(Continued from December Newsletter, Volume 1, Number 5)
III. The Preliminary Title Opinion
When the 1989 Bar forms are used, specific access questions must be answered, such as: "Access to Public Right of Way? yes [ ]; no [ ]." If such access exists, obviously "yes" should be checked. If no such access exists, "no" should be checked, and either a schedule B exception to lack of a right of access will be taken in the commitment and policy (see IV.), or access will have to be obtained. If "yes" is checked, the attorney must then check whether such access (1) is "direct" (that is, does the land abut a public right of way) or (2) is over a private easement (that is, does the land have access to a public right of way over a private easement which easement in turn "goes over" a neighbor's land). If the access is over a private easement the Bar form preliminary opinion asks, "has a search been made of adjoining property on which the easement crosses? yes [ ]; no [ ]." If "yes" is checked, it will be helpful if the opinion states whether listed exceptions apply to (1) all of the land, including the easement; (2) the main land to be insured; or (3) the private easement area. For example, a deed of trust affecting the private easement area will at least have to be subordinated to the easement. If "no" is checked, the title insurance commitment (binder) will require a search of the title to the private easement land. A copy of the private easement should be attached to the preliminary opinion.
It is noted that if the opinion's legal description and/or survey clearly indicates that the land abuts a public right of way, but all of the opinion's access questions are left unanswered, the title insurer should not question access. Statewide Title's preliminary opinion form addresses access in a similar manner.
IV. The Title Insurance Commitment
A. Requirements regarding access questions.
If the preliminary title opinion indicates that there is no right of access (see III above), the commitment will set forth a requirement such as: "(a) a legally sufficient private access easement for the land must be properly recorded and (b) the attorney's preliminary opinion on title must be amended to cover the private access easement area. A copy of the easement must be furnished to the Company. The Company reserves the right to add exceptions regarding the private access easement area." Otherwise, the commitment and policy should take exception to lack of a right of access. See VI.
If the preliminary opinion indicates that access is via a private access easement but does not indicate that the title to the easement area has been checked the commitment will make a requirement similar to (b) of the requirement immediately above.
B. Setting out specific easements
If access is over or to be over a private access easement, commitment Schedule A should (1) state the status of title ownership of the fee parcel and the easement parcel at the effective date of the commitment; (2) state the fact that an easement as well as a fee interest is covered; and (3) describe the fee parcel and the access easement area, the easement area being described by either metes and bounds or by reference to an existent recorded or proposed (to be) recorded easement (usually non-exclusive).
As an alternate to the above, the commitment can describe just the fee parcel and not the easement parcel and the insured can rely upon the access insuring provisions discussed in VI. This approach is not recommended. See VI below regarding survey coverage.
V. The Final Title Opinion
A. Where prior commitment is issued
From the Final Title opinion the title insurer or its agent should be able to clearly tell whether any commitment requirements pertaining to access have been complied with. The "bar form" requires an affirmative statement. Statewide Title's form assumes compliance absent a specific note or exception on the final opinion to the contrary.
B. Where no prior commitment is issued
If a transaction closes without a preliminary opinion on title and a title insurance commitment, obviously, all access questions discussed above should be resolved prior to closing and should be addressed in the final title opinion or attachments thereto.
VI. The Title Insurance Policy Insuring Provisions
A. The policy cover provisions and case law
The prevalent policy forms most frequently used are the ALTA Owner's Policy (10-17-92) and the ALTA Loan Policy (10-17-92). There is also a leasehold form for the owner and lender and an ALTA Construction Loan Policy, all most recent forms being dated (10-17-92). Each policy contains numbered "insuring provisions", which are subject to printed "Exclusions From Coverage," printed "Conditions and Stipulations" and Schedule B Exceptions.
