How to Read a Preliminary Title Report in California

What Is a Preliminary Title Report?

A preliminary title report — commonly called a "prelim" — is a document produced by the title company during escrow that details the current state of a property's title. It tells you who legally owns the property, how ownership is held, and what encumbrances, liens, easements, and exceptions exist that could affect your rights as a buyer.

The prelim is not an insurance policy. It's a snapshot of the title's current condition, produced so the buyer, lender, and escrow officer can review everything before closing. It's the foundation for the title insurance policy that will be issued at closing — the policy insures against defects that the prelim either missed or that arose after the report date.

For buyers, the preliminary title report is one of the most important documents in the transaction — and one of the most frequently skimmed. Many buyers look at it once, see a lot of legal language, and assume their agent will flag anything important. That's sometimes true, but understanding the document yourself gives you a meaningful edge in knowing exactly what you're buying.

How the Prelim Fits Into the Transaction

The title company produces the preliminary title report early in escrow — typically within the first 5–10 days after opening. The escrow officer distributes it to both agents, the buyer, and the lender. It's one of the first major documents the buyer receives, alongside the seller's disclosures and the NHD report.

The prelim and the NHD report are companion documents. While the NHD report discloses the property's hazard zone status — flood zones, fire zones, earthquake zones — the prelim discloses the property's legal status: who owns it, what's owed on it, and what restrictions affect it. Together with the Transfer Disclosure Statement (TDS) and the home inspection report, they form the core set of documents that give the buyer a complete picture of what they're purchasing.

Under the standard California Residential Purchase Agreement (RPA), the buyer has a right to review the preliminary title report during the contingency period. If the prelim reveals something unacceptable — an undisclosed lien, an easement that affects how you'd use the property, or a title defect the seller can't resolve — the buyer can negotiate, request resolution, or cancel the contract before contingencies are removed.

Section by Section: What's in the Report

A preliminary title report is organized into several standard sections. Here's what each one covers and what to look for:

The title page includes the report number, the effective date (the date through which the title search is current), the property address, and the name of the title company and officer. The effective date matters — any liens or changes recorded after this date won't appear in the report until a supplemental search is run closer to closing.

Schedule A — The Estate or Interest describes the type of ownership being insured (almost always "fee simple" for residential purchases), the current vesting (who owns the property and how), and the proposed insured (the buyer). Pay attention to the vesting — it tells you whether the seller actually has the authority to sell. If the property is held in a trust, in joint tenancy, or as community property, the seller may need additional signatures or documentation to transfer title.

Schedule B — Exceptions from Coverage is the most important section for buyers. This lists everything the title insurance policy will not cover — items the title company has found in the public record that affect the property. Each numbered exception is a specific encumbrance, restriction, or condition. Common exceptions include property tax liens, CC&Rs (for HOA communities), easements, deed restrictions, and lis pendens (pending lawsuits). This is where most of the important findings live.

Common Exceptions and What They Mean

The Schedule B exceptions are what buyers should spend the most time reviewing. Here are the most common types:

• Property tax liens — Every prelim will show a lien for current and possibly delinquent property taxes. This is normal — property taxes are always a lien on the property. If taxes are current, this is a standard exception. If delinquent taxes are shown, they must be paid before or at closing.
• CC&Rs (Covenants, Conditions & Restrictions) — If the property is in a homeowners association or planned development, the CC&Rs will be listed as an exception. These are the rules governing the community — what you can build, how you must maintain the property, what dues are required. Review them carefully before closing; they're enforceable and survive the sale.
• Easements — An easement gives someone else a right to use part of the property for a specific purpose. Utility easements (for power lines, water, sewer, gas) are common and usually not problematic. Easements for access, drainage, or shared driveways require closer attention — they may limit what you can do with certain parts of the property.
• Deed restrictions — Some properties have restrictions recorded in prior deeds that limit use — building height limits, setback requirements, prohibitions on certain activities. These may or may not be enforceable depending on their age and nature, but they'll appear as exceptions.
• Liens and judgments — Any recorded liens against the property or the current owner will appear — mechanic's liens from contractors, judgment liens from lawsuits, and IRS or state tax liens. These must be resolved (paid off or released) before title can transfer cleanly.
• Lis pendens — A recorded notice that a lawsuit has been filed affecting the property. This is a significant red flag — it means someone is contesting ownership, boundary lines, or some other interest in the property through litigation.
• Mineral rights reservations — In some parts of California, prior owners have reserved mineral rights below the surface. This is common in areas with oil, gas, or mining history and means the surface owner doesn't own what's underneath.

