As a continuation to the article Best Practices: General Title Exceptions – Part 1, this article will continue the overview of “general title exceptions”, which typically appear in an ALTA loan policy. Most of the general title exceptions should be addressed with the title agent by the lender (or lender’s counsel) so that: (i) they do not appear on the final loan policy; or (ii) the title insurance underwriter insures over them if they remain on the final loan policy. NOTE: All references to a “loan policy” in this article refer to an “ALTA loan policy.”
- UNRECORDED EASEMENTS: Easements or claims of easements not recorded in the Public Records.
- This general title exception excludes from coverage any easements or claims of easements not recorded in the public records. The lender should review the survey to determine if any unrecorded easements or claims of easements exist. If there are no unrecorded easements or claims of easements, the title agent should be able to rely on an affidavit signed by the buyer and seller in order to remove this general title exception from the loan policy.
- MATERIALMAN’S/MECHANIC’S LIENS: Any lien, or right to a lien, for services, labor or material furnished, imposed by law and not recorded in the Public Records.
- This general title exception excludes from coverage any lien or right to a lien related to construction services, labor, and/or materials.
- If the loan is not a construction loan, the title agent should be able to rely on an affidavit signed by the buyer and seller in order to remove this general title exception from the loan policy.
- If the loan is a construction loan, the title agent may set forth requirements which must be met in order to remove this general title exception from the loan policy.
- MUNICIPAL/COUNTY LIENS: Any lien provided by county ordinance or statute in favor of any city, town, village or port authority, for unpaid service charges for services by any water systems, sewer systems or gas systems serving the land described herein; and any lien for waste fees in favor of any county or municipality.
- This general title exception excludes from coverage municipal or county liens which are not recorded in the public records such as code enforcement violations and open or expired permits. Lenders should request that the title agent order a lien search, if available, to reveal any issues and then work with the owner of the property to resolve them so that the this general title exception can be removed from the loan policy.
- MINING CLAIMS/PATENTS/WATER RIGHTS: Unpatented mining claims; reservations or exceptions in patents or in Acts authorizing the issuance thereof; water rights, claims or title to water, whether or not the matters excepted under are shown by the Public Records.
- This general title exception excludes from coverage a variety of claims related to mining, patent, and water rights. The title agent may or may not agree to remove this general title exception from the loan policy, but lenders should ask the question.
In order to obtain the most extensive title insurance coverage, lenders should work with the title agent in order to remove (or at least narrow the scope of) any general title exceptions from the loan policy. If you get stuck on an issue, request the title agent to provide affirmative coverage over the title exception (whether general or specific).
For questions regarding title insurance matters in the context of commercial real estate loan transactions, contact the attorneys at Starfield & Smith at 215-542-7070 or visit our website at www.starfieldsmith.com.