What Can You Recover From the Title Company When They Miss an Easement?

"what can a consumer recover from title company for undisclosed easement"

Basically, the cost of the immediate remedy, at least here in California.

Here's a standard example. Mr. and Ms. Smith buy a property and they wish to put a pool in. The purchase process reveals no easements and they take possession of the property and start digging. Three hours later, the contractor hits a four foot water pipe buried six feet deep and cutting right across exactly where the pool needs to be.

With a standard owner's policy of title insurance, the title company will pay for the contractor's bill, including the cost of filling in that hole they dug. There may also be a small settlement made for the decreased utility of the property. After all, you can't really do anything about that easement, now can you? Nor can you build anything that conflicts with the easement holder's right of access. No pool, no granny flat, no game room or detached office, at least on that segment of the property, which, given the size of most recent lots, means not at all.

The title company will not, under the basic policy, purchase the property or make a large settlement. The reason for this is that if the standard policy made them liable for things like frustrated purpose of purchase, the standard policy would be far more expensive. People wouldn't want to purchase policies of title insurance, because they insure against risks which are relatively rare. However, those risks are extremely expensive when they do occur. Who pays for that? The other policyholders, of course. For a lot of people, they think of title insurance as junk when it will save your bacon if there's a real problem with title, and increasing the base price would mean that a lot of people would want to pass. The idea is to keep a policy of title insurance affordable, and still cover what it really has to cover, which is losing a property you thought you owned through action of law.

You can purchase a rider or endorsement for extended title coverage. Furthermore, if certain purposes are critical to your reasons for acquiring the property, you can do additional research, or pay to have it done. It can be expensive, but if you don't want this $500,000 property unless you can build a pool, an office, or a granny flat on it, spending the money is an excellent insurance policy. After all, even if you finance the vast majority of your purchase, you're on the hook for every dollar you spend buying the property. Spending a little extra to insure you're not wasting every dollar of the purchase cost makes sense in such circumstances.

Caveat Emptor

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