How to Read a Preliminary Title Report in Los Angeles

Key takeaway: A preliminary title report shows what a title company will and will not insure. To read it quickly, start with Schedule A to confirm the property and owner details, then review Schedule B for risks like liens, easements, and other exceptions to coverage.

When a preliminary title report lands in your inbox, it can feel intimidating. It’s a dense, legalistic document that is absolutely critical to the health of your transaction. But it’s not as complicated as it looks. Think of it as the property’s resume, listing its history and any potential baggage.

We've reviewed thousands of these reports for properties across the South Bay and Westside of Los Angeles. This guide breaks down how to read a prelim, what to look for, and which items demand your immediate attention.

What is a Preliminary Title Report?

A preliminary title report is a document prepared by a title company that outlines the current ownership, recorded liens, and other encumbrances affecting a specific piece of property. It is not a guarantee of clear title or a policy of title insurance. Instead, it is an offer from the title insurer to issue a policy, but only after certain requirements are met and subject to the exceptions listed within the report. It’s a snapshot of the property's title as of a specific effective date, based on a search of public records.

This report is the roadmap for closing. It tells escrow, the buyer, the seller, and the lender what needs to be paid, signed, or resolved before the title can be transferred as intended. The American Land Title Association (ALTA) sets standards for the industry, ensuring a degree of consistency in what you'll see from one report to another.

How Do I Read Schedule A of a Title Report?

Schedule A of a preliminary report is the foundation, covering the “who, what, and where” of the transaction. The information here must be 100% correct, as it defines the scope of the future title policy. Always start your review here.

Here's what to check in Schedule A:

• Effective Date: This is the date and time through which the public records have been searched. Be wary of a “stale” date. If the report is weeks or months old, new documents like liens or loans could have been recorded in the interim. If your closing is delayed, always ask for an updated report.

• Proposed Insured: This section should list the name of the buyer(s) exactly as they intend to take title. For a lender's policy, the lender’s name will appear here. A simple misspelling can cause delays, so confirm it matches your purchase agreement.

• Current Vesting: This shows who the county records currently list as the legal owner of the property. You must verify that the person or entity listed here is the same person or entity who signed the contract to sell the property. If the names don't match, it’s a red flag. In Los Angeles, it’s common to see property held in a family trust or LLC. If the seller signed as an individual but the property is vested in their trust, we'll need to get the right trust documents to ensure the proper party is conveying title.

• Legal Description: This is the official description of the property recognized by law. It is more important than the street address. While the address (also listed) is for convenience, the legal description defines the precise boundaries of the land being transferred. For coastal properties in Manhattan Beach or Hermosa Beach, which can have complex lot lines from decades ago, a correct legal description is paramount. Always compare it to the one in the purchase agreement to ensure you're buying the property you think you are.

• Proposed Policy Amount: For an owner's policy, this amount should match the property's purchase price. For a lender's policy, it will be the loan amount.

What Should I Look For in Schedule B?

Schedule B is the heart of the preliminary report, where the title company lists risks and potential issues. This section contains the “exceptions”—items that the title insurance policy will not cover. Think of it as your action list. Some exceptions are standard and acceptable, while others are red flags that must be addressed before closing.

Schedule B is typically divided into two parts. Part I often lists the requirements that must be met to close, like paying off the seller's mortgage, paying property taxes, and recording the new deed. Part II lists the exceptions that will remain on the property after closing and will be excluded from policy coverage.

Common exceptions you will see in Schedule B include:

• Property Taxes: The report will state the status of property taxes. Typically, any outstanding taxes are paid through escrow at closing.

• CC&Rs (Covenants, Conditions, and Restrictions): These are common for properties in planned communities or condominium projects. CC&Rs are rules that govern how a property can be used. For example, in the dense condo communities of Playa Vista or many parts of Torrance, the CC&Rs can restrict everything from exterior paint colors and parking to whether you can run a business from your home. You must review these.

