Does title insurance cover this?

18 years ago

We closed on a home about 6 months ago. It's about 3 years old, but we are the first owners because the builder leased it out to someone who had occupied it with the intention of buying, but never got it together. We bought directly from the builder. Last week I got a notice that a payment was due to cover the assessment for the new sewer connection that occurred when the house was first built. The cost for the connection is set up to be paid over a 15 year period, at the rate of about $100 every six months. Since the account is up-to-date, the contractor was apparently making the payments every 6 months. So...it appears that I owe the county $2400. This is something new to me as this is the first recently constructed house I've ever owned. This obligation was never pointed out to me during closing. It seems to me to be different conceptually from real estate taxes in that I'm making time payments on a charge for a specific type of work that was done, and the payment will end in 12 years when it's paid off (I also can choose to pay the whole thing in a lump sum right now if I want to.) It's almost like a lien on the property, albeit by a government entity, rather than a private one (like a contractor).

My questions are:

1) Should this have been documented in the title search?

2) If this should have been documented in the title search, but wasn't, what recourse, if any, do I have?

3) Should I expect the title insurance to reimburse me for this?

4) If so, how do I best go about getting money out of them?

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Comments (14)

cda44
18 years ago
I would look on the preliminary commitment for title insurance and see if there was a mention of it there. If it is an assessment on the property it should have been there. If it was, and you just didn't notice, then no, the title company isn't liable. If it wasn't on there, I'd say that you definitely need to call it to their attention. Let us know!

Angie
berniek
18 years ago
Special assessments are paid to the assessors office and part of the taxes. Who is this money paid to?
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Jason, title insurance insures what the title insurance policy says it insuare and that is usually clear title subject to the exclusions listed in the title insurance policy. When you get a title insurance commitment (i.e., an offer to issue a title insurance policy if the conditions set forth in the commitment are satisfied--this is what the buyer receives before the closing), it will include a long list of the exclusions to coverage. The standard exclusions to coverage are typically as follows (and there will be additional exclusions listed that are unique to the covered property and which are based upon defects found in the public records): 1. Rights or claims of parties in possession not shown by the public records. 2. Easements, or claims of easements, not shown by the public records. 3. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, any facts which a correct survey and inspection of the premises would disclose and which are not shown by the public records. 4. Any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records (i.e., Construction liens). 5. Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof but prior to the date the proposed insured acquires of record for value the estate or interest or mortgage thereon covered by this Commitment. 6. Taxes due and payable; and any tax, special assessment, charge or lien imposed for water or sewer service or for any other special taxing district. Exclusion #4 deals with construction liens. The reason that construction liens are excluded is that the person with the lien right can file the lien up to 6 months (the time varies by state) after the date on which the person last performed substantial work or provided materials to the property, which means that the title insurance company cannot tell from the public records at closing whether there is anyone out there who can file a construction lien against the property after the closing, which is a risk that it is not willing to assume (i.e., there could potentially be hundreds of thousands of dollars of unknown liens out there). However, the title insurance company will usually waive exclusion #4 if the seller of the property presents it with a signed affidavit listing all persons and entities who have supplied labor or materials to the property within the last 6 months (or whatever the applicable period is for that state), provides lien waivers from each labor or materials supplier listed in the affidavit and agrees to indemnify the title insurance company if the affidavit does not include all labor and materials suppliers or is otherwise false. A title insurance company will usually waive exception #1 (and sometimes #2)if the seller gives it an affidavit identifying all people having a right to occupy the property (e.g., tenants, easement holders, etc.) and agrees to indemnify the title insurance company if the affidavit is wrong. A title insurance company will usually waive exception #3 if you provide the title insurance company with a survey. A title insurance company will usually waive exception #6 if you pay for an tax/special assessment search. A title insurance policy just insures what the policy says that it insures. You receive the title insurance commitment before the closing and you need to read and understand it before the closing and you should not close if the exclusions to coverage listed in the title insurance commitment are not acceptable. If you hire a lawyer, it is the lawyer's job to read and understand the commitment, get the exclusions waived that can be waived and to document in writing that the title insurance company has agreed to waive them so that there will be no dispute when the policy is issued as to what the exclusions to coverage are to be, and to make sure that the purchaser does not go through with the closing if the remaining exclusions are unacceptable (i.e., not of the type that the buyer agreed to accept in the offer to purchase). When you get your final title insurance policy, you need to review it to make sure that the exclusions that the title insurance company agreed to waive have in fact been removed from the final policy.
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It depends on how title insurance is sold in your state. In some states title insurance is only sold through attorneys since they perform the title search. In other states there are settlement providers that perform the search and sell the insurance. Whomever sells the insurance wants to know that the title has been thoroughly and correctly searched. Title insurance is designed to protect against defects in the chain of title that could NOT be found out by inspecting the chain. Forged signatures are one common issue. There is no way to tell from a title search that a signature on a document is forged. Encroachments on to the property are usually only covered IF a survey was performed at the time of purchase. The title policy will list any items found during the search and NOT cover them. There may be an easement on the property for overhead lines to an adjacent house, or even a driveway that is over a boundary. Since you have been put on notice about these items, you cannot later make a claim for them.
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Mandyvilla
18 years ago
Also recommend you check your contract with the builder and see if you see the wording "front foot benefit charges," which refers to the sewer hook up. Have you checked with your neighbors to see if they are in the same boat? Definitely worth a call (or two), I would start with the assessor's office to see if this is something a builder typically pays. It does sound like a special assessment. I would want to know when it went into effect. If it went into effect when the title transferred, I am not so sure the title insurance would be any help. I would also be curious why the builder didn't disclose the charge. Good luck and let us know what you find out. (Get you coming and going, don't they?) Suz
ChristyTN
18 years ago
The title insurance should definitely catch a sewer assessment. Its like "cda44" stated: If the title insurer did notate it on the search, then they are not liable.

