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Residential real estate buyers often erroneously believe that their title insurance policies fully protect them from all legal issues related to their property, including boundary disputes. Owners’ title insurance policies are prudent investments and indeed afford a great deal of necessary protection. For example, title insurance protects buyers from defective deeds and prior owners’ liens. But, title insurance policies generally do not cover boundary encroachment issues. Pursuant to most title insurance policies, coverage is “excepted” formatters that would be disclosed by an accurate survey and inspection of the premises (e.g., encroachments, overlaps, and boundary line disputes).
While the buyer may assert several legal claims and defenses against the seller and the hostile neighbor, the actual successful exercise of those rights is costly, slow, and stressful. For example, if a neighbor makes an adverse possession claim, the buyer can retain counsel to defend the neighbor’s “squatters rights” claim and pursue damages from the seller concerning the tainted property that the buyer unwittingly purchased. In either case, though, the buyer must pay $1000’s in legal fees and tolerate the risk of uncertainty and, potentially, losing property; the title insurance company typically will not bear these burdens.
As a result of the lack of title insurance coverage, and the substantial costs of protecting property rights through litigation, it is sometimes advisable for buyers to consider commissioning a survey before closing. This is especially true if there are any red flags that suggest there may be boundary issues affecting the property. Such signs include, but are not limited to:
– the seller or listing agent indicating, expressly or impliedly, that there is a boundary issue (e.g., “there was a ‘little problem’ with the former neighbor complaining about the shed being built on his property, but the neighbor moved away and the new owner has not caused a ‘problem’ since”);
– the neighbor approaches the buyer during the sales process and indicates there is a boundary issue (e.g., “we will need to talk if you buy this house because your driveway may be a little over the property line— but, I’m sure we can ‘work it out’”); and
– visible boundary markers, such as bushes or fences, form irregular lines or are otherwise peculiarly located (e.g., a stockade fence apparently forms the sideline of the property, but the garage juts out ten feet beyond the fence line and seemingly on the neighbor’s land).
Ultimately, the only way for a buyer to be certain of the exact boundaries of the parcel — and to ensure no boundary encroachments exist — is to have a survey performed by a licensed professional.
If the buyer decides to obtain a survey as a condition of closing, the buyer should include that right in the purchase and sales agreement (with a clearly articulated right of termination in the event adverse conditions are discovered). Surveys can be expensive (typically, more than $750.00), but relative to the purchase price (often the largest expenditure in a home buyer’s lifetime) and the expense of resolving a boundary dispute not covered by title insurance, survey costs are quite reasonable.