If a review of the recorded plat or survey discloses a violation of restrictions, the agent must determine the risk posed by such violation. If the violation is minor and it has been determined that there is little or no possibility of the violation resulting in a loss to the Company because the statute of limitations may have run on enforcement or some other similar reason, affirmative coverage may be given after securing approval from local underwriting counsel as a separate endorsement as follows:
“A review of the survey dated ______ by ______________ discloses that the west side of the house located on the premises encroaches 6 inches over the building restriction line along the west boundary of the property However, this policy hereby insures against loss or damage which the insured shall sustain by reason of the entry of a final court order or judgment which constitutes a final determination and requires the removal of the existing improvements as a result thereof.”
In some jurisdictions specific endorsements exist to provide affirmative coverage for minor violations of restrictions. With approval of Agents National Title underwriting counsel, such endorsements can be used to provide this coverage.
Major violations which may not be affirmatively insured against should be brought to the lender’s attention immediately. The loan should not be closed until amended closing instructions have been received from the lender authorizing the agent to proceed with the closing and accepting the exception in the final title policy.
The agent should also disclose the matter to the purchasers/borrowers at closing and obtain a written acknowledgment of the violation(s).
As an alternative, with approval and guidance from your local Agents National Title counsel you may Suggest that the parties seek a variance from the local governmental authority with jurisdiction of such matters if the setback that is violated is one established by local law or ordinance. Such variance will have to be granted before affirmative coverage may be granted, and even if granted, an exception will still have to be taken for the violation. If the violation is of a setback established by a recorded agreement or plat of subdivision, then all of the parties or successors to the original agreement will have to execute a modification of the agreement allowing the violation, and in the case of a setback established by subdivision plat, the owners of the properties in the subdivision will have to execute a modification allowing the violation. Once the restriction has been modified, with the approval of local underwriting counsel affirmative coverage may be granted.
It is important to stress than any affirmative coverage constitutes extra hazardous risk and as such any requests by a proposed insured for affirmative coverage for violations of use restrictions must be approved by Agents National Title’s underwriting counsel. The affirmative coverage must be on a separate endorsement and may require the payment of an additional hazardous risk premium. Before approving such language, it must be proved that:
1. The use restrictions are ancient;
2. The character of the neighborhood has drastically changed so as to make the violated use a reasonable use of the property in conformity with the present uses and character of the neighborhood;
3. The properties immediately surrounding the properly to be insured have similar violations of the use restrictions;
4. No recent attempts have been made to enforce such restrictions.
Contact your local Agents National Title counsel for further guidance and written authorization.