A “basic” title insurance owner’s policy does not insure against loss related to the following items –
- parties in possession;
- unrecorded easements;
- survey matters;
- unrecorded mechanics’ liens;
- the “gap” (i.e., the time between the effective date of the last issued title commitment and the date the insured deed or deed of trust is recorded); and
- unpaid taxes, assessments and unredeemed tax sales prior to the year of closing.
Deleting, or insuring over, these “standard exceptions” makes for a policy with broader (greater) coverage. This greater coverage is referred to as owner’s extended coverage (“OEC”).
There are title requirements related to OEC. A closing affidavit addresses parties in possession and mechanics liens (items 1 and 4) among other matters. Payment at closing of any outstanding taxes and assessments, as shown on a tax certificate issued by the county treasurer, addresses item 6. An underwriter may require a survey if there are concerns about unrecorded easements or survey matters (items 2 and 3). Adverse matters appearing on a survey would be excluded from policy coverage.
In some circumstances an underwriter may refuse to delete one or more of the exceptions. For example, if a proposed insured property has new construction, an underwriter may refuse to delete the mechanics’ lien exception.
There is a charge for OEC (as with other policy endorsements). The amount depends on the type of property insured (i.e., commercial, residential or vacant land) and it may vary from underwriter to underwriter.