It is common practice to make exception for rights or claims of parties in possession not shown by the public records. This standard exception is designed to protect the Company from claims of adverse possessors, claims of non-record interests, and from tenants under unrecorded leases. This exception relates to both actual occupancy of the property or any other possessory interests such as easements or driveways. Such standard exception does not alleviate the responsibility of the issuing agent to examine the public records and to make specific exception for outstanding possessory rights which are of record.
In cases where the purchaser or mortgagee knows of or should have knowledge of the possessory interest of a third party, such purchaser/mortgagee is no longer considered to be a “bona fide purchaser for value without notice” and will not, therefore, be afforded protection against such possessory interests under the policy. Generally, an affidavit obtained from the seller or mortgagor, stating that they are the sole parties in possession, is sufficient to delete the standard exception for parties in possession.