TITLE COMMITMENT & TITLE INSURANCE
If you have purchased property before you should be familiar with “Owner’s Title Insurance Policy & Title Commitment”, please read on, if you learn one valuable tidbit here it makes it all worth it! If you are brand new to buying, please read this, read it a couple times, understand it, and seek help to understand your commitment.
Title Insurance Policy, aka, Title Policy, what is it? It is an insurance policy for the title of your land. Yes, insurance for title, AND best proof of ownership.
In my professional opinion, the best benefit of a Title Policy is the Title Insurance Commitment, aka, Title Commitment. It is a buyer’s best proof of seller ownership. It is a buyer’s best evidence of interests given to others on a given property, whom has control of your property.
Title Commitment is usually provided by the seller via a title company. Not all sellers will provide it, but again, it is your best evidence of interests in a given property. A buyer may purchase the policy themselves, tell your Realtor. Your purchase agreement should address the Title Policy, whom is financially responsible, and when a commitment will be provided. I strongly recommend you add a provision in your purchase agreement which addresses the title commitment including “copies of filed exceptions”. As a buyer or seller this can be very beneficial. Your purchase agreement should also define the terms of your review period of the commitment and the filed exceptions. This is your due diligence, as best you can, know what you are buying.
BUYERS & SELLERS;
The Title Company usually performs your closing, as well as the commitment & policy. They are in insurance company. They are in business to make money like every other insurance company. They do not want to pay claims, legal fees or damages. They will exempt anything and everything filed against the subject property. Meaning – if you suffer damages as a result of an action taken due to any filed document – you are on your own. They exempted it from policy protection.
If there is going to be an issue, you should know exactly what type of action to expect. This can be found itemized under “EXEMPTIONS or EXCLUSIONS”, most usually a specific “Schedule” within the Title Commitment.
As an example:
So you have your Title Commitment in hand, you find the schedule of exemptions and there is a list of 12 of them – yehaw! Are you happy? You have a list of what they are exempting. Easements, mortgages, guaranteed revenues, to name a few. Your joy should be reserved for now.
At the end you do not find any documents with stamps and notations signifying the document has been filed at the courthouse. You should STOP HERE, and request copies of all filed documents. Hopefully this was addressed in your purchase agreement, if not you may have to pay for some copies, but it is well worth it.
Let’s talk about the “Schedule”;
More likely than not, you may see addressed;
Facts that would be disclosed by accurate and complete land survey (This does not mean just marking the corners, it means topography, plotting of every improvement, road, two track or trail, rock pile and power pole, etc. they are very expensive.)
Then you may see;
Telephone Company easement
Power Company easement
Right of Way
Judgments or Liens
Covenants, Conditions & Restrictions
These will have a date filed with a reference “Book” and “Page”. From this you will know what, generally, you have, when it was filed and where it can be found at the courthouse. Time to break out the joy…. Not yet. You are your best advocate, BE PROACTIVE in your own interests.
Take the schedule at face value with the above list of exemptions here’s what you may be about to put your life’s savings into. Keep in mind this may be extreme, it may be everything bad that could be, BUT DOES NOT mean every property is this clouded. Again, be proactive.
Your dream horse property is 10 acres of pristine timber and meadow, with a nice winding gravel road and bridge over the river that borders the south line and the utilities are already on the property, well is just off the gravel at a perfect home site by the utilities and a newly constructed barn. Taxes have not been paid for two years, and there is a $120,000.00 IRS lien. The seller was going to build his dream home there, but needs cash because he is moving for his job and agreed to sell it to you at a fabulous price. It is reasonable to assume the utility easements are to provide the service that is there, the well agreement is because the well is in place, you will be making some money from the guaranteed revenues, the road and right of ways provide your access, and the taxes & IRS lien belongs to the seller and the barn is paid for since there are no liens. The seller said the covenants are simple and you can basically do what you want. The seller has to relocate and you are getting a deal because of his “misfortune”. You are feeling good, but here’s what this particular set of documents were actually for, and had you received the copies of filed exceptions you would have known.
The telephone easement was for new construction of underground fiber optic running along the east 100 feet of the entire property. With the right to clear the timber.
The power easement was new construction of a power substation and was a 200×200 square as well as a 250 foot easement the entire west side of the property. Plus the right to clear the timber.
The well agreement is for a shared well, construct and build at 50% with the neighbor having the rights to 90% of the volume and 5% of the maintenance.
The guaranteed revenues are what the property owes to the power company for bringing service from 4 miles away, in the amount of $28,000.00, at $233.34 per month for 10 years, nine remaining.
The road easement is an Exclusive Easement 100 feet wide of that nice bridge and gravel road to the neighbor to the north. He owns 2000 acres and is in the process of doing a large tract development. (50 home sites and as an exclusive easement you DO NOT have the right to use it.)
The right of way is a 30 foot right of way granted to “your” property running up neighbor’s property line to give you your legal access off the county road. No road is built, the river needs to be crossed and a major drainage crosses the access with a depth of 30-40 feet and 60 feet wide. And it expires in fifty years, from ten years ago.
The IRS lien was actually from the owner’s father, who has the same name, and is 10 years old.
The CCR’s, are a couple pages, but prohibit having equine on the property. While having dinner you overhear some construction guys talking about being stiffed on the barn they recently built on Mr. Seller’s property.
Broke down …
there is roughly 7.75 acres of this land you can NOT build on. A nice road and bridge to and across your property you have no right to use, but up to 50 other landowners and their guests may. There is going to be a power substation constructed there. Your neighbor has most of the use of the well and you bear most of the cost. You will have a base power bill of $233.34 for the next nine years, it is THEIR guaranteed revenue. You have to build a new road with a substantial crossing and bridge over the river from the county road in, and in forty years it expires. The IRS lien usually follows the property for a given period of time, but they have the right to sell it if and when they feel they can recover the debt owed to them. The taxes will be settled at closing, and the seller will sign an affidavit that he has paid for all work done, so if those construction guys file a lien after you purchase you can sue the seller.
THIS IS EXTREME, but is any one of these acceptable? Would any one of these be an acceptable surprise AFTER you have closed? While you could go to the courthouse and request these documents, I encourage the Insurance Company that is exempting these specific filings to provide them. If an incorrect document is provided let it come from the company providing the insurance coverage, or lack of.
YOU ARE YOUR BEST ADVOCATE. BE PROACTIVE! Know what the exceptions are, what they mean, and the consequences to your ownership, value and resale ability. Nearly every property has something filed that will be exempted, know and understand BEFORE your inspection period expires, definitely before you close.
Control or ownership?
Know who has control of your property.