Property Line Setbacks, Title Company Q&A

QUESTION

“A person buys a cabin in the foothills. It was sold “as is” and there was not much disclosure about the property. After living in the cabin for two years, It was discovered that the laundry room addition to the cabin was actually built on the neighbor’s property line. The neighbor is now thinking about suing me. Shouldn’t this property line issue have been disclosed by someone? Doesn’t the title company check some sort of maps to make sure that there no discrepancies with property lines?” – D.W., Oakland

 

ANSWER

Buying a piece of property in a probate sale, particularly in rural areas, can be quite a gamble if you are not prepared to do a lot of research. When a property is sold in probate, it is usually part of an estate of someone who has just died. There are no requirements for the estate to provide disclosure information to a prospective buyer. This basically relieves the estate of any liabilities that might arise after the sale if some problem were to be discovered. This is one of the few situations in which a house can actually be sold “as is,” leaving the buyer with very little protection from non disclosure.

The title company that you received your policy form, does give you some protection, but it is specifically related to the “Ownership” of the property. Having title insurance policy makes sure that your rights and interests to the property are clear, and that no governmental or individual entity has any right, lien, or claim to your property.

California has two commonly used title insurance policies, California Land Title Association (CLTA) which insures that all items on title are revealed to affected parties, and American Land Title Association (ALTA) which further insures that if an unrecorded claim of ownership arises it will be settled or affected parties will be reimbursed. ALTA policies are preferred by most lenders to insure a deed of trust.

Title companies spend a large percentage of their operating income each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. Their technical experts are trained to identify the rights that others may have to your property such as recorded liens, legal actions, disputed interests, right of way or other encumbrances to your property.

Title companies do not normally check for permits, and they would not necessarily know of any property line violations if there were no recorded notices. The maps that they provide in the preliminary title report show the boundaries and size of the property, but do not show the location of any buildings or structures. This prevents anyone from knowing if there were property line violations. The responsibilities of a title company are clearly set forth in the specific coverage of each policy. To determine the coverage that you have, you must first check the existing policy to see if it even includes coverage of building violations or property line disputes.

If it does, you then want to carefully check to see what the exclusions are, and whether or not there is a deductible. It is possible that the title company is responsible for the result of not having a permit, but each case needs to be evaluated by all parties on its own merit and the conditions in the policy

However, without knowing all of the specifics of your policy, it is impossible to say if your title company had any responsibility. If the title policy contains the new expanded coverage that has recently been introduced by CLTA, there may be some protection for you as legal owner of the property.

Effective August 1998, CLTA began offering an “enhanced” title insurance policy which includes additional coverage that were normally only offered at an additional price. Some policies offered in California now provide coverage for such things as building permit violations, property line violations, restriction or covenant violations and coverage for post policy forgeries that may occur in the future and cloud the title.

All of these enhanced coverages do have some restrictions, limitations and deductibles, but they allow the title companies to provide a higher level of service and protection for the consumer. For more information about the CLTA Policy, you can contact your local title company.