Does Title Insurance Cover Property Encroachments?

Title insurance protects homebuyers nationwide. It’s a vital component in the home buying process. Occasionally, issues come up during the title search, such as property encroachments, but that doesn’t mean you can’t buy the home or qualify for title insurance. Depending on the circumstances — and often property encroachments are minor — buyers and sellers can agree on a final contract. It basically comes down to title marketability and insurability.

The Purpose of Title Insurance

Title insurance exists to protect a homeowner’s legal rights to the property. It also acts as a financial safeguard in case issues come up in the future regarding ownership. Another type of title insurance is the Lender’s Policy, which protects the interests of the financial institution involved in the transaction.

What Qualifies as Property Encroachments?

Simply put, property encroachments are physical structures that intrude on (or over) the legal property boundary of a given lot. These encroachments could be anything from a fence to a tool shed or steps to a screened-in porch. Florida law does not require adjoining landowners to construct fences to divide the land. Property encroachments can occur unknowingly or despite full knowledge of the boundary.

The Basic Parameters

When you work with an experienced title company, they will conduct a title search to uncover things such as existing liens, undiscovered wills, and property encroachments. If a property encroachment is discovered, this is typically placed in the exceptions section in the forms distributed by the American Land Title Association (ALTA) —as long as the encroachment does not render the property unmarketable. A title would typically be determined to be unmarketable due to major property encroachments, such as permanent and extensive home additions and large driveways that render another property with an inability to have a suitable driveway of its own.

If the title is marketable than title insurance can typically be bought. Any encroachments and other matters that an accurate survey discloses would be placed in most likely “Schedule B, Section II” of the title insurance policy. These would be listed as exceptions, as mentioned above, and would not be covered.

On Contracts — and Finalizing the Deal

There are many variables to consider when purchasing a home: location, price, architecture, size of the property, etc. If there are property encroachments, what is the possible financial cost? Often, small encroachments aren’t ever an issue or do not cost much to repair. These things can often be negotiated between the buyer and the seller too.

Property encroachments can sometimes be offset by getting a reduction in the property’s purchase price. If the details can be agreed upon, the sale can still be a win/win situation for the buyer and the seller.

Contact an Experienced Title Company

A reputable title insurance company will conduct a thorough title search to find out if there are any issues related to the property of interest — from encroachments to errors in public records. When this is completed, the documentation for the policy can be written up, and you can prepare for closing. Does title insurance cover encroachments? Typically, these will be listed in the exceptions. But it does cover many areas that come up in the home buying process.