• Easements: An easement gives another party the right to use a portion of your property for a specific purpose. Common examples are utility easements for power or sewer lines. However, some are more impactful. A property on the hills of Palos Verdes might have a view easement restricting the height of your trees, or a shared driveway easement that dictates access rights for you and a neighbor. The prelim will list the easement; you must review the underlying document to understand its physical location and scope.

• Existing Deeds of Trust (Mortgages): The report will list any loans the current owner has against the property. These are almost always paid off in full through escrow and released, so the buyer receives title free of the seller's debt.

• Involuntary Liens: These are major red flags. This category includes mechanic’s liens (from unpaid contractors), judgments (from lawsuits), state or federal tax liens, and child support liens. Any of these must be paid and released before a clean title can be transferred.

Why Do I Need to Review the Underlying Documents?

Reading the one-line summary of an exception in Schedule B is not enough. A prelim that lists “an easement for ingress and egress recorded in 1957” doesn't tell you if that easement is a two-foot strip at the edge of your yard or if it runs right through the middle of where you planned to build a pool. The summary just tells you the document exists.

As your title team, we can and should provide you with copies of these underlying recorded documents for your review. For something like CC&Rs, which can be hundreds of pages long, you and your client need to understand the rules you'll be living with. For easements, you need to see the map. Never assume an exception is minor without seeing the source document. We make it a standard practice to pull these documents for our clients so they can make informed decisions.

What Is a Statement of Information?

A Statement of Information (SI) is a confidential form often requested from the buyer, seller, and borrower in a California real estate transaction. It provides the title company with additional information—like full name, past addresses, and date of birth—to help correctly identify the parties involved. This is a crucial tool for eliminating false claims.

For example, if a seller's name is John Smith, a common name, a title search might reveal several tax liens or judgments against a John Smith. The SI helps the title company determine if the lien is against the actual seller or a different person with the same name. This process ensures that debts belonging to someone else are not mistakenly attached to the property. Filing and verification of such documents happen at the county level, for us that's the Los Angeles County Registrar-Recorder/County Clerk.

According to the California Department of Insurance, which regulates title insurers, this diligence is a key part of what ensures a valid policy can be issued. Completing the SI promptly and accurately is one of the best ways to prevent delays in your closing.

FAQ

Is a preliminary title report the same as title insurance?

A preliminary title report is not the same as title insurance. The report is an offer from the title company to issue a policy, showing the terms and exceptions that would apply. The actual title insurance policy is issued after closing and protects the owner or lender against title defects that were not listed as exceptions.

What are the most common red flags on a prelim?

The most serious red flags on a preliminary report are unexpected liens that require payment to remove. These include mechanic's liens, judgments from a lawsuit, or federal/state tax liens. Other red flags include a break in the chain of title, a vesting that doesn't match the seller on the contract, or a restrictive easement that could impact your planned use of the property.

Who pays for title insurance in Los Angeles County?

In Los Angeles County, local custom typically dictates that the seller pays for the owner's policy of title insurance, and the buyer pays for the lender's policy if they are getting a loan. However, this can be negotiated between the parties in the purchase agreement.

How long is a preliminary report good for?

A preliminary report is only a snapshot in time, valid as of its effective date. It does not provide any information about documents recorded after that date. If an escrow is extended for several weeks or months, it is wise to request an updated report to ensure no new liens or encumbrances have been recorded.

Should I get a copy of the underlying documents for exceptions?

Absolutely. The preliminary report only summarizes the exceptions; it does not provide the full text. You should always request and review the actual recorded documents for items like CC&Rs and easements to fully understand how they will affect your ownership and use of the property.

Reading a preliminary title report is a critical skill for any agent, buyer, or seller in the Los Angeles market. While we've covered the basics here, every property is unique. If you're looking at a report and have questions about complex exceptions, vesting issues, or anything else, our team is here to help.

For expert guidance on your next deal in the South Bay or Westside, please reach out to us, Matt Goeglein and Xavier de la Piedra IV, at Team Goeglein. We are committed to getting your transaction closed cleanly and efficiently.