Reading exceptions on a title commitment before closing

A title commitment with several numbered exceptions in schedule two is completely normal, not a red flag by itself, but understanding what each exception actually means matters more than the raw count. Some exceptions are boilerplate that appear on nearly every commitment, like taxes not yet due and rights of parties in possession. Others are specific to the property, such as an old utility easement or a restriction recorded against a subdivision plat, and these describe permanent facts about the land rather than problems to be removed. A utility easement from decades ago, for instance, usually just means a utility company has the right to access a defined strip of the property, which rarely affects normal use. The useful distinction to make before closing: an exception is anything the title policy will not cover, so more exceptions generally means a narrower policy, but that doesn't mean every exception is negotiable or worth fighting. Some are removable before closing with a payoff or a released lien, some can be requested for removal and the seller may or may not be able to comply, and some are simply permanent and will still be on the policy for the next owner too. Before spending a limited window of leverage on any one item, it's worth asking the title company directly which exceptions are standard for the area, which ones they'd expect a seller to clear, and which are just facts about the land that every future owner will also see.

2 replies

aaron_fitz10 PU1APRO 13

Your read on exceptions is right, that list is the carve out from coverage. The useful sort is between recorded facts about the parcel and open items. A 1961 utility easement is a recorded fact. It is not coming off, and it typically should not cause concern unless it runs through the middle of where a buyer would want to build something later. Worth asking the title company for the actual recorded document and checking where the strip sits. The plat restriction is worth reading in full, because subdivision restrictions can cover things like accessory structures and sometimes rentals, and for anyone planning to rent the place later that matters more than the easement does. Whether such a restriction is enforceable and against whom depends on the state and how the plat was written, so language that looks like it touches a rental plan is a question for a real estate attorney. Standard exceptions like parties in possession are often the ones that can be removed, sometimes with a survey and an owner's affidavit at closing. Worth asking the title company what it would take.

aaron_fitz10 PU1APRO 13

diane_kowalskiServicePRO

Ask for copies of every recorded document referenced in section two. They'll send them, it's a normal request, and half your questions answer themselves once you're looking at the actual easement instead of a one line description of it. The other half you take to a lawyer with the documents in hand, which is a much cheaper hour than the one where he has to go pull them.

diane_kowalskiServicePRO

Reading exceptions on a title commitment before closing

2 replies