Title insurance is crucial for a home buyer because it protects you and the lender from the possibility that your seller doesn't -- or previous sellers didn't -- have free and clear ownership of the house and property and, therefore, can't rightfully transfer full ownership to you. Problems with the title can limit your use and enjoyment of the property, as well as cause you financial loss. This is why you need title insurance.
Your real estate attorney will arrange the process of getting you title insurance soon after your Contract of Sale is signed.
What Could Happen If You Don't Get Title Insurance?
Title insurance protects against the following common hidden risks just to name a few:
Errors or omissions in deeds
Mistakes in examining records
Undisclosed or missing heirs
False impersonation of the true owner of the property
Instruments executed under invalid or expired power of attorney
Mistakes in recording legal documents
Misinterpretations of wills Deeds by persons of unsound mind
Deeds by minors
Deeds by persons supposedly single, but in fact married
Liens for unpaid estate, inheritance, income or gift taxes
Title Insurance: Lender's Policies and Buyer's Policies
Title insurance is typically a combination of two policies: a lender's policy and a borrower's policy. Your lender -- assuming you're taking out a mortgage, will require that you buy a lender's policy (also called a "mortgagee's policy";) to pay for its legal defense costs and reimburse any mortgage payments you can't make because you've lost the house to someone else's claim on it.
The lender may also require you to buy an "owner's policy," covering your own legal fees and other losses, as yet another step toward protecting the lender's collateral. Your title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property. Title insurance will give you the peace of mind in knowing that the investment that you have made in your home is a safe one.
Zoning is a device of land use planning used by local governments. Zoning may be use-based (regulating the uses to which land may be put), or it may regulate building height, lot coverage, and similar characteristics, or some combination of these.
The primary purpose of zoning is to segregate land uses that are thought to be incompatible. In practice, zoning is used to prevent new development from interfering with existing residents or businesses and to preserve the "character" of a community or neighborhood. Zoning is commonly controlled by local governments such as counties or municipalities.
Most zoning systems have a procedure for granting variances (exceptions to the zoning rules), usually because of some perceived hardship caused by the particular nature of the property in question.
Variances enable a property owner to utilize the property in a manner that is not allowed by the local zoning laws. To obtain a variance, a property owner must establish difficulties or "unnecessary hardship" in complying with the zoning law.
The two most common types of zoning variances are a use variance and area variance.
A use variance allows a property owner to use the property for some purpose prohibited by the local zoning laws. When a use variance is sought, the applicant demonstrates "unnecessary hardship" by establishing that:
a. the land cannot yield a reasonable return if used for zoned purposes;
b. the property owner's difficulty is due to unique circumstances and not to general conditions throughout the neighborhood (the hardship must be unique or peculiar to the property for which the variance is sought); and
c. the sought-after use will not alter the essential character of the neighborhood.
Although it is permissible for a municipality to impose conditions on a use variance, the conditions must regulate the property use and not the activities of the applicant (property owner).
An area variance enables the property owner to maintain, build or subdivide on a parcel smaller than that required by the zoning law. To obtain an area variance, the property owner need only show "practical difficulties" in complying with the law.
Even though self-creation of a difficulty is certainly a factor to be taken into account in considering an application for an area variance, it is less significant a consideration in those cases than in applications for use variances. It is not the sole determining factor, and a finding of self-created hardship, normally should not in and of itself justify denial of an application for an area variance.
See New York Times article by Amy Gunderson, "HOME AWAY: When You Need a Zoning Variance", for further discussion on zoning variances.
It is a commonly accepted practice for home buyers to purchase title insurance. Title insurance provides buyers, and their lenders with coverage up to the full purchase price of a home in the event a valid title claim is instituted against the property. Buyers of co-ops, however, rarely purchase title insurance.
Since co-op buyers are not purchasing real estate, but rather shares in a corporation – accompanied by a proprietary lease that gives the buyer the right to live in the co-op, traditional title insurance would not cover the buyer's ownership interest in the shares. Consequently, the Title Rate Service Association (or Tirsa) created an endorsement to the standard title insurance policy that would cover co-ops. The Tirsa endorsement is known in the title industry as "leasehold title insurance." This endorsement insures the buyer's interest created by the proprietary lease.
Just as title insurance provides protection in the event that the title search conducted before closing failed to uncover a valid lien against the real property, the leasehold endorsement provides similar protection in the event the lien search failed to uncover liens against the seller of the co-op. However, the Tirsa endorsement never really caught on with co-op buyers.
As an alternative to the Tirsa endorsement, the State Insurance Department, approved the Eagle 9 policy for sale by title companies to co-op buyers. The Eagle 9 – unlike the Tirsa policy, is not a real estate policy with an endorsement. Rather, it is a policy specifically designed to insure the buyer's interest in the co-op. The Eagle 9 policy insures the buyer for loss and legal expenses resulting from claims arising against previous owners of the co-op.
Additionally, the Eagle 9 policy is significantly less expensive than the Tirsa policy.
Here are some instances where a co-op buyer should consider purchasing an Eagle 9 policy:
Seller is in bankruptcy
Buying from an estate or heirs of a deceased seller
Buying a foreclosed co-op (REO)
Federal tax lien filed against seller in another state (will not be found by a typical search in New York)
Considering the substantial investment involved in purchasing a co-op, the cost of the Eagle 9 policy, which is far less than title insurance for real property or the TIRSA endorsement, is a worthwhile outlay in order to protect your investment and give you peace of mind.