PropertyLaw.guru Blog

Title insurance - sometimes not such a solution after all in the real world....

Now don't get me wrong, title insurance has a place sometimes, but its not a cure-all...

One of the delegates on my courses told me a tale that needs to be told to all those who dismissively say to you 'Oh, can't you just get some insurance, stop holding it up, I just want the keys'!

Picture the all too familiar scene, developer wants to buy site to put houses on - only problem  - a right of way over one corner. The corner has been fenced in for some time and no right of way is apparent though it is clearly shown on the title. Stern advice was given but 'take a view' was the order of the day. Construction starts whereupon next door neighbour with the right of way pops up and demands to use his right of way. Developer contacts solicitor who points out that he can't do anything or try and negotiate anything without involving the insurer or the cover evaporates. Title insurer (a big well known one) fails to respond to emails, phone calls, solicitors letters and so on. Neighbour by this stage is incandescent and threatening injunctions! TWO MONTHS later, insurer finally responds and tells developer to suspend all works while they think what to do. The neighbour refuses to be bought and demands his right of way. End result? Insurer says developer should recreate the right of way, fence it off from the rest of the site, and make an application to vary the planning permission to take into account the loss of the corner. Reason? The neighbour had a legal right and it was cheaper to pay for the cost of a planning redesign that contest it. Effect on delay, breach of contracts with contractors, delay to sale program, extra cost of borrowing? Go whistle, not covered.

Title insurance cannot give you land someone else owns, cannot take rights or land off other people if they aren't prepared to be bought, and won't prevent someone getting an injunction against you when you interfere with their legal rights. Seller's agents won't tell your buyer client that, that's your job.

And from 1st October you have even more obligations to ensure clients really understand what it does and doesn't do. Don't end up taking the risk yourself....while the insurer keeps the premiums..
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