Owner's Policy Standard Exceptions and their removal in Michigan

By
Title Insurance with Reputation First Title Agency

Owner's Policy Standard Exceptions and their removal in Michigan:

Many times during my career, I have had a buyer tell me: "My (insert lawyer, realtor or friend here) told me that I need to get my owner's policy without Standard Exceptions, whatever that means."  This is good advice, but the buyer does not know what a Standard Exception is or why they needed a policy without them. 

Exceptions are matters which are not covered by the title policy.  Exceptions come in two varieties, Standard Exceptions and Specific Exceptions and are located in Schedule B Section II of the commitment for title insurance.  Standard Exceptions are "boilerplate" exceptions, they are the same on each commitment, although they can vary slightly from region to region. 

The Standard Exceptions we use are:

  1.  Any discrepancies or conflicts in boundary lines, any shortages in area, or any encroachment or overlapping of improvements.
  2. Any facts, rights, interests of claims not shown by the public record but that could be ascertained by an accurate survey of the Land by making inquiry of persons in possession thereof.
  3. Easements, liens or encumbrances or claims thereof not shown by the Public Records
  4. Any lien or right to lien for services, labor or material imposed by law and not shown by the Public Records.

So why are the Standard Exceptions important?

The purpose of the Standard Exceptions is to limit the liability of the title insurer for matters that are not disclosed in the public record, or matters that would be shown by a survey or inspection of the premises.  If the insured suffers some form of loss as a result of a matter that is a Standard Exception, such loss will not be covered by the policy.  Therefore, we commonly get requests from buyers to remove the Standard Exceptions.

Removal of Standard Exceptions 1 through 3:

The decision to remove the Standard Exceptions is made on a case by case basis by the title insurer.  Typically, Standard Exceptions one through three can be removed by an affidavit from the seller and commonly coupled with a survey and an acceptable surveyor's certificate.  The survey and affidavit will be reviewed by the title insurer or their agent and may result in additional Specific Exceptions shown on the policy in lieu of the Standard Exception.   An example of this would be some form of encroachment onto the property by a fence disclosed by a stake survey certified to the title company.  The Standard Exceptions could be removed, but a Specific Exception for the encroaching fence would be created and added to the commitment as the title insurer will not wish to pay for loss or damages resulting from the encroachment.

Removal of Standard Exception 4:

Standard Exception four addresses liens for services, labor or material imposed by law and not shown by the public record.  For existing structures, this exception may be removed with an acceptable affidavit from the seller stating that if any services, labor, or material have been provided to the land within the last 90 days, they have been paid for. 

For new construction projects, standard exception four may be removed upon acceptable proof that all services, labor and materials provided to the land have been paid for or that 90 days has passed since the construction project was completed.  The acceptable proof will likely include acceptable sworn statements and appropriate waivers evidencing that the project has been completely paid for.

Remember if you want the Standard Exceptions removed, the title insurer will review each matter on a case by case basis and may make additional Specific Exceptions, so make sure to read your commitment!

Comments (4)

Letitia Stevenson
BHHS Fox & Roach | www.DelawareValleyRE.com - Greenville, DE
Listing Agent DE/PA/MD, Digital Marketer & Coach

John, Welcome to Active Rain! Active Rain is a great place to share your knowledge, expertise and thoughts, as well as network and learn so much from the vast pool of talent already onboard.

Welcome Aboard and Much Success!

Jun 22, 2010 03:14 PM
Sergio Rebollo Jr.
Real Estate TeamMates - Miami, FL

Welcome to ActiveRain. This is a great community to network with others as well a great place to learn from other's experiences and knowledge. I've enjoyed it; I hope you enjoy it as well.

Jun 26, 2010 10:59 AM
Sergio Rebollo Jr.
Real Estate TeamMates - Miami, FL

Welcome to ActiveRain. This is a great community to network with others as well a great place to learn from other's experiences and knowledge. I've enjoyed it; I hope you enjoy it as well.

Jun 26, 2010 10:59 AM
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

I have been involved in several transactions where surveys uncovered critical encroachments or violations of minimum setbacks.

Jun 29, 2017 06:45 PM