| Dr Winston O Boogie jr |
07-07-2015 08:05 AM |
Here is what a lawyer friend wrote in response to an e-mail that I sent asking him about the subject.
Quote:
1. Owner’s Title Insurance is a waste of money, UNLESS you end up needing it, such as is the case with many insurances! Titles are examined by “people” and sometimes they make mistakes and overlook something that they should have discovered which affects the validity of your title and/or the security interest of the Lender, or perhaps imposes a lien on the property which must be satisfied before it can be later conveyed, or a house is built over, or too near, the boundary line, etc. The Lender’s Title Insurance Policy covers the Lenders’ interests, but does “nothing” for you.
2. I do not know about “zero”, but It is probably accurate that there is not a great chance that there will ever be an issue with the title of a new home sold by The Villages; however, it is not “unthinkable.” [ I think it is fair to mention in this regard that there is a “close” relationship between the developer, the builders, Properties of the Villages and the myriad of separate legal entities involved in the development, construction and sale of Villages homes.] Title issues can include not only matters related to the “chain of title” but also things such as matters of survey, zoning, unpaid liens, easements, covenants, failure to get all heirs of an estate to convey their interest in large tracts of property, access to public streets, rights of ingress and egress, etc…matters which may not become an issue until years down the road [if ever]. [ Coverage of some of these matters occasionally could require special endorsements to the policy and sometimes additional premium.]
3. Truth is many residential home purchasers do not buy Owner’s insurance. Often, this is simply due to the cost; or they mistakenly believe that somehow the Lender’s Policy provides them some protection or comfort. The vast majority, probably well over 95%, of homebuyers never have a title claim, regardless of whether the Seller is The Villages or some other developer, in which case the owner’s title insurance premium would have been a waste of money, if you discount peace of mind.
4. All of the above being said, even if you decide to purchase an Owner’s Policy, it is extremely important to know what it covers and what it does not. The pre-printed boiler plate language on the policy cover sheets generally apply to all policies. However, the “Schedules”, i.e., inserts into the policy, can contain “exclusions and “exceptions to coverage, and, as a practical matter, can negate the benefit of the policy.
Case in point: I had an investor come to me several years ago who had purchased two (2) side-by-side condos from the same seller and had purchased Owner’s policies for each. One of the Condos, for some inexplicable reason, had access to the nearest public street and the adjacent condo did not. The investor believing that she was fully covered as to such matters by virtue of having purchased the policies, apparently at closing did not read the “Exceptions” Schedules contained in the Policy related to the Condo unit which did not have public access…it was expressly excepted from coverage under that policy….Naturally, the corporate Seller had since dissolved and was no longer around to respond to the issue.
Morale of the story: If you buy an owner’s policy, be sure to ask for a draft prior to the closing; read the “exclusions” and “exceptions” from coverage and if you do not thoroughly understand them, require the closing attorney to explain...completely! If it still does not make sense, do not close until you are satisfied.
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