After the contract of sale has been fully signed by both the Seller and the Purchaser, the purchaser will contact a Title Insurance Company and will order Title Insurance and a Title Report.
Unlike a homeowner’s or auto insurance policy that is renewed every year, and the payment of premiums are ongoing, A Title insurance policy is a one-time purchase and a one-time premium, paid at the time of closing.
A Title Insurance policy ensures that the property that the purchaser is buying was rightfully owned by the seller and that there are no legal impediments (judgments, liens, etc) to the legal transfer of the property. The title report that is produced outlines the legal status of a property and all of the related information on its ownership. Several key components in the title report include information on the county zoning laws, property value, whether there are any violations of record on the property, whether the home has a proper certificate or occupancy whether all real estate taxes are current.
Once the closing occurs, if someone were to then claim that the Seller of the property purchased did not have the legal right to sell it, then the title insurance policy would kick in and cover all of the damages that this person is seeking. Under no circumstances would a purchaser ever lose his home to such a claim, which is the main purpose of the title insurance policy.
In addition to ordering a title report, a purchaser will also order a survey of the property. A surveyor will provide a type of map detailing the property's legal boundaries. The survey will also include a written description of the property, the street address, the location of buildings and adjacent properties, and any improvements a homeowner has made to the land since it was first constructed.
In many, many cases problems arise when fences that have been installed on the property are not properly placed on the actual property lines. When a fence is installed over the property lines, whether inside or outside of the property lines, an “out-of-possession” condition is created.
For example, if your next-door neighbor installed a fence 1 foot inside of your property line, then, under certain conditions, your neighbor may be able to assert an ownership interest in that 1 foot or property. (See figure 1 below)
In New York, Real Property Actions and Proceedings Law, Section 501 deals with a legal doctrine called “Adverse Possession.” Adverse Possession is defined as follows:
1. Adverse possessor. A person or entity is an “adverse possessor” of real property when the person or entity occupies the real property of another person or entity with or without knowledge of the other's superior ownership rights, in a manner that would give the owner a cause of action for ejectment.
2. Acquisition of title. An adverse possessor gains title to the occupied the real property upon the expiration of the statute of limitations for an action to recover real property pursuant to subdivision (a) of section two hundred twelve of the civil practice law and rules, provided that the occupancy, as described in sections five hundred twelve and five hundred twenty-two of
this article has been adverse, under claim of right, open and notorious, continuous, exclusive, and actual.
3. Claim of right. A claim of right means a reasonable basis for the belief that the property belongs to the adverse possessor or property owner, as the case may be. Notwithstanding any other provision of this article, claim of right shall not be required if the owner or owners of the real property throughout the statutory period cannot be ascertained in the records of the county clerk, or the register of the county, of the county where such real property is situated, and located by reasonable means.
In lay terms, Adverse Possession is created when someone occupies a portion of your land, adverse to your ownership of same. An example of this would be if you were to own 100 acres of land and someone built a house on the 99th acre. In that case, if you never objected to that person occupying that 1 acre, that person, after other conditions are met, may actually become the legal owner of that parcel of land. One way to ensure that this does not occur, would be simply to put up a sign around the perimeter of the 100 acres that states you are the owner. For many people traveling up to the wooded areas in New York State, you may notice metal signs on trees which state “POSTED”. This is the way the owner of the land is advising anyone seeking to claim ownership of the land by adverse possession, that there is a rightful legal owner and that the owner is laying claim to his/her property.
So, getting back to the fence issue, if your neighbor (or even the person from whom your neighbor purchased the property) installed a fence, but failed to properly place it directly on the property line, the surveyor will note this in his report. If the fence is on the adjacent property more than 1 foot inside of the actual property line, then the title insurance company hired by the purchaser will not insure that parcel of land unless and until either: 1) the fence is moved on to the actual property line (this is rarely done as it is expensive and would ruin the look of the property); or 2) A boundary agreement is entered into between the 2 property owners.
A typical simple boundary agreement sets forth the amount the fence has encroached on to the adjacent property and, most importantly, that the ownership of the parcel of land that the fence has cut off is not being asserted by the next-door neighbor.
Take, for example, figure 1
The area shades indicate where Property A installed a fence. The fence is located 2 feet inside of Property B’s property line. As such, pursuant to RPAPL §501, if certain conditions have been met, then the owner of Property A could actually assert a legal ownership claim over that 2 feet of property. While this scenario almost never actually arises (i.e., when a next-door neighbor asserts and is granted an ownership interest in that strip of property on his neighbor’s property), a title insurance company will not insure that piece of land. The boundary agreement will cure this issue and the property can then be sold with all parties knowing that the shaded areas is owned by Property B, and that Property A has been provided with a legal license to use that parcel, but that no ownership rights go along with the use of the said parcel.