Antonio (Tony) Lopez was sitting in his attorney's office looking over the title report for a tract of land he was trying to buy. The attorney explained to him that everything was good with the purchase except for access. A recent survey revealed a gap of around 14 inches between the deeded right of way and the land. And as it was explained to Tony he might not be able to get to the property if he purchased it.
He left the attorney's office disappointed as he had his heart set on acquiring the 50 acre tract. The neighboring land owner had not been friendly to him since Tony was an outsider from New Jersey and he knew there would be no use in approaching him to get a right of way. When Tony returned home he called his realtor to tell him he wouldn't be able to go through with the purchase because of the access problem.
"What do you mean access is short by 14 inches?" the realtor asked. "Look, you can jump across 14 inches. Don't let something that small keep you from buying your dream property," the realtor had argued. Tony still felt unsure and informed the realtor he was backing out.
The next day the realtor called Tony and said he had some good news. The seller's attorney had advised him he was going to get title insurance over that 14 inch gap and Tony would have access insured. There would be no reason now for Tony not to go through with the purchase.
Should Tony go through with the purchase since he is being offered title insurance coverage over the access problem? What are some of the issues he should consider? Assume his purchase contract calls for marketable title to be delivered.
If he accepts the seller's offer what will this mean in the future when he sells the land? Would he be able to offer marketable title to his purchaser?
What exactly would the title policy cover? The 2006 ALTA Owner's Policy, on the face page, under "Covered Risks" the policy provides:
COVERED RISKS SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B, AND THE CONDITIONS, BLANK TITLE INSURANCE COMPANY, a Blank corporation (the "Company") insures as of Date of Policy and, to the extent stated in Covered Risks 11, 13, and 14, after Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of:
4. No right of access to and from the Land.
What would be the title company's obligation in the event the adjoining landowner decided to block his access in light of the coverage given above? Title policies operate in two ways, first as a contract of indemnity to indemnify the insured against out of pocket covered losses. And second as a contract to defend the insured when they have been sued and the suit involves the insured land and the suit raises an issue covered under the title policy.
Given the facts of Tony's situation and taking into consideration what a title policy will cover should Tony go forward with the purchase of the 50 acre tract of land accepting title insurance coverage for the access defect?