Facts: An owner of an undeveloped parcel of real estate intended to divide it into two parcels. The owner held a title insurance policy which did not disclose and exclude from coverage a restriction preventing development. The owner proceeds with preparation of a map to parcel the property when they discover the undisclosed easement which was not excluded from coverage and prohibits division of the property. The owner makes a claim on the title insurer, which accepts liability and tenders an amount of loss based on the property’s undeveloped value as a single parcel. The owner obtains an appraisal of the property based on its highest and best use as two parcels of property under a likely parcel map yet to be finalized by the local planning agency.
Claim: The owner claims they are entitled to losses based on the difference between the highest and best use value of the property as two parcels and its value based on its reduced use as a single parcel.
Counterclaim: The title insurance company claims the owner is entitled to losses based on the value of the undevelopable property, not as property capable of parceling since the value is set on the date the undisclosed easement was discovered when the property had not yet been divided into two parcels.
Holding: A California appeals court holds the owner’s compensation for the loss in value is based on the reasonable likelihood of parceling the property in the near future, not as undevelopable property since the property’s highest and best use was its development as two parcels. [Tait v. Commonwealth Land Title Insurance Company (2024) 103 CA5th 271]
Tait v. Commonwealth Land Title Insurance Company
Related Reading
Real Estate Principles Chapter 52: Title insurance
Real Estate Principles Chapter 29: The appraisal report
