Title Problems: What Would You Do?

Pulled from our archives and decades of experience, here are title problems we hope you never have to see!

Presented by Kay M. Creasman, VP & Virginia State Counsel

Title Problem: Builder constructed a residence on a corner lot, so the house angles toward the corner rather than facing either street. The new plat shows that the house encroaches 18” into the building setback line at one corner. Can we give affirmative coverage to the owner and/or the lender for the encroachment?

Discussion: First question is what type of building setback line is being violated? One established by the locality or one established by the restrictive covenants (enforced by the Property Owner’s Association)?

If it’s a restrictive covenant violation determine whether this is a new subdivision with many homes being constructed or whether it is what’s often called a “tear down and rebuild.” Also need to know how many houses are in the subdivision.

Resolution: If it’s a violation of local ordinances require a variance from the locality. Each locality has independent rules which may be part of their zoning ordinances. This might be waived for the loan policy if the violation had existed for a long time period, but this is new construction.

If this is a violation of a restrictive covenant we’d evaluate the number of homes in the subdivision, how the property visually looks compared to other properties, what it takes to obtain permission of the property owner’s association to allow the violation, and all other relevant facts that can be obtained. Then a business decision is made as to whether we will give the lender coverage.

In neither case will affirmative coverage (ALTA 34) be given with the owner’s policy.

Some people argue that there can never be a problem with things like this so it should be insurable. If there’s no chance of a problem then there’s no need for insurance, is there? In one case several decades ago, a builder was told by the County building inspectors that the residence was violating the setback and needed to be moved. The builder ignored the inspectors, completed the home and was shocked when the title company needed a variance. The locality refused and builder had to remove front 10’ of the house to comply with the county regulations. The country kitchen in the front became a galley kitchen with a strange small sitting room at the front on the other side of the entrance. Problems like this are real.