Title insurance

[LvgonaDream]

I had posted inside the thread "reading reading, learning" that I had run into a snafu of sorts.

Let me recap real quick and then you'll soon see why this applies to anyone buying, selling or considering a lease to own. Note that typically in my past experience with Land Contracts (about x6) that NO title insurance was in place.

1. We settled a dispute with our mortgage servicer in our favor.
2. That being done, we're looking to move on with our life.
3. We call an ad in the paper "buying handyman homes".
4. He comes out on Saturday, does not blink at the asking price of $150. "How soon can you be out?"
5. He comes back on Sunday with closing papers and his brother who double checks everything. Once outside, my very honest husband says "oh we understand that there's a drain that runs here". Well what's the easement? Easement???? It's not on any of our documents, not title insurance, survey, appraisals x3 (refinanced 2x)
6. Buyer leaves. Double checks with the Twp, Village and Drain commission. Calls us on Monday "sorry not interested".

7. So Christmas comes and goes - busy here with 4 little girls - and we're back on track. Listening to all the good advice on these boards and applying what we learn. Decision is made to (a) fix the house ourselves (b) split house from extra land (c) sell house first and then either develop extra lots (1 to 2) ourselves or just sell them.
8. Call the village - splitable into 3.
9. Call the Drain Commission - "Oh yes we have an easement". Its 66 feet wide. This cuts across our property and virtually leaves it unusuable.

There goes the whole idea of splitting off the property, plus they have now done 1 of 2 things. Made 66 by 150 unusable and may have also landlocked the rest of the property. I can't split it, I've lost value, I paid too much for it, ad infinitum.

Okay - looking for those open doors. Using 20 years as a legal assistant background, off I go.

Here's where it all comes together and how it applies to everyone. Title Insurance. Note a new title insurance policy is NOT necessary when refinancing, so the original one applies.

Because the title insurance company failed to record this easement as an exclusion on the policy, I have a claim. Because the surveyor did not record the easement, I have a claim. Who's paying? The insurance company. This is valid whether the easement was recorded or not.

From my research - a title insurance policy passes to the heirs and is valid for the life of the property.

Two types of policies tho. 1) Owners 2) Lenders. You want the OWNERS (which thankfully I have). A lender may insist you have a policy, but it only covers the amount of the loan. In my research I have found that title companies have a very low instance of claims because they do such a thorough job, just wish in my case they had. The owners policy of course covers the owner, including legal fees to research and settled the supposed claim.

So bottom line "Owner's Title Insurance" and it might not be a bad idea to check at the register of deeds yourself. We only knew about the drain after living here for 5 years and a neighbor told us it was there.

Of course, I'm not an attorney, just a person who knows how to do research and sharing what I learned. :SM125:

I'm off to the Register of Deeds this afternoon to see what was recorded (or not) and let you all know when it's concluded.

Karen

[Dan Auito]

Nice research Karen and a very timely reminder of why owners title insurance is worth getting almost every time you buy ANYTHING! It is cheap protection over the long haul because even if it only saves you once, odds are you've made back all your premiums plus!

It also helps to sell things easier in the future to new buyers as it relieves fears as well! Keep us posted on how you find the opportunity in this seamingly troublesome deal!

[LvgonaDream]

The other interesting piece of information I found out on title insurance, which I had NO idea existed, is that aside from "owners" and "lenders" there are also different levels, such as First American has standard, premium and Eagle - much like getting PL and PD or full coverage on your automobile.

[LvgonaDream]

If it looks like a duck and walks like a duck, is it a duck?

NO

It's a RELEASE OF RIGHT OF WAY.

Before I went to the register of deeds, I knew that a release of right of way existed as it's on my title insurance. The definition of a "release of right of way" is where a right of way that once existed is released back to the property and/or property owners and the right of way is cancelled.

Or is it?

The register of deeds is an interesting place. Some counties are entirely on computer, making it easier. However ours, you start on the computer, but only back to 1989. Then you go to microfische, but only to 1965. Then you go to the basement and have to haul out some pretty hefty books.

