Did you know… that an enhanced title insurance policy can provide coverage for non-permitted work?

This year, one of the closings we handled involved a property with a carport. Shortly after closing, the purchaser applied for a permit to close-in the carport and was told by the County that they had to tear down the carport because the sellers had not obtained the proper permits to build it. Fortunately, the purchaser had the good sense to purchase an enhanced owner’s title insurance policy (also known as a “homeowner’s policy”) at closing, and their title insurer hired a lawyer to resolve the issue. 

If the above mentioned purchaser had not bought a title insurance policy, or had only bought the standard policy, he likely would not have any coverage for legal fees, the cost to tear down the carport if necessary, or the loss of value to his property if the carport had to be removed.  There are other “post-closing” risks that an enhanced policy covers, but a standard policy does not, including:

  • Subdivision Map Act Coverage – This coverage applies if you cannot close a sale, secure a loan or obtain a building permit because the land was improperly subdivided prior to purchase.
  • Location Coverage – Ensures that the home has the same address as the property insured in the policy.
  • Restrictive Covenant Violations Coverage – Protects against loss of title if someone attempts to enforce an existing restrictive covenant due to a violation that occurred before the purchaser owned the property.
  • Zoning Coverage – Protects if you are forced to remove or remedy a structure because it violates zoning laws.
  • Post-Policy Coverage – Protects against possible post-policy ownership claims as a result of forgery or encroachment.
  • Enhanced Access Coverage – Covers actual pedestrian and vehicular access to the property.
  • Encroachment Coverage – Protects against someone building a structure (excluding boundary walls and fences) that encroaches on the insured property.
  • Coverage for Structure Damage from Extraction of Minerals, Water and Other Substances – Protects all existing structures and landscaping (including future replacements) on the property, against damage caused by others using the land for extraction and development of minerals, water and other substances.
  • Automatic Coverage Increases – Each of the first five years, the policy amount will automatically increase by 10 percent in value, up to a total of 150 percent, to cover increases in the value of the insured property.
  • Living Trust Coverage – Extends policy protection to include a trust you create.

Remember, however, many of these post-closing coverages are subject to deductibles and maximum dollar liability amounts.