The Bizarre Ways Your Home Can Be Taken from You Legally Part 2
Think paying your mortgage on time every month means you’re safe from losing your home? Think again. There are many bizarre ways your home can be taken from you legally. Or, even if you don’t lose your home, the value of your home can be diminished, and your home can be rendered umarketable, or unsellable. You’ll be stuck underwater on your mortgage with no exit plan.
Take mineral rights. That’s a hot-button issue you find in the news a lot these days, especially as fracking continues its upward trend. For the longest time, when you bought a piece of land, you were presumed to own that land from the very core of the earth to the atmosphere above your plot.
Nowadays, developers are likely to sell you a piece of real estate where you own what’s on the surface – but not what’s underneath. The developer retains the rights to minerals and other natural resources beneath the surface of your real estate. That means they can sell those rights to other companies or lease access to these resources and continue to profit from the land where your home sits – and you have no say in the matter.
For example, Reuters reported in 2013 about a development called the Valencia Golf and Country Club in Naples, Florida. The developer, D. R. Horton, sold many homes in this new development, many to retirees like Robert and Julie Davidson, while retaining the mineral rights for themselves. The Davidsons fell in love with their brand-new, three-bedroom, Spanish-style home, right on the fairway near the fifth hole. They had no idea that the developer owned the mineral rights beneath their feet until the investigative reporter from Reuters told them what his research had turned up.
At the time of publication, this article also reported that the same developer had plans to build developments in Virginia with similar arrangements regarding mineral rights. The article lists many other large companies that are doing the same thing across the country.
Other problems that can interfere with your homeownership rights – incorrect property lines and municipal infrastructure. The Daily Journal of Commerce out of Portland, Oregon, reported that a homeowner hired a contractor to build a swimming pool in his backyard. Before excavating, the contractor searched city records to double check for pipelines, property lines, and other things that responsible contractors look for before digging.
In his search, he found a properly recorded (but previously undisclosed) underground sewer easement running practically through the middle of the homeowner’s backyard. (If you’re not familiar with the term “easement”, it’s a legal term that describes when one property owner has rights to use the land of another property owner for a limited use, such as access to certain infrastructure or the right for certain infrastructure – in this case, a sewer line – to pass through.)
The title insurer missed the easement, which had been recorded and known by the city. Fortunately, the homeowner had bought title insurance. The insurance company settled with the homeowner for the diminished value of his property. Without title insurance, the homeowner would not have been compensated for the financial hit his property took due to this easement.
Finally, there’s the problem of missing heirs. Imagine a long-lost cousin, an embittered first wife, or an estranged youngest child of a previous owner knocking on your door one day (or more likely, their lawyer knocking on your door). They tell you that your property was sold to you without their consent or buy-in. They still have a legal claim to all or part of the property. Even if their claim is as little as one-tenth of your property, could you afford to pay someone one-tenth of what your real estate is worth in order to settle their claim? What if you all end up in court?
The cost in legal fees and wasted time will be astronomical. However, if a title search doesn’t turn up this problem before closing, title insurance will cover you for the legal fees and the cost to settle with the heir in question.
And on the flip side, what happens if someone finds this defect in your property title prior to you selling it to someone else? Until that heir is found, your real estate becomes unmarketable – meaning you won’t be able to close on it. If you bought title insurance when you first bought your real estate, then that insurance should cover you for damages of having an unmarketable property.
All of these scenarios are scary – and if the title searches are done right, then that helps safeguard against problems like these.
But unexpected things can turn up. And when they do, it can be devastating to you as a homeowner.
Title insurance isn’t like other forms of insurance that protect you from a specific kind of loss that can happen in the future. Title insurance pays out based on past events that could come back to bite you. Title insurance is based on “loss prevention theory”. That means a greater amount of time, money, and effort is spent on the front end trying to prevent title problems from ever occurring in the first place.
With or without insurance, would you ever really want to buy a piece of real estate with defects like any of these – or any of the other examples from Part 1 of “The Bizarre Ways Your Home Can Be Taken from You Legally”?
The best steps you can take to protect not just your investment but your home and your lifestyle are first to make sure you work with a reputable title company or real estate attorney (in Virginia, you can use either) to check your title before you close on a property. Then, look into title insurance when you close. It’s a one-time payment, and it can protect your property for as long as you and your heirs own the property.
Then, you’ll be better prepared should someone try to take your home from you legally.