On today’s show we’re talking about the usefulness of your property and how the title report can help you understand what you’re buying.
You’re buying a piece of property. You pay the purchase price, and now it’s yours. But the truth is, it’s not that simple. There are so many things that can encumber the use of your property.
All kinds of things that affect your property can be recorded in the official records of a property.
To start with, the title report can tell you a lot about your property. There is an enormous amount of complexity in what seems like a pretty straightforward transaction. Sometimes these reports can be lengthy and boring to read. But they contain a ton of information about the history of a property. I recently received a title report that was 96 pages in length. It had all kinds of details, including when transfers happened between family members, loans taken out against the property, when they were repaid, when the owners were behind on their taxes, or their water bills. So much information is contained in the property records.
The first and simplest item is the deed. This is the ownership. Who owns it and under what kind of structure is it owned? Is it owned by a person, an entity like a company, or a land trust. If the property was transferred as a result of a foreclosure, the new owner would be listed on the property. But some areas have a right of redemption period after the transfer whereby the original owner can get their property back. For example, there is a rule in Philadelphia that says if a property is sold at the Sherriff’s tax sale, and the original owner was not properly notified of the impending sale, they have a right of redemption period whereby they can pay the back taxes owing and get their property back. How long is that redemption period? Get ready for this. It’s 21 years. That’s right, 21 years.
There is additional complexity coming from the various forms of encumbrances that can be attached to a property. This can be a lien. But there are other forms of encumbrances. There could be a right of way or an easement. These are sometimes used to provide utility companies the right to have a pipeline, or an electric transmission line cross your property. It might be a right for a neighbor to access your property for a driveway in order to prevent their property from being isolated.
Sometimes there can be a deed restriction recorded on title. It could literally say anything. It might say that the property is transferred on the condition that the any structure built on the property must be painted yellow. You can literally put that kind of restriction on a deed. That restriction might be temporary or perpetual. Unless you perform a full title search, you may not know what burdens you are signing up to. They’re contained in the history of the property.
I’m dealing with an issue on a property right now where one of the owners granted an easement to the electric utility company to have wires crossing the middle of the property. That easement was granted in 1938 and the property owners were paid a grand total of $4 for the right of way from the utility company.
From a practical standpoint, the electric utility is highly unlikely to ever enforce their right to access the property. But if I build a house in the easement, they could theoretically come to me one day and ask me to demolish the house.
Then you have to consider what new regulations might be in place. Just because a house exists on a property, doesn’t mean you’re permitted to modify what’s there. Many elements of the building code allow existing structures to continue in their current location. These are the so-called grandfathering clauses. But sometimes, the new rules say that if you make any modifications to the property then the new rules apply.
Pay very close attention to the title report and I recommend that you read every word contained in it.