What You Should Know About Title Insurance (Part 3)

By Laurie Murphy

In two prior blogs I discussed title insurance in general, what it covers and what it doesn't, introduced the two types of title insurance available in California (CLTA and ALTA policies) and discussed the coverage generally available and the exclusions which apply to a CLTA policy.  

Here, I discuss generally what an ALTA policy covers.  In general the ALTA policy covers everything that a CLTA policy covers, plus it also covers certain "off-record" risks not covered by the CLTA policy.  The ALTA policy covers not just the owners but those who succeed the owner by operation of law.  The risks insured against include the standard risks of incorrect vesting, undisclosed liens and encumbrances, unmarketabilty of title, lack of lien priority, and the invalidity or unenforceability of an insured mortgage lien on title.  It also includes coverage of unrecorded liens water rights, mining claims and discrepancies and conflicts in boundary lines and shortages in areas not reflected in the public records.   

Because an ALTA policy will provide coverage for off-record defects in title and boundary line defects, the insurer will usually survey the property prior to issuing the policy.  Based upon what it learns from the survey and/or any inspection, it can exclude certain items, e.g. an open or notorious encroachment.  The costs of the survey and the additional coverage provided is why the ALTA policy is more expensive than the CLTA policy.  ALTA policies are typically used in commercial transactions.   

In California, there is a hybrid CLTA/ALTA homeowner's policy available for owner occupied 1-4 family housing or condominium units.  This policy typically costs 20% more than a CLTA policy and is generally only available for natural persons which includes a trustee.  This hybrid policy in addition to covering what a CLTA policy covers also covers adverse claims to title or to any interest in the land or claims that limit the use of the land including easements, claims based upon leases, contracts or options, claims based upon forgery or impersonation, neighboring structures encroaching upon the land as well as the cost of removing encroachments on neighboring land or easements, CC&Rs violations, violations of building permit laws, subdivision laws or regulations and zoning laws. 

If you have any questions regarding title insurance, please contact: Laurie Murphy