Zwiren Title Agency, Inc - ZTA Blog #Land Use

Land Use Regulation & Title Insurance

Wed, 30 Apr 2025 13:19:00 -0400

Land Use Regulation & Title Insurance

Title insurance generally does not cover any matters relating to zoning or land use. There is an exclusion in the standard title policy with respect to not covering loss relating to laws, ordinances, permits or regulations relating to use, occupancy, dimensions, subdivision, and environmental protection. Effectively this excludes coverage for zoning, planning and land use matters. However, there is a way to get some coverage.

Title insurance underwriting involves a review of the County land records, as maintained in accordance with the Recording Act. It also involves a review of certain records maintained in the Superior Court, Bankruptcy Court, Tax Collectors’ Offices and other public records. However, the laws, ordinances, permits and regulations that impact a property with respect to zoning, planning and land use are not as uniform and simple to address as the County land record matters. It is hard to imagine what title insurance underwriting would look like if a title company had to search every government agency, law, statute and ordinance, and determine how it impacted the property, if there was a violation or if there was a potential issue.

Even with the layers of complexities, there has been an evolution of the title insurance product which includes two ways to obtain limited insurance coverage with respect to these types of issues. Both options include additional cost. One of the options requires additional proofs, which can also add additional costs to obtain.

Residential Properties – The Enhanced Policy

In the residential environment, certain limited coverages with deductibles and maximums are available with the Enhanced Policy. It has a higher premium than the standard policy and includes certain standard lender’s endorsements; however, it is only available for 1-4 family owner-occupied residences. Additional covered risk items referenced on an Enhanced Policy include violation of existing zoning law, building permit violations and subdivision law violation. In some cases, the maximum loss payment is capped at $10,000 or $25,000, depending on the type of claim. This may not seem like a huge benefit for the Enhanced Policy, but these coverages are only some of the dozens of additional covered risks provided, most of which are not similarly capped.

While standard underwriting does not require obtaining proofs regarding these additional covered risks, it might be prudent for a title agent to make further inquiry if the property use obviously does not match the surrounding area or if other red flags are noticeable. To optimize the coverages available in the enhanced policy, a survey is highly recommended or else all the additional covered risks are subject to the general survey exception.

Residential & Commercial Properties - Endorsements

In the commercial environment, additional coverages regarding these matters are sometimes requested in the form of the following endorsements: Zoning ALTA 3 series, Tax Parcel ALTA 18 series and Subdivision ALTA 26.

The Zoning ALTA 3 series includes 4 separate options: Zoning; Zoning – Completed Structures; Zoning – Land Under Development; and Zoning – Completed Improvement – Non-Conforming Use. For Zoning Endorsements, the title insurance underwriter often requires the review to include a standard Zoning Report, including, but not limited to PZR Reports often obtained by the lender, or other form of Zoning Letter from the municipality.

Although our office cannot be held to this expectation on every transaction, there have been a few transactions we were able to issue Zoning Endorsements without any proofs. In one case it was a car dealership that pre-dated the municipal code. We were able to obtain historical aerial photographs from the client that were included in a newspaper article and displayed in the dealership. Combined with other historical information found online, the title insurance underwriter accepted that the dealership’s land use predated the municipal code and was willing to issue the endorsement without any confirmation from the municipality.

In another case, a Zoning Endorsement was requested on the eve of a refinance closing for a large commercial building The lender did not previously require a Zoning Report or Zoning Letter; however, due to Paula’s experience on a Board of Adjustment, she was familiar with navigating municipal code. By presenting the municipal Zoning Map and code to the title insurance underwriter in a formal memorandum, we were able to get authorization to issue the Zoning Endorsement without further proofs. This prevented a closing delay and saved the borrower thousands of dollars. Although some title companies have the capacity and expertise to assist in working around a requirement for proofs regarding zoning as a part of issuing the endorsement, it is not always the case.

