Understanding the Role of Title Insurance
By Tillie D. Ross, VP, Fidelity National Title
About a year ago, I received a frantic call from one of my
clients whom I had not heard from in a couple of years.
She acquired a piece of property, which I will call Parcel
A, to build student housing units. She had negotiated the
purchase directly from the Seller and paid cash. As she was
putting together her entitlement package to the City she
discovered she had no easement rights on the right side of
the property, which would provide access to the proposed
parking which was to be located at the rear of the building.
According to her, during her negotiations with him, the
Seller agreed she could use the neighboring parcel, which
we will call Parcel B, which he also owned at that time, as
access to her property. In return, he requested she grant
access to him to the front of her property, Parcel A, as
access to Parcel B, which he owned. These agreements
were never put in writing and therefore never recorded.
One year later, he sells Parcel B to another party, whom
we will call, the Neighbor. In the meantime, the vacant
parcel, Parcel A, has no activity other than the preparation
of the property for entitlement. Client has no interaction
with Neighbor who owns Parcel B and Neighbor is totally
unaware that Client had been granted easement rights to
his property, Parcel B. Client is also aware Neighbor is
using the front of her property as access to his property,
Parcel B. The day came when Client had to go to Neighbor
to notify him that she was building a student housing
unit on her property and she needed his authorization to
include and improve the driveway on Parcel B. Neighbor
refused stating he was not made aware of any agreement
the previous Owner had made to her, and therefore,
demanded that if she wanted the easement, she would
have to pay for it.
The Result:
Client had to pay Neighbor $50,000 for the easement rights
to Parcel B but incurred legal costs of $30,000 just so she
could build her project. Neighbor was granted easement
rights to her property, Parcel A, at no cost to him.
What Happened?
Because both easements had never been recorded, the
parties had to seek legal counsel to settle the matter.
When Client acquired title insurance to Parcel A, she
only purchased the basic policy that did not cover items
of unrecorded matters, so when she sought seek legal
assistance from the title company, they declined her claim
because it was not covered under the policy she purchased.
On the other hand, Neighbor purchased the Extended
Policy that included matters of unrecorded items. Neighbor
went to his title company and they defended him.
How important is Title Insurance?
Title insurance is the protection that assures the rights and
interests to the property are as expected, that the transfer
of ownership is smoothly completed and that the new
owner receives protection from future claims against the
property. It is the most effective, most accepted and least
expensive way to protect property ownership rights.
10 BPM Real Estate Insights
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