Pennsylvania Title Insurance Endorsement 301
By Marc Shaw
A home buyer shows up to the walk through the morning of settlement to find the next door neighbor lingering around waiting for him to show up. As the buyer walks toward the property the neighbor explains that the house encroaches on his property. The buyer continues with the walk through and if it wasn’t for this newly found information settlement would be a breeze.
Lets assume that the home buyer has no reason not to believe what the neighbor said. What are his options?
The truth is Pennsylvania Title Insurance Endorsement 300 is always issued with a lenders title insurance policy. This endorsement has the effect of insuring without exception for matters discoverable by survey and will further insure against loss or damage by reason of encroachment (other than party walls), whether by the building on the mortgaged premises encroaching upon adjacent property, or by any building on adjacent property encroaching on the mortgaged premises. The endorsement is a standard Title Insurance endorsement for all lenders in Pennsylvania. And for the most part PA Title Insurance companies will issue it with out a Survey. The reason is pure risk tolerance. The only way that an encroachment can ever become an issue for a lender is if there is a default on the loan and the lender actually takes the property back. That said, the fact that there even is an encroachment is usually very unlikely.
The problem is the owners comparable Pennsylvania Title Insurance Endorsement 301 which does the same as the lenders 300 is rarely issued or asked for. In fact it is only issued upon receipt of a survey by the title company.
So back to our story from above-
Buyer shows up to the settlement room at the title insurance company and explains to the seller what the neighbor said. The seller doesn’t really know what to say, he/she is really unsure of the truth to the statement but is not positive either way. Since the seller does not want to lose the sale at the last minute he offers the buyer some sort of concession.
The buyer is left with a few options-
– Take the sellers concession and roll the dice
– Or delay settlement due to evidence and order a Land Survey in order to obtain proper coverage
The buyer unfortunately is out on an island at the title company. The sellers, the realtors and even the bank have an interest in making sure settlement occurs. Their long hard work would go for naught and their commissions would be uncollected for the time being.
The buyer with no attorney present has no voice at the settlement and gives it some thought. What’s the worse that can happen? What are the potential damages? Depends on many variables. How much does the home encroach? What needs to be done to fix the issue? Can the space in question be purchased from the neighbor and for what? etc. etc.
The fact is buyers often do not obtain a title survey before closing in Pennsylvania and similar stories to this happen all the time. Additionally in Pennsylvania it is common practice not to have an attorney for real estate closings. This is much different then all surrounding states, Delaware, New Jersey and New York. When buyers and sellers do not utilize the services of a Pennsylvania real estate lawyer to examine the risks of the transaction, the consequences can be financially and emotionally overwhelming.
In this case the buyer may not own the property they thought they were buying. One may say well the seller has owned the property for x amount of years… etc. etc. etc. But only after 21 years of open, hostile and notorious possession (Called Adverse Possession) against the real owner’s interest (the future neighbor) is it possible to assert a claim of ownership of the property that was apparently being purchased.
If the buyer actually moves forward without coverage and the neighbor was right and asserts a claim, the buyer can be facing litigation by the neighbor in his attempt to force the buyer to move his structure. And the buyer will not be covered for any of his legal expenses since proper coverage has not been put in place.
Long story short, when in doubt we recommend that all home owners have their own title survey ordered in order to procure PA Endorsement 301. And if something pops up please don’t hesitate to consult with an attorney! For most of you a home purchase will be the largest investment you will make in your lifetime. It is a small cost to protect against a possibly very large one!