The ALTA 18 series include references to Single or Multiple Tax Parcel options and coverages. Until we saw a transaction where this endorsement was relevant, we did not perceive much use for this series of endorsements. In a commercial refinance for several million dollars, the lender reviewed the property for its current use as a truck yard with a related owner-occupied business on it. Years prior, the owner subdivided the property into 12 residential lots and had a proper filed map recorded, which dedicated a portion of the property to the municipality as a street. This meant the property could only be considered as the 12 filed map lots and excludes the area that was dedicated as a street; however, the municipality never assessed the lots separately. The municipality advised that they didn’t separately assess the lots, because a required sewer utility installation was not started for the subdivision. This posed more issues than just not being able to issue an ALTA 18 Single Tax Parcel for the loan policy. The lender never actually asked for this endorsement; however, this transaction brought to light its value.

The ALTA 26 Subdivision Endorsement contains the following language: The Company insures against loss or damage sustained by the Insured by reason of the entry of a final and non-appealable judgment or order by a court of competent jurisdiction setting aside or invalidating the Title because the Land does not constitute a lawfully-created parcel according to the subdivision statutes and local subdivision ordinances applicable to the Land.

If the Subdivision Endorsement is to be issued, the title agent must review the public records and make sure a subdivision deed or map was properly filed and signed, or that other evidence of a proper subdivision is satisfactory. A municipality can request the Court to void a deed that violates subdivision law after the deed is recorded. Without specific additional title coverages through the Endorsement or Enhanced Policy, this risk of loss would not be covered by title insurance.

Zoning and planning are not only interesting but also important for understanding how a property may be affected by specific land use regulations and municipal ordinances. While title insurance generally does not cover any matters relating to zoning or land use, there are other ways to get coverage for both residential and commercial properties. Working with a title company that is competent and knowledgeable on land use regulation topics is key for navigating title coverages in this area.

Fineberg, Lawrence Joel (2021, Jan). New Jersey Title Practice: Chapter 116: Zoning and Planning; Land Use Regulation. New Jersey Land Title Institute. 2021.

Easements

Wed, 01 Nov 2023 11:24:00 -0400

Easements

An easement is a non-possessory right to enter and use land in the possession of another and obligates the possessor not to interfere with the uses authorized by the easement. It may be more broadly described as a right for a property owner to use the land of another property. An easement which runs to benefit of the grantees and to their heirs will be construed as being perpetual in duration; however, an easement can be granted for a certain period of time, such as 10 years. There are two main categories of easements: appurtenant and in gross.

An easement appurtenant benefits a particular parcel of land, known as the dominant estate and burdens another parcel of land, known as the servient estate. A conveyance of the dominant estate also passes the benefit of the easement, while a conveyance of the servient estate passes with it the burden thereof. Easements appurtenant are generally considered perpetual because they “run” with the land.

The easement may be exclusive, benefiting only one party, or non-exclusive so it benefits several parties who have the right to use it in common. It is important to remember that the dominant estate owner may not use an appurtenant easement to benefit property other than the dominant estate. For example, if A, B, and C are owners of contiguous lots, and only A’s lot abuts a street, (and B’s and Cs’ lots are landlocked) an easement granted by A to B to pass over A’s lot for access to the street may not be extended to allow C to cross A’s lot without A’s consent.

An easement in gross does not benefit any parcel in particular. This type of easement may indirectly benefit another parcel by enhancing its value and there is no dominant or servient estate. Easements in gross were originally held to be non-transferable but the modern view is that an easement in gross is transferable by the holder thereof. An example of an easement in gross is a right-of- way for high-tension power lines that cross over a property. The utility company would be the grantee of the easement and in most utility easement cases, the easement does not benefit a particular adjacent parcel owned by the utility company, therefore there is no benefitting party or dominant estate.

Creating an Easement

There are generally three ways to create an easement: grant or reservation, implication (including necessity), or prescription. The instrument creating the easement must be executed by the owner of the land which is to be burdened by the easement. If more than one person owns the land, all owners must sign, or the easement is invalid.

Easement by Grant or Reservation

An easement is created by grant or reservation through the use of a written instrument. The grantor may “grant” the easement to the grantee or the grantor may reserve an easement to the grantor in a deed of conveyance; however, a reservation may not be created in favor of a third party by attempting to “reserve” it in a deed of conveyance. Additionally, an easement may also be created by depiction on a filed map, notwithstanding the lack of a separate, written instrument establishing it.

