TItle & Encumbrances TITLE & ENCUMBRANCES RISKS & - - PDF document

TItle & Encumbrances

LOCAL AGENCY COORDINATORS: DAVID NARVAEZ, NORTHWEST REGION, YOUR NAME HERE?, OLYMPIC & SOUTHWEST REGIONS, and TERRI BROWN, SOUTH CENTRAL, NORTH CENTRAL & EASTERN REGIONS

February & March, 2020

TITLE & ENCUMBRANCES

RISKS & DOCUMENTATION

What is an Encumbrance & Why is it Important?

FOCUS AREAS:

• 1. Preliminary Title Commitments
• 2. Encumbrances (Special Exceptions)
• 3. Clearing Encumbrances
• 4. Documentation
• 5. Tools & Resources

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• 1. Preliminary Title

Commitments

• Provides property information:

– Vesting – Legal Description – Special Exceptions (Encumbrances) & Notes – Parcel Map – Recorded Exceptions

• Identifies Restrictions and Defects
• Tool to Reduce Risk of Loss

*The entire commitment must be in the acquisition file. – Including recorded encumbrances & subject map

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• 2. Encumbrances

MAY…

• Limit/Restrict Use of Property
• Create Financial Burden

TItle & Encumbrances

• Allow Claims from Others (Rights)
• Reduce Property Value
• Be Complicated (Quiet Title Action)
• Be Simple (Payoff)

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• 2. Encumbrances – Types

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Mechanic’s Lien

Taxes Leasehold

Option to Purchase

Mortgage

Reservations

Utility Easement

Water Rights Assessments Life Estate

Deed of Trust Mineral Rights Private Road

Real Estate Contract CC&R Judgments

• 2. Encumbrances – Common
• Easements (temporary & permanent)
• non-owner right of use
• Deed Restrictions/Restrictive Covenants
• run with land & affect use
• Encroachments
• illegal intrusion onto adjacent property
• Liens
• Collateral claim for payment of a debt

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TItle & Encumbrances

• 2. Encumbrances – Risks

Risks Associated with Accepting Encumbrances:

• Established Authority Level and Delegation
• Written Policy for Accepting Risk
• Risk Evaluated as to Impact to Project And

Deviation from Standards Documented  Correct Authority Approval Level

• What Constitutes Acceptable Risk – Dollars Versus

Property Rights

• Constructability – Conflicts Must be Resolved
• 3. Clearing Encumbrances

Clearing Encumbrances Based on Type of Acquisition – Fee, TE, Permanent Easement, Lease, etc.

• Fee – under $10,000 usually not cleared unless

matters disclosed that would make risk higher

 Bankruptcy, judgments, liens, child support, tax liens, foreclosure

• TE – any encumbrance that will directly affect the

area

 Mineral reservations, excavation, gravel reserved

• Permanent Easement – any impact to area and

same as fee

• Lease – depends on circumstances
• 3. Clearing Encumbrances

Four Simple Steps to Clearing Encumbrances:

• 1. Locate the Encumbrance
• Is it in the acquisition area or not?
• 2. Determine Action
• Does it create a financial burden?
• Does is restrict/conflict with agency use?
• 3. Take Appropriate Action:

– clear “delete” (prepare proof of record); OR – accept “subject to” (risk analysis/approval)

• 4. Documentation

– Encumbrance report, diary, correspondence, etc.

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TItle & Encumbrances

• 4. Documentation

Document for each encumbrance:

• Location (relationship to acquisition area);
• Action to be taken; must clear if conflict with

acquisition; A.“Subject to” (accept exception to title)

• policy or risk decision
• B. “Delete” (clear/remove exception from title)
• requires proof (of record)

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• 4. Documentation

… and:

• Explanation for Action

– Based on Location? – Based on Risk? – Based on Impact? – Method of Clearance – Include additional documents if needed

• photos, maps, utility plans, risk analysis/approval,

correspondence, etc.

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• 4. Documentation

If it’s not documented, it didn’t happen!

Sources in the acquisition file include…

• Diary: actions, decisions, approvals, etc.
• Agent’s Encumbrance Report (approved by agency)
• Escrow Agreement
• Correspondence: agency staff, lien holders, title

specialist, etc.

• Title Report & Instruments (with hand written notations)
• Utility Plans: showing located utilities

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TItle & Encumbrances

• 4. Documentation – Example

Preliminary Title Commitment

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• 4. Documentation – Example

Agent’s Encumbrance Report

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• 4. Documentation – Example

Title Insurance Policy

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TItle & Encumbrances

• 4. Documentation – Example

Title Insurance Policy

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• 5. Tools & Resources
• WSDOT ROW Manual

– Chapter 7 Title – Chapter 8 Encumbrances – Chapter 9 Instruments

• 9-11 Miscellaneous Clauses
• WSDOT LAG Manual

– Chapter 25, Section 25.8

• Title Clearing Checklist (LPA-004)
• Request to Accept Encumbrance (LPA-333 and LPA-

333a)

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• 5. Tools & Resources
• Secretary of State Corporations Search

(https://ccfs.sos.wa.gov/#/)

• Washington Courts Search (https://dw.courts.wa.gov/)
• Dept. of Revenue Business Lookup (https://dor.wa.gov/)
• Dept. of Licensing UCC Search

(https://fortress.wa.gov/dol/ucc/search.aspx)

• Title Company Representative
• Utility Plans/Surveyor

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