Title commitments contain a lot of “exceptions”, which basically means something your title insurance will not cover. There are seven standard exceptions, some of which can be deleted. To “delete” an exception means that the insurance must cover that issue – actually increasing your insurance coverage. In Santa Fe, buyers frequently ask for exceptions one through four to be deleted. Increasing your coverage provides more peace of mind, though it does come at a cost. You’ll need to weigh the factors in your home purchase to determine what, if anything, you’d like to delete.
Below is a discussion of the reasons for, effect of, and requirements to delete each exception.
This policy does not insure against loss or damage, and the Company will not pay costs, attorneys' fees, or expenses that arise by reason of
1. Rights or claims of parties in possession not shown by the public records.
- Deletion provides coverage against claims by tenants, squatters or other parties in physical possession of the property.
- To delete, an affidavit is required from the sellers that they have sole possession of the property.
- If the sellers do not have sole possession, an inspection of the property and release from the party in possession are required.
- There is no additional premium to delete Standard Exception 1.
2. Easements, or claims of easements, not shown by the public records.
- Deletion provides coverage against claims for prescriptive easements or easements by necessity.
- To delete exception, survey work is required (this may include a recent ALTA Survey, a recent boundary stake survey, or a recent Improvement Location Report – depending on the nature of the property and the insurer’s underwriting requirements).
- There is no additional premium to delete Standard Exception 2.
3. Encroachments, overlaps, conflicts in boundary lines, shortages in area, or other matter which would be disclosed by an accurate survey and inspection of the premises.
- Deletion of this exception provides coverage against encroachments, overlaps conflicts in boundary lines shortages in area or other matters disclosed by an accurate survey.
- When deleting from an Owner's Policy or a Loan Policy, survey work and certain certifications/representations are required (this may include a recent ALTA Survey, a recent boundary stake survey, or a recent Improvement Location Report, and a certification from the surveyor that all improvements are shown on the survey or an affidavit from the Seller/Owner – depending on the nature of the property and the insurer’s underwriting requirements).
- The additional premium to delete this exception is 15% of the Basic Premium Rate in effect at the time the coverage is provided.
- A "recent survey" is defined under the regulations as a survey meeting the requirements of the underwriter.
4. Any lien, claim or right to a lien, for services, labor or material heretofore or hereafter furnished, imposed by law and not shown by the public records.
- Deletion of this exception provides coverage against Mechanics' Liens.
- To delete for new construction, all work must be completed and an affidavit and indemnity agreement executed stating that all subcontractors, materialmen and/or suppliers have been paid in full in accordance with underwriter requirements.
- To delete for an existing home, the seller must execute an affidavit and indemnity stating that no improvements have been made within 120 days of issuance of the policy; and/or an affidavit that all work has been paid for in full, along with copies of all receipts and lien waivers from the mechanics and materialmen.
- If requirements for evidence of priority have been met, the exception may be deleted from an Owner’s Policy or a Loan Policy upon payment of the additional premium of $50.00.
- If the insurer's evidence of priority have not been met but the insurer's underwriting requirements of the risk incurred by reason of the lack of priority have been met, the exception may be deleted from a standard Loan Policy upon receipt of the additional extra-hazard risk premium of $5.00 per $1,000 of coverage liability under the policy; or for an Owner’s policy an additional premium is $3.00 per $1,000 of total coverage under the policy.
5. Community property, survivorship, or homestead rights, if any, of any spouse of the insured (or vestee in a leasehold or loan policy).
- This exception may be deleted from an Owner's Policy or Loan Policy if the vested owner is a corporation, a partnership, other artificial entity, or a person holding title as a trustee, or personal representative of an estate.
- The exception may also be deleted from a Loan Policy if both spouses are the borrowers or the vested owner's spouse has signed an acceptable, recordable sole and separate property agreement, specifically describing the property to be insured.
- The exception may never be deleted from an Owner's Policy if the insured is an individual.
6. Water rights, claims or title to water.
- This exception was amended in 2009 to provide coverage against mining claims and patents, by deleting that portion of the exception. However, coverage against "water rights, claims or title to water" is not available and this exception may not be deleted. Specific exceptions to patents, which frequently contained reservations of mineral rights and prior severance of mineral rights of record, must appear under Schedule B of the policy.
7. Taxes for the current year, and thereafter.
- This exception may not be deleted. However, it may be modified by excepting taxes for the second half of a year if taxes for the second half are due, but not yet delinquent. Under that circumstance, the language “Not yet delinquent” may be added to the policy. Also, the exception may state: “Taxes for the year ______and thereafter, not yet due and payable”.
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