Someone had posted in another thread that first you put in the name of the current owner and then can search by property ID. Not so here in our archiac county. It's all by name. So I had to go from my name, to the guy I bought it from, to the person he bought it from and so on down the line.

I found the easement on our property. The reason it was missed on the surveys? Its entitled a "release of right of way". When going thru the records - and they are numerous, one may deduce "okay that's not what I want". It's dated 1912 (or 1922 its not quite clear) and was not recorded until 1968, which leads me to believe someone else had a problem back then.

You're saying "release", as many have, gives the property back. If you actually open the document and read it "the estate hereby releases to the County the property described below ... for a drain". The estate was paid a whopping $1.00 back in 1912/1922 for this 66 by 150 piece of property.

So bottom line is, when doing your title search don't just read the title of the document, open it, print it and read it. Even the gals at the Register of Deeds were flabergasted - but its a RELEASE! I told them NO - read it! OMG, they said, they sure did state things different back then. It costs a $1.00 a page here, but well worth it in the long run. Had someone bothered to do that along the line in my instance, I would not be in this pickle - altho I may not be in a pickle as I have a pretty good claim now against my title insurance for missing a recorded easement - yes it's on my title insurance policy, however it's NOT on my recorded survey nor my legal description, so it's a missed easement.

I'm going back today to research some more (ran out of time yesterday - those books are HEAVY) and I'll let you know if there's anything else.

[Dan Auito]

Excellent research Karen, your learning by leaps and bounds, do keep us posted on what you learn first hand by doing this investigative type records work. Interesting to say the least!

[LvgonaDream]

Spent the whole day yesterday at the Register of Deeds and at the Drain Commision.

The deed was filed in 1988, dated 1912 mind you, but legal and binding.

The guy I bought it from bought it in 1983, so this recording would not have shown up on his paperwork. There is a prior registered survey of 1980 - again not showing the easement.

I go to the drain. They give me maps of the drain. Note NOT surveys, just pencil drawings of where it should be "approximately".

I get home. Husband has talked with neighbors and come up with a "proposed" Drain. It has the 1912 drain on there. It goes right thru my barn - I guess that's why the foundation is cracking and the old oak we cut down last summer was leaning because of a giant sink hole under it.

I call the drain. Fax the "proposed" drain map. They call me. Not only do they have a 24 easement for the 1912 drain, but also a 66 foot easement for the drain put in in 1988. Why is THIS not recorded? They don't have to as they put the new drain on the very edge of the old easement - thereby exercising their right as is in the recorded 1912 drain of "expanding the drain". Note total of 66 feet easement as the new easement goes over all of the existing one.

Still trying to get a copy of my title insurance policy to see if the "release of right of way" was excluded or not.

I'll keep you posted.

[Dan Auito]

And the Saga continues! Please do keep us posted. Something has got to give!

[REIaddicted]

And the Saga continues! Please do keep us posted. Something has got to give!

I am learning so much from your research. I also am learning on the steps you took to do the research.

Continue to post and teach us all. Thanks :SM009:

[LvgonaDream]

Where's the policy? Who holds the policy? The originator tells me "we don't keep records that long" as does the original lender, as does the refinancer (used same broker 2x).

However - ALTA http://www.alta.org Amerian Land Title Association tells me that the originating title policy company should have this record.

I was cautioned by ALTA to always protect and keep safe a title policy as an Owner's policy will cover you for as long as you have an interest in the property and even extends to the heirs.

The other questions I have are: In reviewing the "proposed drain" survey that our neighbor gave us, while most of the new drain is on the very edge of the old drain easement giving them authority to "widen" the drain, it is 1) a brand new drain and 2) when going across my property is about 5 feet off of the easement of the old one. So why did they not have to get a new easement from the prior owner?

and ALTA has "accuracy standards" for surveyors (you can get the current one at their site) which govens what must be done during a survey. The guy at ALTA is digging up the 1989/1990 standards for me. Nice guy!

[LvgonaDream]

Just a thought on how this would apply to the investors here.