Easements: What Buyers Most Often Miss

Easements deserve special attention because they're the exception type that most often surprises buyers after closing. An easement is a legal right for someone else to use a defined portion of your property — and it typically survives the sale, binding you as the new owner.

The most common easements are utility easements — rights for the electric company, gas company, water district, or cable provider to maintain infrastructure on or under your property. These are standard and rarely cause practical problems, though they may prevent you from building a structure over the utility line.

Access easements are more consequential. If a neighboring property has an easement to cross your land for access — a shared driveway, a path to a back parcel — that right doesn't go away when you buy the property. You can't block the access or build over it.

Drainage easements give a neighboring property or a public agency the right to direct water flow across part of your land. These can affect where you can landscape, build fences, or add structures.

What to do when the prelim shows easements: ask for the recorded easement document itself (the prelim usually just references a recording number). The document will describe exactly where the easement runs, who benefits from it, and what it allows. Your agent or a real estate attorney can help you assess whether the easement materially affects how you'd use the property.

Title Problems That Can Delay or Kill a Deal

Most preliminary title reports are clean — the exceptions are routine, and closing proceeds on schedule. But when title problems surface, they can be among the most difficult issues to resolve in a real estate transaction.

Unreleased liens — A prior lender's deed of trust that was never formally reconveyed (released) after payoff is a common issue. It often requires tracking down the old lender and getting a reconveyance recorded, which can take weeks.

Boundary disputes — If a survey reveals that a fence, driveway, or structure encroaches on a neighboring property (or vice versa), it creates a title issue that may require a boundary line agreement, a lot line adjustment, or litigation to resolve.

Breaks in the chain of title — If a prior transfer wasn't properly recorded, or if a deed was improperly executed (missing signatures, incorrect legal description), the chain of title has a gap. Resolving this may require a quiet title action — a court proceeding to establish clear ownership.

Unpermitted construction — While not technically a title defect, unpermitted additions or modifications can affect title insurance coverage and may appear as notes in the prelim. Some title companies flag known permit issues; others don't.

Judgments against the seller — If the current owner has unpaid judgments, those may attach as liens on the property. They must be paid or negotiated before title can transfer.

The title company's job is to identify these issues before closing. The buyer's job is to understand what the exceptions mean and negotiate resolution before removing the title contingency.

The Prelim and Your NHD Report: Companion Documents

The preliminary title report and the NHD report serve different but complementary purposes. The prelim tells you about the property's legal encumbrances — who has claims on it, what restrictions limit it, and whether the title is clean enough to transfer. The NHD report tells you about the property's physical environment — which government-mapped hazard zones it sits in and what risks come with the location.

Together, they answer two fundamental questions every buyer should be able to answer before removing contingencies: "What am I legally buying?" (the prelim) and "What environmental risks come with this location?" (the NHD report).

Both documents should be reviewed during the contingency period. If either one reveals something unexpected — a lien on the prelim, a fire zone on the NHD — the buyer has the right to investigate further, negotiate, or cancel before they're committed.

One practical connection: if the NHD report shows the property is in a flood zone or fire zone, the buyer should check whether their title insurance covers or excludes losses from those hazards. Standard title policies have specific exclusions for government action and natural events. Understanding both documents together gives you a complete picture of what you're buying and what risks you're accepting.

Check Your Property's Hazard Zones

The NHD report is the companion to your preliminary title report — while the prelim covers legal encumbrances, the NHD report covers natural hazard zones. Use Verity NHD's free hazard preview tool to check any California property's flood, fire, earthquake, and other hazard zone status instantly. No account required, no credit card, no commitment.