Title News

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6-9-2009

TITLE INSURANCE POLICY ENDORSEMENTS

The basic, no frills, title insurance policy is good enough for almost every transaction and the extra cost homeowners title insurance policy provides even more coverage for the one to four family residential owner. But then some buyers, or their attorneys, want additional assurances for reasons that might seem strange and unnecessary to many sellers but very important to a given buyer.

Many endorsements have been requested so many times they have been turned into standardized endorsements by the American Land Title Association and used by all title insurance companies. For instance, many buyers want the assurance that the land they are buying constitutes a single tax parcel. Generally that is very easy to determine even by the buyer. But when the title insurance company puts that assurance in writing in the form of an endorsement to the policy, it’s backed by hundreds of millions of dollars of reserves, if not billions. And if that’s what the customer wants, that’s what the customer should get.

Other endorsements are similar to those used by other title insurance companies but not identical—the wording varies quite a bit. One such endorsement insures against violations of the plat act or land division act. There seems to be a lot of variation in the choice of words used by each title insurance company but all these endorsements basically accomplish the same thing.

Still other endorsements are written to be used once or twice and perhaps never again. These customized endorsements address unique concerns of a buyer or attorney due to the unique nature of the title to a particular piece of land.

We’ve used the so-called “Great Lakes access endorsement” once in the past and then, much to our surprise, we recently had a request to use it again. It provides a very limited assurance. Briefly, it assures the buyer that “There are no recorded documents describing the land and executed by a former owner of the land whereby any right, title, estate or interest was granted or reserved which would prevent the insured’s access to Grand Traverse Bay other than those documents referred to in Schedule B of the policy.” That’s a long winded sentence but it satisfied a high priced lawyer who didn’t want the title insurance company to weasel out of a claim in the event his client lost money due to some ancient access limiting phrase in a recorded document.

The most common customized endorsement we use assures the buyer that no former owner kept for himself or conveyed to someone else any interest in oil, gas, minerals, underground disposal or storage rights, etc. other than the specific transactions shown in Schedule B of the policy. You’d have to read the actual endorsement(s) to know all the details, but that’s briefly what it does.

Some of the standardized endorsements and most of the customized endorsements, especially anything dealing with oil, gas, etc., cost extra. Often we simply tell the person making the inquiry that the customized endorsement is cost prohibitive—it isn’t worth it.

But if your buyer client has a concern, it doesn’t cost anything to ask.

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7-28-2008

              RIPARIAN RIGHTS, TITLE INSURANCE and DUE DILIGENCE

Your title insurance policy neither insures nor guarantees riparian rights! The very reason you paid big bucks for a little piece of dirt, and now that you spent your money you find out that you are self insured as far as riparian rights are concerned. Shoulda read the fine print!! So now what do you do?

Don’t panic! After all, most lakefront owners suffer no loss as a result of riparian title defects or even the complete lack of riparian rights. There’s no guarantee that you gain anything by spending money on a due diligence riparian record search before buying the property. It’s possible to quietly and peacefully possess land forever even with defective or fatally flawed riparian title.

But if you’re concerned and really want to spend a lot of money, any title insurance agent can prepare a so-called “due diligence riparian record search” for your attorney to examine. Just ask the title agency that sold you your title insurance policy.

Ask about cost first because the riparian search costs more money to produce than the high profit, no brainer record search usually required to issue a title insurance policy. We’d all rather spend our time on the most profitable stuff. You have to be persuasive to get a title agency to devote high profit time to low profit business.

If you’re dealing with a small title agency, your dollars speak loudly. But if you’re a captive customer of one of the title agencies with lawful profit sharing arrangements with banks and real estate companies (we don’t), you’re low profit riparian search is not as important to their bottom line. Consequently your powers to persuade are, well, forget it. Your buyer will probably have to accept the riparian title blindly, as is, and with all faults or even accept the property with a complete lack of riparian rights. The only protection they’ll get is the seller’s (you) title covenants in the Warranty Deed.

But, like any other inspection, buyers should make sure their purchase agreement reflects their concerns.

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