Understanding Forced Removal Encroachment and How Title Insurance Helps
After spending months looking at houses, you have finally found your dream house. It meets all your needs and is within your budget. You are excited to proceed only to discover after you have purchased the property that a structure situated on the property is encroaching onto the neighbouring lands!
An encroachment is the projection of the actual building or a portion thereof including any improvements on the lands as of the date you purchased the property onto the land belonging to the adjacent property owner. This can include but is not limited to, a portion of the home, garage, shed or driveway encroaching onto the neighbouring lands.
As a homebuyer, can you proceed with the transaction if you become aware of an encroachment issue before you complete your transaction? Well, the short answer is you should consult with your lawyer/notary who can then liaise with your title insurer to determine whether there is any comfort or coverage available for the known defect. The title insurer will then explain the nature of the limited coverage available if any, and you can make an informed decision while instructing your lawyer/notary on how you wish to proceed.
In some instances, depending on the nature of the encroachment, no coverage may be possible for the issue. With title insurance, you may get a limited form of coverage or be able to close with the known defect, but without coverage. Read the following story to see how title insurance may provide coverage for an encroachment.
How Chicago Title Settled the Insured’s Endorsement Claim
An insured purchased a property that had an encroachment onto the neighbouring property. The purchaser was aware of the encroachment and it was noted as a known defect as it did not affect the marketability of the property. So Chicago Title issued an owner’s policy that covered the encroachment to the adjacent property (with an Identified Risk – Enforced Removal Endorsement) owned by the School Board.
Shortly after purchasing the property, the Insured reached out to the School Board to purchase part of the lot or to obtain a servitude to park or servitude for vehicular access.
The School Board sent an email refusing to sell a portion of the lot or to provide any servitude. They advised that they were open to a temporary servitude to allow the Insured to rectify the encroachment of the exterior cladding, the two Hydro-Quebec electrical meters and the two ventilation outlets.
Since the insured had a Chicago Title insurance policy with the Identified Risk – Enforced Removal Endorsement, we settled the claim by paying the cost of rectifying the encroachment.
Title insurance provides coverage from an actual loss suffered by the insured resulting from the forced removal of a structure encroaching on an adjoining property or a public utility easement.
In unique cases like this, the underwriter will consider the possible title insurance endorsements and exclusions from coverage and review the property comprehensively. This includes considering easements and servitudes, standard restrictions, the option to purchase or the right of first refusal and other reservations mentioned in the title commitment. It is important to review the policy issued for actual coverage and exclusions.
Title insurance helps and it’s an essential form of insurance. Chicago Title provides insureds with coverage for any actual loss suffered in relation to matters that are covered under the title insurance policy and are not otherwise excepted or excluded from coverage. For a competitive, one-time premium, an owner’s title insurance policy protects the purchaser or the existing owner from title issues, fraud and other title defects more specifically set out in the title insurance policy.
Title insurance from Chicago Title can help provide peace of mind with the knowledge that your client’s interests are fully protected. For more information, contact your Regional Manager today!