What? No owner policy!

Hi Diane, 

I moved into a house and thought my lawyer had included a buyer's title insurance policy because I asked for one. However, it turns out the lawyer was in a conflict of interest situation as he was also the lawyer for the mortgage company. The lawyer had had me pay for title insurance for the mortgage company and admitted as much when I questioned him about it at a later date.

I need to make a claim because an inspection of my home by a city inspector found several building code and by-law infractions in renovations, construction and structural work that was done before I purchased the house. I was presented with an order to have them remedied. 

This would be a huge expense expense for me so was glad I had purchased title insurance - or so I thought I had done.  I purchased title insurance after I received the order from the city and the policy date is my possession date for the house. 

 

Will the policy still cover these violations? Or, is my only recourse to sue my lawyer?

Thanks in advance for your help,

J

Morning, Jim:  Well, I guess the good news is that there's a good chance these items would not be covered by an owner policy.  I think it depends on whether you would have purchase enhanced coverage and what type of enhanced coverage is available in your state.  Zoning violations and by-law infractions are often exceptions to coverage.

I think you should have an attorney review your transaction.  I wouldn't think too much about the conflict of interest angle as this is very common with the attorney's serving both the buyer and the lender.  I would mainly look at his fiduciary duty to take care of you with the same level of care that he gave the lender.  In PA a buyer has to sign a hard worded waiver to skip the owner policy. Perhaps your state has a similar document.

Good luck.

Diane

living through a title insurance claim is no fun

hi came across your website, which I really enjoyed reading, I have a question maybe you can help me.

I purchased a property with a small house on it right after we closed some siblings of the previous owner started fighting about it, so my title insurance company hired a lawyer and this is been in court for over 3 years, 2 months ago we were granted the motion and we won the case, but today we got a call that they are appealing, which they have 6 months to prepare if they will go to the appeal or not, my question is as follow I am pretty much fed up, i need to renovate and put in a lot of money in the house, I know normally i should wait till everything is over and done with, but its just so long and i'm living like temporary cause i didn't want to put it any money just in case we lose,...

so now my question is, what are my rights? can I put in the money fix up the property now? and hold the title insurance responsible if something goes wrong, or do I have to put my life on hold for so many years?

thanks appreciate if you can help me with any answers,

S

Hi, S:  Wow, that's a frustrating case.  This is the unfortunate side of title insurance claims.  A title insurance claim process can really interfere with your use and enjoyment of a property, even when you win.

I can't give you any comfort about improving the property.  That's a risk assessment you have to make.  Your title insurance is limited to the amount of your coverage and if you improve the property beyond that amount, you won't be covered.  Keep in mind that the legal fees have accrued against that coverage.

I hope folks who read about your case realize all title insurance is not equal. The type of search and knowledge and motivations of the examiner that laid the foundation for the title insurance policy play a major role in the level of risk assumed by the consumer. It is entirely possible that in your case the examiner was highly competent and simply made an error.  It is also possible that there was an automated search or a title examiner operating under a conflict of interest. 

I wish you well and if it were me, I'd be interested to know if the title agency was owned by any interested party in your transaction.  If so, and if I felt like taking this to a different level, I'd try to find out if the examiner found the risk of sibling interest and chose to insure over it without discussing the risk with you.  The conflict faced by examiners working in closely affiliated businesses is huge and one we have a hard time getting regulators to grasp.  These examiners may be working for a company that is getting a large sum of money from the real estate transaction and if the examiner finds a problem that will cause the buyer to walk away, could cost them their job.  I'm not saying this is what happened in your case but it's the most likely reasoning that comes to my mind other than simple human error, which could just as easily been the case.

Thanks so much for reading and sharing your story.  I do hope it works out for you and you can relax and enjoy your home.

D