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Frequently Asked Questions: Owner's Title Insurance; Mortgage Plot Plans

                                 FREQUENTLY ASKED QUESTIONS

   PERTAINING TO PURCHASING OR REFINANCING A HOME IN MASSACHUSETTS    

1. Why should I purchase owner's title insurance in connection with purchasing a home?  

For a one-time premium, an owner's policy is your best protection against potential title defects that could deprive you of your ownership rights. In the event of a claim, the title insurance company will either correct covered title problems or will reimburse you for insured losses up t to the amount of the policy and will defend against any lawsuit attacking your title as insured.  
The lender will almost always require a home purchaser to purchase a loan policy to protect its mortgage interest in your property. However, this policy protects only the lender.  

An owner's title insurance policy insures against title defects that are not covered by an attorney's certification of title. For example, the following types of title defects, so-called "hidden defects," are covered by the owner's policy:

Forged documents
Unknown creditors
Undisclosed or missing heirs
Missing signatures
Mistakes in recording
Incapacity of a grantor  

An owner's policy remains in effect for as long as you or your heirs own the property. When purchasing an owner's policy in connection with the issuance of a loan policy, a reduced "simultaneous rate" is charged.

As with any insurance policy, a title insurance policy contains exclusions and exceptions for certain matters that are not insured against. For example some of the standard exceptions in a title insurance policy are:  

A. " Any facts, rights, interest, or claims which are not shown by the public records, but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof."

This is commonly called the "parties in possession" exception. In other words, the policy does not insure that you may gain full possession to the home.  

B. "Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records."

This is commonly called the "survey exception" and is relatively self-explanatory. After all, attorneys are not surveyors, and lenders do not require "surveys," merely plot plans.  

C. "Any lien, or right to a lien, for services, labor or material heretofore or hereafter furnished, imposed by a law and not shown by the public records."
This is commonly called the "mechanic's lien exception." Under Massachusetts law, anyone who has made "improvements" to property may file a lien on the property which would have special priority. This means that, in certain situations, a contractor, or someone who has made improvements on the property may be entitled to an enforceable lien on the property, although no lien appears at the Registry of Deeds as of the date of issuance of the title insurance policy.    

2. Why should I purchase a new plot plan?  

In connection with a purchase of a home, a plot plan is advised as there could be a  sideyard or setback violation. This means that there could be structures or improvements too close to the front lot line the rear lot line,  or too close to the side lines of the lot, according to the city or town zoning requirements, or according to private restrictions on record at the Registry of Deeds. Plot plans are not "instrument surveys," and as such, can not be relied upon for proper measurement of lot lines or dimensions . Plot plans may indicate easements which affect a parcel, and will always indicate if the dwelling is situated in a flood zone.  If the dwelling or improvements are in a flood zone, the lender will require flood insurance to be purchased.  Most lenders have special requirements regarding flood insurance and homeowner's insurance including required coverage amounts and allowed deductibles. 

                                                  DISCLAIMER

This memorandum is for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. This web site should not be considered a substitute for proper, individualized advice from an attorney.  

Copyright (c) 2016 Jeffrey H. Levin, Esq.