem from unresolved title issues or mistakes in the closing process. All of these matters fall under the jurisdiction of the Texas Department of Insurance and are primarily governed by the Texas Insurance Code, Title 11, Subtitle B. Both of those set standards for title insurance operations and practices.
Examples of common legal issues include:
- Outstanding liens: Unpaid debts such as property taxes or contractor bills can remain attached to a property and jeopardize a sale
- Disputes over ownership: Conflicting claims, especially from heirs or prior divorces, can delay or void a transaction
- Problems with legal documents: Mistakes in deeds, such as incorrect names or missing signatures, can make them legally invalid
- Fraudulent activity: Fake deeds or forged documents may result in serious legal and financial risks
- Survey or boundary conflicts: Inaccurate property lines can trigger disagreements with neighbors
- Title policy errors: When exceptions or encumbrances aren’t properly listed in the title insurance policy, the company may be held accountable for resulting losses
It is important to note that title companies must comply with strict procedures to avoid these pitfalls. If they violate regulatory standards, they can face sanctions, including suspension or loss of their license. Should you have any questions, it is recommended to set up a legal consultation in Texas with title dispute lawyers experienced in handling issues related to title companies.
Find My Lawyer Now!
What Legal Remedies Are Available When Suing a Title Company in Texas?
When a person decides to pursue legal action against a title company in Texas, various claims and legal remedies may be available depending on the facts of your particular case. These actions generally arise from problems related to the handling of title insurance policies or mistakes made during the closing process.
It is important to note that legal remedies in Texas are governed by several statutes, including the Texas Insurance Code, Texas Civil Practice and Remedies Code, and Texas Business & Commerce Code.
Examples of common legal theories upon which a title company in Texas may be sued include, but are not limited to the following:
Negligence
In Texas, negligence occurs when someone fails to use reasonable care, and that failure directly causes harm to another person. In order to hold a title company liable for negligence, a plaintiff must establish:
- Duty of care owed by the title company
- Breach of that duty, such as failing to identify a recorded lien
- Causation, showing the breach directly led to harm
- Actual damages suffered as a result
Texas law requires title companies to perform their services with reasonable care, and failure to do so may expose them to liability under general tort principles.
Breach of Contract
In Texas, a breach of contract occurs when one party fails to perform a duty or obligation promised in a valid agreement, either expressly or implicitly. It is important to note that title insurance policy is a contract.
In order to succeed on a breach of contract claim, a party must prove:
- The existence of a valid contract
- Performance or tendered performance by the plaintiff
- Breach by the title company, such as failure to cover a valid claim
- That there were concrete damages that resulted from the breach of contract
This claim may entitle the policyholder to recover direct financial losses and, under Texas Civil Practice and Remedies Code Section 38.001. They may also potentially recover attorney’s fees.
Unfair Settlement Practices (Insurance Code)
Title companies may also be sued under Texas Insurance Code Chapter 542 for unfair claim handling practices or insurance bad faith. In order to succeed in such claims, the movant (i.e., the person seeking relief from the title company) must prove the following elements:
- A covered claim was submitted
- The insurer failed to process or pay the claim within statutory timeframes
- The delay was unreasonable or without proper cause
Legal remedies for succeeding in an unfair settlement practices claim may include policy benefits, interest on delayed payments, and attorney’s fees.
Deceptive Trade Practices (“DTPA”)
In Texas, deceptive trade practices refer to false, misleading, or unfair business conduct that harms consumers. The law prohibits actions like misrepresenting goods or services, failing to disclose important information, or using bait-and-switch tactics. Consumers harmed by such practices may be entitled to recover damages.
In order to succeed in a claim under the Texas Deceptive Trade Practices–Consumer Protection Act (Texas Business & Commerce Code Section 17.41 et seq.), a consumer must show:
- They qualify as a consumer under the statute
- The title company engaged in a false, misleading, or deceptive act
- The act caused actual damages
If all of the above is proven, plaintiffs may recover economic losses and, in some cases, treble damages for intentional misconduct.
Exemplary (Punitive) Damages
Punitive damages in Texas, also referred to as exemplary damages, are monetary awards meant to punish a defendant for fraud, malice, or gross negligence and deter similar misconduct, as defined in Texas Civil Practice and Remedies Code Section 41.003.
In order to obtain punitive damages under Texas Civil Practice and Remedies Code § 41.003, a plaintiff must prove the following:
- Malice, fraud, or gross negligence, by clear and convincing evidence
- Actual damages as a prerequisite
Punitive damages are intended to punish the defendant and deter future misconduct but require a higher evidentiary burden. As such, there will need to be sufficient evidence to meet the plaintiff’s burden.
Do I Need a Texas Real Estate Lawyer for a Title Company Lawsuit?
If you are having any issues related to a title company in Texas, then it is recommended to meet with an experienced Texas real estate lawyer as soon as possible. LegalMatch can assist you in setting up a consultation with an attorney near you that handles cases similar to yours.
An attorney will be able to help you determine your best course of legal action, whether it be using administrative action or filing a private civil lawsuit against the title company. They can also help you gather the evidence necessary to support your claim through formal discovery. Throughout all of this, they can also help you negotiate a settlement with the title company. If settlement is not possible, they can file a lawsuit and represent you in court, as needed.