In each type of loan and owner's policy, the access insuring provision is insuring provision #4. That provision insures against loss or damage caused by "Lack of a right of access to and from the land." Item 1(d) of the Conditions and Stipulations of all policies defines the term "land" as follows: "...the land described or referred to in Schedule [A], and improvements affixed thereto which by law constitute real property. The term 'land' does not include any property beyond the lines of the area described or referred to in Schedule [A], nor any right, title, interest, estate or easement in abutting streets, roads, avenues, alleys, lanes, ways or waterways, but nothing herein shall modify or limit the extent to which a right of access to and from the land is insured by this policy."
Regarding title insurance and the right of access insured, see Kraus v. Title & Tr. Co. of Fla., 390 So. 2d 805 (Fla. App. 1980); Hocking v. Title Ins. & Tr. Co., 234 P. 2d 625 (Cal. 1951); Marriott Financial Services v. Capitol Funds, 217 S.E. 2d 551 (N.C. 1975), aff'g in part, rev'g in part, 209 S.E. 2d 423 (N.C. App. 1974); Lincoln Savgs. & Loan Ass'n v. Title Ins. & Tr. Co., 120 Cal. Reptr. 219 (App. 1975); Title & Tr. Co. of Fla. v. Barrows, 381 So. 2d 1088 (Fla. App. 1979). These cases stand for the following propositions: (1) the policy's insuring provision does not insure a particular type, location or width of access; (2) it does not insure the physical condition of the right of access, such as whether the access is physically open or physically "passable"; (3) it does insure reasonable access under the circumstances, which can include, for example, vehicular access for a commercial property; and (4) the access insuring provision is subject to the Exclusions From Coverage which would exclude liability, for example, for the failure to obtain "curb cut" permits. See the Marriott case, supra; and paragraph 1 of the policies' Exclusions From Coverage pertaining to zoning laws and governmental regulations. For additional materials, see E. Urban, "Commercial Title Insurance Underwriting," Commercial Real Property 1990 (Wake Forest CLE), p.p. 71-72 and 78; and P. Hart, E. Urban, L. Howell, R. Cardinal, D. Dorton and C. Burti, Examining and Evaluating Title To Real Property in North Carolina, p.p. 218, et seq. (P.E.S.I. 1995).
B. Setting up the policy's Schedules A and B
1. Method where easement is not described
If the land abuts a publicly dedicated road, often Schedule A of the policy will not (1) recite any easement interest in the road and (2) describe any access easement as an insured parcel. The insurer and insured rely upon the access insuring provision quoted in VI.A. above.
On occasion, if access to a publicly dedicated road is over a private recorded easement Schedule A will not refer to the easement or describe the easement as an insured parcel. In such a case, both the insurer and insured are relying upon the access insuring provision quoted above. However, this provision insures no particular route of access, so a more desirable approach is set forth in VI.B.2. immediately below.
2. Method where Schedule A insures and describes private easement
With this method, the relevant numbered items in Schedule A must make it clear that if, for example, a fee simple as to Tract 1 is insured and Tract 2 is insured as a private access easement, (1) Tract 1 is a fee simple interest vested in the insured (if the policy is an owner's policy) or the owner (if the policy is a loan policy); (2) Tract 2 is an easement interest likewise vested and (3) the legal description of each Tract is clearly set forth or otherwise identified with one tract labeled, for example, "Tract 1" and the other labeled "Tract 2." The easement tract is either described (1) by metes and bounds or
(2) by reference to a recorded access easement (usually non-exclusive).
3. Exceptions when a private easement is insured by any method above
Schedule B should note which exceptions apply to (1) the fee simple tract and the easement tract; (2) the fee tract only and (3) the easement tract only. If there is no current survey of the easement parcel, a survey exception limited to the easement parcel only will be needed in any policy (unless, for example, the policy is loan policy and survey coverage can be given without such a survey).
It is possible to obtain endorsements insuring, for example, that fee parcel 1 is contiguous to access parcel 2. An endorsement can also state that the access easement provides access to a named publicly dedicated street. See, for example, CLTA Endorsement Form 103.4.