QUESTION: I bought a vacant lot that was supposed to be 5,000 square feet. But the title insurance company didn't report an easement for about 1,600 square feet. As a result, I can't build the house I want unless the house size is reduced. Can I get payment from the title insurance company for my losses?
ANSWER: If you purchased an owner's title insurance policy, the title insurer must either pay to get the undisclosed recorded easement removed, or pay you the diminished market value of your property with the recorded easement, which the negligent title insurer failed to disclose to you.
Of course, if you didn't buy an owner's title insurance policy, even if you paid for a mortgage lender's title policy, you have no claim against the title insurer (although the mortgage lender has a valid claim under the lender's title policy).
However, if the easement was not properly recorded or obvious from a visual inspection, such as a power line easement, then it is not a valid easement and the title insurer has no liability. Consultation with a local real estate attorney is advised to determine your legal rights against the title insurer.
Get tax advice
I would like to put my name on the title of the home I share with my mother. We are about to sell it. I want to know what I need to do to make that happen. I share in the upkeep and the payments. I was told having my name on the title is the best way to assure funds when the sale is completed. Is this true?
If your name was not on the title when you paid the mortgage interest and property tax payments, you are not entitled to claim any itemized tax deductions for those expenses.
If your mother gifts you a partial interest in her house, perhaps 50 percent, that makes you obligated for 50 percent of the capital gains tax. The reason is when you receive a property gift, you take over the donor's (presumably low) adjusted cost basis for that gift.
Even if the house has been your principal residence at least 24 of the last 60 months before its sale, you can't yet qualify for the $250,000 principal residence tax exemption of Internal Revenue Code 121. The reason is your name was not yet on the title at least 24 months before the home sale.
Your mother's gift to you of part of the house could be a major mistake for both of you. Before she gives you a quitclaim deed for any interest in her house, you should both consult your tax adviser to discuss all the details, especially the disadvantages.
Robert J. Bruss is a San Francisco lawyer, broker and nationally syndicated real estate writer. Send general real estate questions to him at Robert Bruss, 251 Park Road, Burlingame, CA 94010 or www.bobbruss.com. He cannot handle individual requests for assistance.