Lets say you found a property, you do the background search at the register of deeds and find an easement. You go to the property owner "do you know ..." and they don't and it's not on their paperwork and it's not EXCLUDED on schedule B of the title insurance policy AND it's an "owner's policy" they could put in a claim. Another idea might be to put in an offering in writing and rescind it also in writing based on the easement you found. The seller then has a "written loss" on the property. I actually found case law on this and examples at title insurance company websites.

So where's it all going? You most likely will get that same property (with the easement or other defect of course) for less after the title is cleared. Of course the property owner would retain any losses recovered under the policy.

[LvgonaDream]

Well the first title company can't find the policy, but are relying on the committment "release of right of way" to exclude coverage.

My current lender did get me a copy of the committment from the 1997 loan - no mention of a "release of right of way" or easement there.

So I'm working on getting the 1995 title work.

Here's the remaining question - when title work is updated, are any and all exclusions of the original title policy required to be carried over to the next one?

And another interesting tidbit for you all - property sales are based on the "statute of frauds". Under that, the guy I bought it from had a duty to tell me about the 1988 drain. Because the 1912 drain was recorded he did not have to say a word about that. So I might still have a claim afterall.

But going on some Island Time this weekend (Parrothead :biggrin: ) and will worry about it when I get back. Heck, it's been there for 15 years, another week won't hurt.

Later!
Karen

[LvgonaDream]

Well were back from Island Time the benefit raised $12,500 for Hurricaine relief!

But we are interviewing attornies right now. First package went out yesterday as even tho I try to do everything in pro per this one is a little bit beyond me.

So far we have 3 claims - one against the title insurance for the existing drain, one against the county drain for not filing a new easement when they "expanded the drain and caused further damage to the property" and then finally one against the prior owner as under the warranty deed he gave a "Covenant against Encumbrances: this warrants that there are no encumbrances against the title, except those stated in the deed."

So it looks like hi ho hi ho it's off to court I go - I guess nothing is easy, but a valuable lesson learned. The next property I buy will not only have an "owner's policy" of title insurance, but an "extended owner's policy" which would have covered me for the unrecorded easement as well as the incorrect survey.

[LvgonaDream]

After $200 and an hour with a real estate attorney yesterday:

1. Because the title commitment says "release of right of way" we can't file a claim there (of course still looking for the original policy to double check - IF I find it and IF it's not there I can still file a claim there).

2. The statute of limitations has run against the prior owner. Even tho we just found the easement(s) I'd have to prove that for the last 15 years he has actively tried to keep us from finding out about it, which I doubt he did.

3. He suggested going to the County Drain sitting down and talking and getting the 1912 easement "moved" to where the 1988 easement is, but only allowing a 24 foot easement (as given in 1912) if not they had to pay for the extra 42 feet for their 66 ft easement. The attorney suggested WE pay for the survey to get everything right.

So we called the Drain. They must have been doing their homework too over the last couple of weeks, as we got everything worked out over the phone. His secretary was wrong - imagine that - they only want a 24 ft easement as it is a closed drain (open drains are 66 ft). They are drawing up papers to abandon the 1912 drain and sending out surveyors to record the 1988 drain. He's also plugging off the drain at the manhole across the way which still drains water to the old drain which will help preserve ground under the barn as well as sending a crew out to inspect the "sink hole" in front of the barn where the drain failed.

So I did not make $$ off of the deal, but that's okay. I got the 1912 easement off of my property which made it unsellable, i.e. it went under part of the garage and the whole barn. This way I can still split the property and get this ole house on the market! The 1988 easement however still makes the front of the property unbuildable.

2 lessons learned thru this. 1) Do your own due diligence, check the register of deeds and if there is an easement, check with the easement holder to make sure it is still valid. 2) Expanded policy of owner's title insurance, by spending a few pennies more it would have covered me for all of the above problems.

My next mission? Read the e-books available on this site as well as REI's many pages of "sell by owner".

Later all!
Karen

[Dan Auito]

Thank you for the rest of the story Paul Harvey, I mean Karen! :SM032: What a lesson and a good arguement for a little extra title insurance rider on those policies.
Thanks for the insightful detective work and the confirmation that city secretaries are sometimes overpaid! :smiley3: