Insuring title to the improvements in one party and title to the land upon which they are affixed in another party is often referred to as a “severed improvement”, “split fee”, or “constructive severance” transaction. As indicated earlier, the party owning the improvements also must have a properly created and documented leasehold estate in the land.
It is important to determine whether the severed improvements are real or personal property. Provided the improvements have, or will continue to be, permanently affixed to the land, and the estates or interests have been properly created, separately described land and improvements are capable of title insurance coverage for both owners and lenders if there is a concurrent recorded leasehold interest in the land held by the owner of the improvements.
Depending upon the instruments creating the interest, the policy will show title vested in fee simple to the severed improvementss and in leasehold as to the land. Before insuring such an interest the documents creating the severed improvements must be carefully reviewed to determine if a fee absolute or qualified interest is created in the improvements. A qualified ownership is generally created in a lease transaction where the conditions of ownership are limited by its terms, and upon the happening of a certain event, such as the expiration of the lease, the estate will revert back to the lessor. If the interest in the improvements is qualified, Schedule A of the policy should reflect that the ownership in the improvements is vested in a qualified fee.
A mobile home would not qualify for insurance coverage as a severed improvement because of its readily movable nature. A mobile home would remain personal property unless it was permanently affixed to the property when it would then become an improvement to the real property and non severable. You may never separately insure mobile homes; the policy must only describe the land upon which the mobile home sits.