An owner’s title policy is written the same way as most insurance policies, it provides you coverage limited by certain exceptions and exclusions. Among these exceptions is one that states; “We do not cover loss, costs, attorneys’ fees and expenses resulting from any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements.” In other words, the policy does not insure against boundary issues or that the improvements on your land, or your neighbors, do not cross the property line or any building set-back or easements. The Texas Department of Insurance does allow this exception to be modified to provide additional coverage to the buyer after the title company reviews an accurate survey of the property. If the buyer elects to amend the standard exception, the title company will review the survey and may make specific exceptions based on what is shown on the survey. Beyond those specific exceptions, the normal exception will be changed to read: “We do not cover loss, costs, attorneys’ fees and expenses resulting from shortages in area .” Shortages in area is a reference to the mathematical term area, or the actual size of the property. Other issues, such as boundary lines, encroachments or protrusions that are not specifically excepted to, will then be covered by the owner title policy.
In residential transactions, the cost for the additional coverage is 5% of the base policy premium for the owner title policy. In commercial transactions, the cost is 10% of the base policy premium for the owner title policy. I typically advise residential buyers that they should purchase the additional coverage. The cost is nominal, a couple of hundred dollars or less on most transactions, and you never know what issues you may have with your new neighbors. On commercial transactions, it really depends on the scenario because the cost can run into the thousands of dollars.
If you would like to use a knowledgeable title company conveniently located in the Heights, please give us a call.
Fidelity National Title, 1512 Heights Blvd., Houston, TX 77008 (713) 529-8800.