Does Title Insurance Cover Easements?

Title insurance is an essential element of any successful real estate transaction. It provides protection against various risks and covers losses due to undisclosed or unknown encumbrances.

A common question that often arises among homeowners and hopeful buyers is whether title insurance covers easements. An easement is a situation in which one party uses the property of another party, and they can have a major impact on the marketability and value of the parcel in question.  

Your clients depend on your local knowledge and expertise in all matters relating to buying their dream home. Let’s explore the complexities of easements, common title encumbrances, and other vital information for anyone interested in protecting their investment. 

Get the Facts

Before delving into the details of title insurance coverage for commercial or residential real estate, it’s important to cover the basics.

There are several different types of easements, but here are the main ones you may encounter:

  • Easement Appurtenant: Involving two neighboring properties, one dominant and one servient, this is permanent and is transferred with ownership.
  • Easement by Necessity: Not always recorded, this easement grants needed access via a driveway, service road, or right of way.
  • Easement in Gross: This category includes utility easements, stormwater drainage channels, and sewage pipes.
  • Historic/ Conservation Easements: With so many older homes in the Upper Midwest, these preserve historical significance and natural resources and can potentially lower property taxes. 
  • Prescriptive Easement: If an entity is allowed to openly use another’s property for several years without formal written permission, a prescriptive easement can grant permanent right of access, which can affect future ownership.

Your title company partner will perform an in-depth review of all available records, assembling a complete chain of title, on the hunt for inconsistencies or missing links which may indicate possible title defects. Unrecorded or undisclosed easements are where problems can arise. 

Breaking Down Title Insurance

Many first-time buyers are unfamiliar with the concept of title insurance, what it covers and doesn’t cover, and how it benefits both lenders and homeowners. Navigating the journey to homeownership or becoming a real estate investor can be fraught with challenges.

Simply put, these policies are a type of indemnity insurance that guards against financial loss due to defects or errors with a property title. 

Lender’s title insurance protects the mortgage company’s interests if someone files suit with a claim. Owner’s title insurance, purchased with a one-time premium paid at closing, ensures the buyer retains their rights through any disputes resulting from previous ownership.

Title insurance typically provides coverage against:

It’s crucial to inform your buyers that easements not recorded or included in any public record may not be covered in a particular policy. 

It might benefit your client to have a professional survey performed, especially for new construction or for real estate that has had substantial improvements. An ALTA/ NSPS survey can help head off future boundary disputes or an adverse possession claim by looking for signs of possible unrecorded easements like utility lines, shared driveways, or drainage ditches.  

Finding Solutions

Depending on the results of the title search and/ or land survey, you may want to consult with your title partner regarding the benefits of an enhanced or extended owner’s policy. Advocating for extended coverage tailored to your client’s specific needs can enhance transaction security and mitigate risks. 

A qualified real estate attorney should also review the title commitment and survey report to ensure that there are no potential clouds from easements, encumbrances, encroachments, or prior claims. 

When entering into a commercial or residential property transaction, due diligence is critical for both buyer and seller and their respective teams. Title piracy and other types of online scams are on the rise, and recovering funds from these types of cybercrimes is notoriously difficult.

Knowledgeable brokers and real estate professionals serve as an invaluable resource for consumers in search of their family’s dream home, a solid retirement investment, or the perfect location for their growing business. It’s imperative that your clients are educated on the common red flags of wire fraud, phishing, and business email compromise, and that they understand their rights and obligations regarding easements on their land.

If you have any questions or concerns about title insurance coverage for easements in Illinois or Wisconsin, the expert team at Landtrust Title Services can help. We provide personalized service and a seamless closing process for your important clients — reach out to us today!

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