Quick Answer
Title exceptions are matters that the proposed title insurance policy will not insure against. They are listed on Schedule B of the title commitment and generally become exclusions from coverage in the final policy. Some exceptions are standard; others are specific to the property.
When you read a title commitment, the exceptions section tells you what the policy will not cover. Understanding exceptions is crucial because they define the limits of your title insurance protection.
What Does an Exception Mean
An exception means the title insurer will not cover losses related to that specific matter. If a problem arises that falls under an exception, you cannot make a claim on your title insurance policy for that issue. You would bear the loss yourself or pursue other remedies.
Common Types of Exceptions
- Easements: Rights others have to use portions of the property, such as utility easements or access rights
- Restrictive covenants: Rules that limit how the property can be used
- Mineral rights: Reservations of oil, gas, or mineral interests to prior owners
- Taxes: Current and delinquent property taxes, special assessments
- Liens not being paid: Liens that will remain on the property after closing
- Encroachments: Improvements that cross property boundaries
- Leases: Existing tenant leases or occupancy agreements
Does an Exception Mean Something Is Wrong
Not necessarily. Many exceptions reflect matters that are normal and expected. A utility easement for power lines or a standard subdivision restriction are common and typically do not detract from property value. An exception becomes a concern when it affects how you intend to use the property or when it represents an unresolved legal issue.
Standard vs. Specific Exceptions
Title commitments typically include two types of exceptions. Standard exceptions are general categories of matters excluded unless evidence is provided to remove them. Specific exceptions are matters found during the title search that apply to this particular property. Both types deserve attention.
Can Exceptions Be Removed
Some exceptions can be removed, modified, or limited if acceptable evidence is provided to the title insurer. Others represent valid property rights that cannot be removed. For more detail, read Can Title Exceptions Be Removed?
Why Buyers Should Care
Exceptions directly affect your ownership rights and the protection your title insurance provides. An exception for a restrictive covenant could limit what you can build or how you can use the property. An exception for an easement could mean neighbors or utility companies have rights across your land. Reading and understanding exceptions before closing helps you make informed decisions.
For more on the relationship between requirements and exceptions, see Requirements vs. Exceptions on a Title Commitment.
Key Takeaway
Exceptions define what your title insurance will not cover. Some are standard and expected; others are property-specific and may affect your use or value. Review exceptions carefully and ask about any that concern you.
FAQs
Are standard exceptions the same on every policy?
Standard exceptions are similar across policies from the same insurer, but they can vary between companies and states. They typically cover matters like surveys, encroachments, and rights of parties in possession.
Can I negotiate which exceptions appear on my policy?
You can discuss concerns with your title company and ask about removing exceptions where documentation exists to support removal. However, some exceptions reflect valid, recorded property rights that cannot be removed.