Insurance against the Risk of Loss of Property Rights (Title Insurance)
Upon taking possession of a real property item, and in the process of possession of this item, the owner is not immune to the possibility that its acquisition transaction may be invalidated due to the fact that previous transactions were made with violations. At the same time Kazakhstan has no legal instruments by which the owner, even being a bona fide purchaser, can compensate their losses and can at least partially recover their losses incurred due to loss of ownership of the real property item.
The only tool that allows one to insure against such damage is conclusion of insurance contract against the risk of loss of property rights, or as it is commonly called, title insurance.
Object of Insurance
The object of insurance is property interests associated with the risk of damage resulting from termination of property rights.
Sum of Insurance
The sum of insurance is determined by agreement of the parties, but cannot exceed the actual cost (insurance value) of the property in the area at the time of contract execution.
Actual value of property is understood to be:
- market value - the most probable price at which the property may be alienated on the basis of transaction in a competitive environment where transaction parties are, having all of the available information about this property.
- contract value - value determined by agreement of the parties, reached at the time of acquisition of the property specified in the contract;
- book value - original or current value of the property (net of any accumulated depreciation) at which it is reflected in the balance sheet (records) at the reporting date.
- The parties may stipulate the amount of straight deductible (insurer’s exemption from damages not exceeding a certain amount). The deductible can be established as a percentage of the sum insured or a fixed amount of cash.
- When establishing a straight deductible, damages that are less than or equal to the fixed amount of the deductible is not refundable; the damage exceeding the deductible is reimbursed in the amount of the difference between the total amount of damage and the established deductible.
An insured event is the loss of property resulting from termination of ownership of the property based on a legally effective court decision for the following reasons:
- errors in a document of title to the property at the time of their execution;
- violation of the legislation of the Republic of Kazakhstan, in force at the execution of the previous property purchase and sale agreements;
- execution of property purchase and sale agreement with a person with limited powers and/or who does not have the right to do so;
- execution of purchase and sale agreement with unincorporated legal entity;
- execution of purchase and sale agreement in violation of rights of minors owners;
- execution of purchase and sale agreement in violation of applicable laws of the Republic of Kazakhstan;
- execution of purchase and sale agreement under the influence of third parties, as a result of misrepresentation.
An insured event is deemed to have occurred from the time of entry into force of a court judgment.