Easement by Implication (Including Necessity)

An easement by implication arises by operation of law. It is created by judicial interpretation of the circumstances surrounding a conveyance of land. An easement by necessity is a form of easement by implication and is created when there has been unity of ownership and a subsequent separation of the parcel results in the grantor or grantee owning a landlocked parcel. The key to establishing an easement by necessity is the original common ownership. For an easement by necessity there is no requirement that one portion of the land has been used for the benefit of the other prior to severance. The four required elements to establish necessity are:

1. Prior common ownership of the dominant and servient estates
2. Transfer of one of the parcels (severance/ separation)
3. Necessity for an easement at the time of severance/separation; and
4. Continuing need for an easement.

Easement by Prescription

Finally, an easement may be created by prescription in a way similar to the acquisition of a fee simple estate by adverse possession – the use must be adverse, hostile, continuous, uninterrupted, visible, and notorious. Easements by prescription must be distinguished from easements by implication/necessity.

For example, if Owner A walks across Owner B’s land every day for a period of 20 years, despite Owner B’s demand that A stop, Owner A may have acquired a prescriptive easement over Owner B’s land. However, it is important to keep in mind that a license or permissive use cannot ripen into a prescriptive right. Therefore, if A had been granted permission by B to walk across B’s land, or if B tolerated A’s use of B’s land without protest, no easement is created. However, if the use continues for a sufficient period of time after permission is revoked, there could be a prescriptive easement.

Termination of Easements

An easement may be terminated or extinguished through written instrument, merger, terms of the instrument creating the easement, overburdening, abandonment, or estoppel.

By Written Instrument/Merger:

A written instrument, such as a release or deed, given by the owner of the dominant estate to the owner of the servient estate will serve to extinguish an easement. In addition, an easement could terminate automatically by its own terms if it has a specific timeframe in it. A merger of the dominant and servient estates will also destroy an easement. Additionally, the holder of an interest senior to the easement may, under certain circumstances, be able to destroy it.

By Abandonment:

An easement may also be terminated through abandonment; however, the mere non-use of the land is not unusually enough to establish an abandonment. The non-use must also be accompanied by other actions on the part of the holder of the easement, which the servient owner relied upon to his detriment. To verify the termination, one would obtain a Court Order or written agreement with the other party.

By Overburdening:

Overburdening or misuse of an easement can also result in its destruction when a dominant estate subjects an easement to a use far beyond the original contemplation of the parties; however, it is only applicable in extreme cases. As a general rule, where the dominant estate is subdivided, an easement appurtenant insures to the benefit of each subdivided parcel. So, one should not generally assume that an easement has been destroyed by overburdening merely on account of the subdivision of the dominant estate.

By Estoppel:

If the owner of a dominant estate, by his or her words, action, or conduct, indicates that the easement is no longer needed or useful, and the owner of the servient estate relies thereon to his or her detriment, the dominant estate owner is prevented from later asserting the validity of the easement. For example, a dominant estate enjoys the benefit of a right-of-way easement over the servient estate. The owner of the dominant estate, John, is aware that the owner of the servient estate, Jan, intends to construct a building over the area affected by the easement; however, John does not object to Jan’s plans. After the construction of Jan’s building has been completed, John demands that Jan demolish the building because it obstructs the easement. Jan refuses on the grounds that John did not object before the building was constructed. Therefore, John could be estopped from enforcing the easement. A Court Order may be necessary to effectuate this formally.

Unenforceable Easements

Certain easements are unenforceable because of the manner of their creation, or for other reasons. Some examples of easements that may be considered unenforceable are:

easements not executed by all owners of the property at the time of creation
easements not properly recorded or indexed in the chain of title; and
unrecorded easements.

Fineberg, Lawrence Joel (2021, Jan). New Jersey Title Practice: Chapter 4: Easements Generally. New Jersey Land Title Institute. 2021. (Pages 4-1 - 4-10).