Exception added to Title Report based on ???

[Jay Wright]

I will pose this as a hypothetical question, it is information gleaned from a phone call from a prospective client.
I turned it down.

A home is in escrow with a closing date of next week. Ten days prior to closing, neighbor of subject property sends an email stating that a gate post is encroaching. Neighbor provides no survey or other information.

Title Company immediately updates prelim and excepts this post area from coverage.
Lender now will not lend unless exception is removed with an ALTA survey.

What is the clients next step, is it that easy to kill a million dollar deal?

Was the Title Company action appropriate or actionable?

[mpallamary]

Under the law, (I can send case law if needed) a title company assumes no liability for a preliminary report. The title company is in the risk business. The gate post issues can be resolved or confirmed by a reliable survey. If the title company is put on notice of a potential risk or even the rumor of the risk before policy issuance, they will disclose it. What type of policy is it?

Have you had a survey done to confirm it?

If it is a legitimate encroachment has anyone asked that it be moved or an easement created?

This can happen frequently up until the time a policy is issued.

[mpallamary]

State of California Insurance Code:

12340.2. "Title policy" means any written instrument or contract by
means of which title insurance liability is assumed.

12340.10. "Abstract of title" is a written representation, provided
pursuant to a contract, whether written or oral, intended to be
relied upon by the person who has contracted for the receipt of such
representation, listing all recorded conveyances, instruments or
documents which, under the laws of this state, impart constructive
notice with respect to the chain of title to the real property
described therein. An abstract of title is not a title policy as
defined in Section 12340.2.

12340.11. "Preliminary report", "commitment", or "binder" are
reports furnished in connection with an application for title
insurance and are offers to issue a title policy subject to the
stated exceptions set forth in the reports and such other matters as
may be incorporated by reference therein. The reports are not
abstracts of title, nor are any of the rights, duties or
responsibilities applicable to the preparation and issuance of an
abstract of title applicable to the issuance of any report. Any such
report shall not be construed as, nor constitute, a representation as
to the condition of title to real property, but shall constitute a
statement of the terms and conditions upon which the issuer is
willing to issue its title policy, if such offer is accepted.


Also look at: Southland Title Corp. v. Superior Court (Nye) (1991) 231 Cal.App.3d 530 , 282 Cal.Rptr. 425

"A preliminary report, for which little or no charge is made, is merely the inducement to purchase a title policy. It will no longer be treated or considered to have the legal consequence of an abstract of title. If a current representation as to the status of title is required then an abstract can be ordered and separately purchased."

As the Department of Insurance stated to the Governor, in 1981 when it forwarded its recommendation ("No Objection to Signing") on the legislation which included sections 12340.10 and 12340.11, "This bill would define the appropriate terms to ensure that the distinction between 'abstract of title' and 'preliminary report' is restored to the usage and practice in effect before the cases were decided. ... [¶] [It] will help assure that the title insurers are able to charge appropriate premiums for foreseeable liability, rather than as is the case under current case law. Since the premiums or fees charged for preliminary reports are much less than those for abstracts, the result of such decisions is to impose liability on the insurers to an extent beyond which they have computed the premium charge (i.e., an unfunded liability)."

Hope this helps.

[land butcher]

Vindictive neighbors can really mess up RE deals.
I know of a case where the stepped lots ~6ft were on basically sand and the neighbor on the down side had zero landscaping to keep the sand from sliding down. The owner of the PIQ approached the neighbor early on as many of the grape stake slats were lying in the downside lot back yard - kids. The neighbor slammed the door in his face. A few years later when the owner had the house for sale a portion of the fence had slid down the slope and was going to fall over soon. The downside neighbor contacted the owner stating HE needed to fix the fence (common fences installed by the developer). When the owner said the cost should be shared the downside neighbor hung up. The downside neighbor then contacted the listing agent and said "There is an issue with the fence". The RE agent had to disclose this to all potential buyers. The owner ended up fixing the fence with no cost sharing from the neighbor to sell the house. He did have the fence guys leave all of the fence that was now off his property.

On another note. We got a call, we aren't getting involved, but apparently someone recently removed PL pipes, left them laying on the ground, we assume set by Jack Raab multi million dollar properties. LOL

[Dave Karoly, PLS]

People are weird and childish.

If you don't like your neighbor why on Earth would you mess up the sale of their property so they can't move away?

We have moved four times, times 1, 3, & 4 a neighbor got mad at us for moving away. I guess I didn't break the news correctly? The last time we moved was 17 years ago. I've accumulated a lot of tools since the last time, I hate the thought of moving.

[LS_8750]

So now the seller absolutely needs a survey. What's the big deal?