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Ian M. Livaich, left, and Megan E. Moyer, right, of Saul Ewing Arnstein & Lehr.

Most people have title insurance on their property but some may be unfamiliar with the concept, protections or limitations of title insurance. Title insurance is a form of insurance that protects a property owner from financial loss caused by defects in title to a property. When property is purchased or financed, and sometimes even when property is leased or other property rights are acquired, it is advisable to obtain title insurance to protect the rights associated with the property. A request for title insurance will begin with the issuance of a title commitment from a title company. The title commitment is essentially a promise to the future policy holder that the title company will issue an insurance policy for the property after the terms and conditions set forth in the commitment are met. The commitment will contain the title company’s requirements for policy issuance, detail any liens or encumbrances that affect the property and specify any exceptions or exclusions from the policy coverage. After receiving the title commitment, the property owner should carefully review the commitment to identify any issues related to the property. While there are slight differences in a title commitment for residential properties in comparison to commercial properties, the process of reviewing title is similar for both types of transactions.

One of the most critical areas of the title commitment is the list of exceptions that the title company will exclude from the policy coverage. Exceptions to the title insurance coverage come in two forms: standard exceptions, which apply to all properties, and specific exceptions, which apply to the particular property under review. The specific exceptions from coverage are identified by the title company after it conducts a search of the public records related to the property. Any documents recorded against the property will be listed as specific exceptions in the title commitment, such as deeds, mortgages, easements and other agreements between prior owners of the property.  It is crucial to understand each document listed as an exception, as certain restrictions or limitations can be imposed on the property and can ultimately affect one’s ownership rights related to the property. Below is a summary of a few categories of exception documents to be specifically aware of when reviewing title:

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