To determine whether severed improvements are real or personal property, the agent must thoroughly review the instruments creating the interest for the intention of the parties involved. Documentation must not only properly describe the improvements, title to which is being or has been constructively severed
from that of the land, but must also provide clear language assuring that the building and improvements are and shall remain real property. The agent must also obtain written verification that it is the intention of the parties that the improvements are not to be physically removed from the land to which they are affixed and there are no agreements to the contrary. In addition, there must be a lease agreement between the owner of the land and the owner of the improvements.
If title to a severed improvement is not insurable as an absolute or unqualified fee estate as outlined in the overview above, the leasehold estate in the underlying land may be insured and described under Schedule A as a leasehold estate if there is a recorded lease or memorandum of lease. (See also: Leasehold Estates.) The agent should also make an exception for any easements for access, maintenance, use, and support of such buildings and improvements which, although not necessarily constructed, may be implied by the separate estate or interests created by the severance. An exception must also be taken for the terms and conditions of the agreement by which title to the improvements was severed from the land. Easement created by express grant or reservation:
“Easement for the access, maintenance, use and support (QUOTE VERBATIM FROM INSTRUMENT CREATING THE EASEMENT) of the buildings and improvements situated on and excepted from the land described herein, as (GRANTED TO/RESERVED BY) _____ in deed recorded ___________.”
“Such easements or other rights for the access, maintenance, use and support of buildings and improvements situated on and excepted from the land described herein, as maybe implied from the severance of the title to buildings and improvements (GRANTED TO/EXCEPTED BY) _____________ in document recorded ____________________ as _____________________.”
“Terms and conditions of the lease by which the insured occupies the land described in Schedule A including the obligation to make payments under the lease.”
“Terms and conditions of the (name the agreement using the exact language) severing title to the improvements from the title to the land dated ____________, recorded _______________ as instrument/book _____________, page __________, in ___________________ County, State.”
All severed improvement transactions must be submitted to Agents National Title Underwriting counsel along with the Company’s Policy Authorization Request (for unusual underwriting risks).