TItle & Encumbrances TITLE & ENCUMBRANCES RISKS & DOCUMENTATION 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 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 2 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 3 1 TItle & Encumbrances 2. Encumbrances MAY… • Limit/Restrict Use of Property • Create Financial Burden • Allow Claims from Others (Rights) • Reduce Property Value • Be Complicated (Quiet Title Action) • Be Simple (Payoff) 4 2. Encumbrances – Types Mechanic’s Lien Leasehold Utility Easement Taxes Mortgage Option to Purchase Reservations CC&R Water Rights Mineral Rights Assessments Life Estate Deed of Trust Real Estate Contract Judgments Private Road 5 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 6 2 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. 9 3 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) 10 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. 11 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 12 4 TItle & Encumbrances 4. Documentation – Example Preliminary Title Commitment 13 4. Documentation – Example Agent’s Encumbrance Report 14 4. Documentation – Example Title Insurance Policy 15 5 TItle & Encumbrances 4. Documentation – Example Title Insurance Policy 16 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) 17 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 18 6 .