Exceptions should be carefully considered and comprehended
When purchasing property, it is not uncommon to encounter title policy exceptions. Yet understanding these exceptions and what they mean to you as a potential new owner, is essential to knowing you can use your property in the way you intend, without restrictions. So what are title policy exceptions? And when should they raise a red flag for you? Let’s take a closer look.
What is a title policy exception?
A title policy exception can indicate any type of limitation or encumbrance on the title or the property.
When you have the opportunity to read the title commitment, you will find a list of standard exceptions, typical exclusions from coverage that might include easements not shown in public records, liens from construction and worker’s compensation, encroachments or boundary disputes which could be laid to rest by an accurate survey, and more. Of course, standard exceptions vary, and it’s important for you to review them and understand them when the time comes.
On top of standard exceptions, your title company may enumerate some special exceptions, which typically relate directly to the property you hope to purchase. It is here that you will find issues uncovered that could pose a problem with the title or your ability to use your property. These exclusions indicate that if an issue arises related to them, you will not be entitled to assistance from the title insurance company. These might include the balance of the seller’s mortgage, which should be paid off in its entirety at closing — this is common. Somewhat less common exceptions might include any lien from the previous owners or other issues.
Dealing with exceptions
In most instances you would want to make sure that any outstanding issues excluded from your title policy are cleared up before you take ownership of the property. If they are not, the responsibility typically would transfer to you when you take ownership. In many cases, that’s not what a new buyer is looking for, and it’s understandable if that doesn’t work for you.
In instances where exceptions do not meet with your expectations, you may with you consult with an attorney and require that the seller rectify the core issue, that the title company remove or limit the exception based on corrective action, or provide records that prove the issues have been addressed. It’s also important to note that your title insurance company may offer extended policies which provide coverage at a higher level, and you may also buy endorsements which insure some exceptions. Discuss these possibilities with your title insurance company if you think you might benefit from additional coverage.
Understanding title policy exceptions is key
Purchasing property can be thrilling, but knowing you’re getting what you’re paying for and can use it the way you want to, without exception, is essential. Be sure to take time to read and understand any title policy exceptions listed in your title commitment, and you can rest assured that your investment in your property is safe and protected from title defects.