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Matters Covered and Not Covered by Title Insurance

By Staff Reporters

During the current housing market implosion it is prudent to understand that home owner’s title insurance enables the buyer of real property to take clear title of the purchased property. That means there are no outstanding liens in existence and no one has a prior claim to said property.

Covered Items

In general, items that are covered by title insurance can be determined solely from review of the property records and court records:

• Judgments
• Liens (Except to the extent that they have superiority, i.e., once recorded, they gain a priority ahead of things recorded prior to the lien, for example, mechanic’s liens.)
• Deeds of trust, mortgages, and real estate contracts
• Easements
• Restrictive covenants
• Rights granted in real property by divorce degree (right to half proceeds of sale of property)
• Mineral rights reserved by prior owner or granted to a third party
• Recorded leases
• Latecomer’s agreements
• Recorded no-contest agreements (agreement not to contest future imposition of taxes or assessments, usually for things like traffic, water, and sewer mitigation)
• Deeds transferring ownership of any interests in the property
• Whether the property has access to a public road
• Taxes and recorded assessments
• Condemnation actions filed with the court or property records.

Not-Covered Items

Generally, items that are not covered by title insurance cannot be determined by reviewing the property records and court records:

• Zoning laws, restrictions on the use of property
• Building codes, setbacks, lot coverage, construction standards
• Wetlands regulations
• Storm water drainage permits
• Flood plain, location of property in relation to flood plain
• Unrecorded leases
• Use permits
• Hazardous materials, environmental contaminants
• Subdivision regulations
• Shoreline Management Act
• State Environmental Policy Act (SEPA)
• Persons claiming an interest in the property, through adverse possession (both ownership of the property and easement rights)
• Compliance of the property with recorded restrictive covenants.

Additional Extended Coverage Policy Items

Coverage extends beyond basic coverage. This covers items that show up during an inspection of the property:

• Additional matters include those that the title company can determine from either an inspection of the property or a review of a survey showing all improvements to the property and the location of all easements.
• Mechanic’s liens filed after the date of the policy, but that take priority prior to the date of the policy
• Encroachments (the buildings on the property that overlap the property lines or buildings on adjacent property that overlap onto the client’s property)
• Persons claiming an interest in the property through adverse possession (both ownership of the property and easement rights).

Additional Matters Covered by Endorsement

• Compliance with subdivision laws (Guarantees that the property constitutes one or more legal lots)
• Zoning laws.

Assessment

Conclusion

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Filed under: Insurance Matters | Tagged: home owner's insurance, title insurance | 2 Comments »