In Washington, it is my understanding that sewer assessments may be paid to the local assessors office but are NOT considered part of realty taxes. The assessors office is merely the collector. Hence, sewer assessments are not eligible for federal tax deductions because they are considered fees. Its been a while since I studied this so I could be wrong, but that is the way I remember it.
hgli2003
18 years ago
This is not necessarily a title insurance issue. They very likely disclaim this type of assessment if it is not on record. If the builder was paying on time, then there might be nothing on record. If the builder was in defalt, then you would expect something to turn up on the title report. Check the report very carefully.

However, it should have been mentioned on the contract of sale from the builder to you. I wouldn't be surprised if the boilerplate language mentions sewer connections or other assessments without itemizing them.
docksyluver_yahoo_com
17 years ago
Does title insurance cover my legal fees for a case involving us being sued for a portion of my property via adverse possession?
qdognj
17 years ago
In 25 years of land surveying/engineering, i have since ZERO cases of adverse possession win in court..There are so many issues besides the using of the property that it usually gets thrown out rather quickly...If you'd like to post the details, i'd like to see the issue
sue36
17 years ago
I worked on the appeal of a case where the other partty had been successful with their adverse possession claim. So it is possible to win. And I recently worked on a case where the person was not successful. The adverse possessor met all the elements of the state statute. The only reason the adverse possessor didn't win was because that state has separate law that lists rare exceptions and this happened to be one of the exceptions (very rare case). Neither of the attorneys found it (I was brought in separately). The other attorney was shocked, he had no idea. In fact, the attorney for the land owner told them to settle because they would lose.

It seems like it is much easier to defeat a claim in those states where the adverse possessor has to pay the taxes on the claimed land during the period of possession. That was not the case in either situation above.
qdognj
17 years ago
what state was this Sue36?
rrah
17 years ago
The answer to your question will involve a little research on your part.
1. What type of title insurance policy do you have? Is it an ALTA 92 or an ALTA 98 policy? If it's a 92, then the simple answer is no. ALTA 98 will cover "supplemental taxes for a period before policy date because of construction or change of ownership or use that occured before policy date." Directly from a title company booklet on different types of title insurance.

2. If it's an ALTA 98 policy, then the question becomes is this fee considered a tax? It doesn't really sound like it is, but it's definitely supplemental. In my part of the country fees such as this are not a tax and not recorded as such, and are not necessarily part of the public records a title company would search.

3. Finally--was this obligation recorded and what specifically does your policy say regarding unrecorded fees, liens, etc?

4. Did you receive a seller's disclosure from the builder? (Keep in mind these disclosure forms vary from state to state.) Here people are required to disclose any letters concerning the property from government or quasi-government agencies. A utility company would be considered a quasi-govt. agency.

You need to carefully read your title policy. If you believe you have a claim, contact the company directly and ask how to file for a claim. Also read through your purchase agreement very carefully. Sometimes in the excitement of a home purchase people overlook the small details such as this. If this information was truly never disclosed to you, and your state requires it should have been then I would contact the builder about it.
jerzeegirl
17 years ago
Why would you not just call the builder and ask him what's going on? He will probably be able to tell you where the disclosure is in your home buying paperwork. If you are not satisfied with his answer, then you can pursue it further.
logic
17 years ago
FWIW, we bought 2 new construction homes...in NYC & NJ...both times we did not pay a specific sewer hook up fee. In our town the developer pays it in order to hook up and have the home serviced by water & sewer. Some may indeed pass it on to the buyer, but if so, IMO it must be in the cost of the house itself, as I have not heard otherwise as of yet...and I know a number of people who also bought new construction.
sue36
17 years ago
Someone asked what state the cases I worked on were in. One was Mass. and one was PA.
qdognj
17 years ago
In the community where i previously lived, the town was going thru neighborhoods and installing sewers, you didn't have to make the final connection from main to house, but ALL owners were assessed the costs payable over a 15 year time frame...In the long run, it is a cheaper alternative to replacing a septic system...

Does title insurance cover this?

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