Reviewing Title Commitments: Pay Attention To Those Exceptions

The title commitment is a document that is issued by the title insurer; it discloses all liens, defects, burdens, and obligations that affect the property in question.

The title commitment reveals important information about who owns, owns a piece of, or can use the property and under what conditions the title company is willing to issue an insurance policy. It spells out what will be covered by the title insurance policy and what will not be covered. Title insurance protects homebuyers from claims of property ownership by other parties. The title commitment comes before closing; the title policy is issued after closing.

It is very important to review the title commitment so you understand what, if any, limitations there may be on your use and enjoyment of the property.

Common exceptions include:

  • Easements
  • Use restrictions
  • HOA covenants or requirements
  • Survey issues, problems, concerns
  • Leases

In this post, we’ll take a look at the parts of the title commitment so you understand where to look for those exceptions.

Parts of the Title Commitment

The title commitment is broken down into three Schedules: A, B-I, and B-II. Here’s what they contain:

  • Schedule A. This section lays out the basic facts of the transaction such as: the effective date of the policy, the proposed insureds (purchaser and lender), policy types and liability amounts, the legal description and address of the property and the estimated title insurance charges.

In Schedule A, you’ll want to carefully review the information for accuracy including names, addresses, policy coverage, purchase price, etc.

  • Schedule B-I. This section lists the requirements that must be met before a title policy can be issued. Common requirements include: a deed from the Seller to the Buyer, a Mortgage from the Buyer to the Lender, releases of liens, entity or estate documentation, releases of judgments, corrective deeds, and any other documentation required to ensure marketable title at closing.

All items listed on Schedule B-I are items that our office diligently works towards satisfying prior to closing.

  • Schedule B-II. This section lists items that are not being insured by the title company. This includes several standard exceptions as well as specific exceptions. Standard exceptions include things like encroachments and unrecorded easements, municipal liens, and rights of parties in possession (tenants’ rights). Specific exceptions include association restrictions, easements of record, utility agreements and any other matters of record that are attached to the property.

All items listed on Schedule B-II are items that will be exceptions to your Owner’s Title Policy, unless your Title Attorney is able to have them removed after receipt and review of the municipal lien search and survey.

Dealing With Exceptions

All title commitments will reveal exceptions. It’s up to the buyer and his/her real estate attorney to review these exceptions and determine if they are acceptable or unacceptable. If they are unacceptable, your attorney can ask to have certain exceptions corrected by the seller, removed, and/or covered by the policy by purchasing endorsements or an extended policy.

At The Metka Law Firm, we work closely with buyers to help them understand the title commitment so there are no surprises once they take possession of the property. Our services include negotiating exceptions and coverage with title companies and sellers’ attorneys to guarantee your use and enjoyment of the property.

To learn more about our buyers’ services and/or title commitments, contact us at 407-826-1952 or online.