Misconceptions about title insurance keep popping up so I thought it would be a good time to clarify a few things. First of all, if you do not purchase an owner’s policy, you have no protection even though you paid the premium for a lender’s policy. Secondly, insurance will not cover every scenario so working with a reputable company and agent is important as you can’t just bank on coverage for shoddy work on the front end.
Many people assume that when you have a title commitment all is fine. Actually the commitment is a list of requirements and exceptions to create good title. Your closer is supposed to ensure the requirements are handled at closing but the exceptions will remain after closing. In other words, you need to actually read and understand (or have your closer interpret) each exception from coverage to confirm that those exceptions won’t inhibit how you plan to use your property.
One common exception is access. Does your parcel have legal access? Are the roads to your property all public or if not, do the private roads have maintenance agreements? If there is a private easement, has that easement been surveyed to confirm that the road is actually within the described easement area?
Another common exception simply lists covenants or restrictions. Many developments regulate pets, renting your property, outdoor storage, amount or size of outbuildings or many other uses that control the look and feel of the neighborhood. It’s up to you to get a copy of those covenants and again identify if any may be a problem for you.
Zoning is a similar issue to covenants – just because you have good title does not mean that you can build what you want on the lot you are purchasing. Or, if there are already improvements on the lot, insurance does not usually guarantee that those improvements are legal. It’s not uncommon to see structures to close to setbacks or built without a permit. This can be an issue if after you buy you want to remodel or expand what is already on the ground at closing.
As with most things in life, a little work or research on the front end can avoid a lot of wasted time, effort or expense later on – make sure you have a qualified closing company and know your rights before you actually purchase.
Please send any request for topic suggestions to email@example.com. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.