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Research Title & Restrictions: Tip #7 for Buying Residential Lots and Land

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In our last post on the 8 Tips for Buying Residential Lots & Land for a New Home we discussed roads and access, including easements that may benefit your land. Now we will shift our focus to title restrictions and other restrictions that may burden your land.

Before buying a lot, you always should review the lot’s title and get owner’s title insurance. Reviewing “title” for a property typically includes an in-depth study of the parcel’s history through land records, maps, liens, legal documents and other facts on the public record that may affect a property.Photo of Title Insurance Policy Used by Property Owners for Title Restrictions and Coverage

This may sound boring, detailed and technical…and, well…it is. However, this is a critical subject for which you absolutely should involve the use of experienced professionals who can help you arrange for these items and evaluate whether there are any negatives – or deal breakers – related to them. The formalities of title insurance and other closing customs may differ from state to state, but a qualified buyers’ broker and/or real estate attorney will be able to hold your hand on this. We’ll help you understand what’s potentially at stake by explaining some of the title review process and describing some types of restrictions you may uncover.

Start with Title Insurance and a Survey

Title insurance and surveys work hand-in-hand and both are critical to obtain when you are buying land or residential lots.

Owner’s title insurance insures the status of a property’s title at the time of your purchase by looking at historical transfers for the property and outstanding liens, documents or other facts on the public record. You’ll receive a list of any documents or items that are “exceptions” to the title insurance – items that are not covered. These exceptions should be reviewed carefully by you and your team during your due diligence and before closing. Your contract should provide a time for you to object to negative title conditions that are found, and either 1) have the seller fix them or 2) let you terminate the contract.

A recent boundary survey of the land can show field conditions (e.g., encroachments by the neighbor’s fence), locate property in a floodplain, reveal access issues and confirm the accuracy of the property’s legal description. Your survey also should display easements or other plottable title exceptions found during the title review.

Without exception we always order title insurance and a survey, and review the materials carefully before making a purchase. Some people try to save money by skipping the survey, but we think this is unwise. Not only are they useful, but a survey also can allow you to remove a very broad “survey exception” that limits your coverage and is standard in title insurance policies.

Types of Restrictions

While your title review will help you find and evaluate specific documents or facts that affect the property, there also may be other restrictions and limitations on the use of your property that may not be detailed in your title review or covered by title insurance. Either way, a few types of restrictions and issues to consider:

  • Use Restrictions – These restrictions may limit you to a solely residential use, which could prevent you from starting that bed and breakfast or running a business out of the garage.  Other restrictions may include protected wildlife areas or things like no renting, no boats or RVs, no farm animals and even no trucks or SUVs allowed.
  • Maintenance and Appearance – Mandatory guidelines may describe your responsibilities for keeping your lawn cut, removing fallen trees, cleaning your siding or small details like fixing a leaning mailbox. Similarly, requirements may prohibit open storage of debris, unused vehicles on the lot, visible trashcans, holiday lights out of season, and signage (some even forbid “For Sale” signs).
  • Location of Home on Lot – Mandatory setbacks from the street, sideyards and rear can control where you locate your home on the lot. It’s helpful to ask your surveyor to plot the applicable setbacks on your survey too. Other rules may prevent you from subdividing your land.
  • Rules About Architecture and Construction – There can be rules against vinyl siding, the wrong color brick or that quirky mailbox shaped like a duck. Others prohibit sheds, detached garages, manufactured housing or houses smaller than a specified square footage. There also can be rules about height limitations, architectural styles and when your construction must begin.
  • Liens and Financial Matters – Some items are able to be easily removed from title…as long as a payment is made. Your title review will help you identify things like liens, judgments and mortgages that must be paid by the seller and removed from title before (or at) your closing.
  • Easements, Use and Service Agreements – Easements and use agreements can burden your land by allowing others like neighbors or utilities to have the right to enter, build on, use or restrict your property. Agreements also can impose obligations on you to maintain improvements, like roads, or to pay a homeowners’ fee for neighborhood services.
  • Other Site Conditions – Your site inspection may have helped you identify some conditions that require further research. Make sure your surveyor flags the property corners so you see the boundaries of the lot better from the ground. Is the boggy area you observed actually on the property, and will it affect where your front door is located?

Who Says I Can’t?

Most new lots in planned developments have restrictions that are designed to benefit the overall community by imposing uniform standards on each lot. These often are associated with property owners’ associations and architectural review boards that provide oversight and help review and enforce violations.

In other scenarios, your new lot could be burdened by rights that other individuals or companies have through easements, deed restrictions or liens that apply to your lot.

Some restrictions may be government-imposed through local zoning and subdivision rules that include standards like use restrictions, setbacks and height limitations. There may even be historic districts that prohibit certain types of architecture or uses.

Too many people have no clue what restrictions apply to their lot, and end up inadvertently violating rules. This can be very costly, because both property owners’ associations and the government often can make you remove new buildings or other improvements that violate their rules and even can impose liens for failing to comply. It helps to be informed.

The final post in this series will talk about the importance of having experienced professionals on your team.

Be sure to check out our page dedicated to Tips & Resources for Buying Lots & Land, which gathers many different helpful resources in one place for lot and land buyers and provides tips about using LotNetwork.com to help you in your search.

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