Does Title Insurance Cover Encroachments

Title insurance is a crucial safeguard in real estate transactions, designed to protect buyers and lenders from defects in the title that could threaten ownership. Encroachments—situations where a neighbor’s structure or property feature crosses property lines—are a common concern for buyers. This article explains how title insurance treats encroachments, what is and isn’t covered, and how homeowners can obtain appropriate endorsements to address potential encroachments before closing.

What Is Title Insurance?

Title insurance differs from other forms of homeowners insurance because it protects against defects that existed before the policy was issued. These defects can include forged signatures, unknown heirs, boundary disputes, or clerical errors in public records. Unlike homeowners or hazard insurance, title insurance is primarily a one-time premium that lasts for as long as the insured party or their heirs retain an interest in the property. An owner’s policy protects the owner’s equity and rights to the property, while a lender’s policy protects the lender’s financial interest.

Encroachments and How They Can Affect Title

An encroachment occurs when a structure or improvement on one property unlawfully extends onto a neighboring parcel. Common examples include fences, garages, sheds, driveways, or landscaping that cross boundary lines. Encroachments can create ownership disputes, limit the use of the encroached area, or complicate future sales or refinancing. Title searches aim to uncover encroachments, but some may not be visible until surveys are completed or improvements are measured on the ground. The key question for buyers and lenders is whether the encroachment is a defect in title and whether it is covered by title insurance.

Is An Encroachment Covered By Title Insurance?

Coverage for encroachments depends on the nature of the encroachment and the policy language. In general, most standard owner’s policies do not cover encroachments as a direct loss unless the encroachment constitutes a defect in the title that affects ownership rights. However, title insurers often provide coverage for encroachment-related losses if the encroachment arises from a recorded item or a recognized boundary issue, or if an endorsement is added that specifically addresses encroachments. Lender’s policies may have different coverage expectations, focusing on ensuring the lender’s secured interest rather than the buyer’s full enjoyment of the property.

Endorsements That Address Encroachments

To tailor coverage to encroachment risks, buyers can request endorsements, which are add-ons to a standard title insurance policy. Common endorsements related to encroachments include:

• Encroachment Endorsement that covers losses caused by encroachments onto or from the insured property, provided the encroachment is discovered or specified in the policy.
• Boundary or Survey Endorsement that clarifies the precise property lines and may cover issues arising from boundary disputes or survey discrepancies.
• Location Endorsement that protects against certain location-based title defects, including issues tied to improvements near the boundary.

Endorsements typically come with an additional premium or rate adjustment. It is important to review the policy language carefully and discuss with the title insurer or attorney to determine which endorsements best fit the property’s specific encroachment risks.

What Is Not Covered by Title Insurance Regarding Encroachments

There are several common exclusions to be aware of. Title insurance generally does not cover:

• Encroachments that are not discovered during the title search or survey and are not documented in public records at the time of policy issuance.
• Ongoing or future encroachments caused by the insured property owner after closing.
• Defects arising from zoning violations, building permits, or land-use restrictions that are not properly recorded or enforceable against the insured.
• Losses resulting from improvements that are not located on the insured property due to a boundary mismeasurement unless endorsed.
• Economic losses due to construction to remove or cure an encroachment, unless specifically covered by an endorsement.

Understanding these exclusions helps buyers avoid surprises and coordinate with closing professionals to mitigate risk before purchase.

How a Title Search and Survey Interact with Encroachments

A comprehensive title search examines public records for defects in chain of title, liens, and encumbrances. A professional survey, often ordered as part of the closing process, establishes precise property boundaries and reveals encroachments that may not appear in records. When a survey reveals an encroachment, the parties can negotiate a resolution, such as a cure, removal of the encroachment, or a seller concession. If an encroachment is discovered after closing, title insurance may be invoked if it constitutes a covered title defect or if an endorsed protection applies.

Practical Steps For Buyers Concerned About Encroachments

To reduce risk and secure appropriate coverage, buyers should consider these practical steps:

• Request a current boundary survey or a retracement of the parcel to identify any encroachments before closing.
• Discuss available endorsements with the title company and obtain endorsements that specifically address encroachments or boundary issues.
• Review the title commitment carefully, focusing on any encroachment notices, easements, or boundary disputes noted by the title insurer.
• Negotiate with the seller to cure encroachments, obtain an encroachment agreement, or secure a price adjustment if remedies are not feasible.
• Consult a real estate attorney if encroachments raise questions about ownership rights or future use of the encroached area.

What Happens If An Encroachment Is Discovered After Closing

If an encroachment is discovered after closing and it is covered by an endorsement or by a latent title defect, the title insurer may cover the insured’s losses up to the policy limits. The resolution may involve curing the title defect, removing or reducing the encroachment, or compensating the insured for damages. In some cases, escrow arrangements or settlements with neighbors may be necessary. If no coverage applies, the insured may need to pursue civil remedies separate from the title insurance policy.

Choosing The Right Policy For Encroachment Risk

Choosing a title insurance policy involves balancing cost with risk protection. Consider:

• The property’s boundary history and any known encroachments.
• Availability and cost of encroachment or boundary endorsements.
• Whether the transaction involves a lender with additional requirements or policy preferences.
• Potential long-term use of the property and the impact of any unresolved boundary issues on resale value.

Discuss these factors with the closing team, including the title agent and real estate attorney, to craft a policy that aligns with the property’s encroachment risk profile.

Summary Of Key Points For Encroachments

• Encroachments can affect ownership rights and future property use; title insurance targets defects in title rather than general property damage.
• Standard title insurance may not cover encroachments without endorsements; consult for specific coverage terms.
• Endorsements like Encroachment, Boundary, or Location endorsements can extend protection for encroachment-related risks.
• A thorough title search and a professional survey are essential to identify encroachments before closing.
• Proactive negotiation with the seller to cure or compensate for encroachments minimizes post-closing disputes.