Expensive mistakes - title exceptions

If you haven’t read about what the purpose of Title insurance is for properties- start here:

Why do you need real estate title insurance?

When you buy property, there are always restrictions that impact your ability to use the property, change it or expand.

Some of these title exceptions are listed on the Schedule B of the preliminary title report (PR), and other times they are buried deeper into documents that are recorded against the property and linked to in the list of exceptions.

I discussed major title exceptions with Marc Angstead of Stewart Title that are critical for you to understand when buying a property. Your Realtor & title rep/title officer on that escrow should be calling these items out to you when they review the PR.

Restrictions on a property live with the life of the parcel, unless a new agreement is made with the appropriate party to remove it. In other words, they do not cease with ownership. In some cases, this is near impossible when it is the city, county or Coastal Commission with the restriction.

If you miss these exceptions, they can be very costly mistakes as it can impact value, maintenance costs, and future re-sale value

1. Air space & lot restrictions: in San Diego County, you own the lot your home is on plus the air space up to the city height restriction. This is seen a lot on the coast where views factor heavily into the value of your home

   1. There can be restrictions on the air space or setbacks limiting your ability to build up or use the full air space or expand your home due to neighborhood or lot specific CC&Rs (covenants, conditions & restrictions). To be clear, you can have CC&Rs on a property that is not apart of an HOA nor planned development. Sometimes these restrictions are buried in 100s of pages of documents that were recorded decades ago and scanned in that can be difficult to read or even catch. This may or may not be an exception in the title report

   2. There can be recorded agreements between neighbors where 1 person agrees to never build up nor beyond their existing footprint. The heavily favors the person benefiting from the agreement to protect their view & can limit the deed restricted property’s ability to capture views

2. There are properties that were built as 1 large lot that gets subdivided and restrictions recorded as the lots sell where the restrictions on the new lots benefit the original owner. This can be restrictions on use or building within your lot. Examples include restrictions on color & architectural & finishes, parking, setback, pets. These constraints are often found in condos, but again, these restrictions be placed on any lot

3. There are easements between 2 neighbors regarding fencing, shared driveways, landscaping, access, trash storage. This is critical to you if you are the one burdened by these easements. An example is the neighbor owns a tree that is excessively large & overgrown and they never have to trim it nor maintain it, are not responsible for any damage including invasive roots to neighboring properties

4. There are properties with shared utilities because they were built at a time as a family compound. Examples include 1 gas line feeding 4 separate homes on different parcels. How costs are divided is up to you to negotiate with neighbors

5. If you buy a home on the ocean, the Coastal Commission can have restrictions on your ability to maintain or preserve your lot. Likewise the city, county or utilities can have easement/maintenance requirements for slopes, drainage, utilities

   1. Your lot can be eroding and decreasing in size, and you are inhibited in your ability to fix or maintain your lot. You bought a home on a 10k ESF lot, 2k has now eroded and the restriction can prohibit you from recapturing that lot which can impact the value of your property

   2. You could have a deed restriction stating you can’t build a seawall to protect your property

   3. If you currently have beach stair access, you can have restrictions on your ability to rebuild them if needed, or you are required to maintain them for public access and cannot block access to it due to security issues of the public trespassing on your property

   4. Do you have a gas line running through the middle of your backyard?

6. Access to your property: do you have legal access to your lot? There are cases where you must cross private property or a private road in order to access your lot. If you don’t have this legal right, then you do not have legal lot which inhibits your ability to pull a building permit or even sell the home as its not lendable

7. Legacy easements can be vague and be recorded on the property often times when the lots are being developed and thereby a developer can grant utilities a blanket easement. However, if this blanket exception is not clarified nor removed from the title report, it can show up as language that appears to exclude coverage on unknown easements, liens or claims which defeats the purpose of the Homeowners Policy. This is one of the main tenets of why title insurance exists for homeowners.