Chopping down a tree for the holidays may seem like a pretty harmless activity, but it actually brings up a fairly contentious property issue. Timber rights allow an individual to own all or part of the trees on a property without actually owning the ground where they grow, and this can lead to some interesting title insurance questions.
Title insurance only covers rights in real property—meaning land and any improvements attached to it. The physical condition of land is not insured, including things like the quality of the driveway or whether the land is located in a designated floodplain. This distinction can be difficult to define, and title issues relating to trees sprout up in some unique ways:
In Alabama, a plaintiff purchased 335 acres of land, along with a title insurance policy. The title company failed to identify a timber deed that gave someone else the right to cut trees on the property. So, the new owner sued the title insurance underwriter over the omission.
The underwriter argued that the timber deed was beyond the policy scope because timber is a part of the property’s physical condition, and is not an estate in land. The Alabama Supreme Court found this unpersuasive, holding that because the timber deed was recorded in the county’s public records, it should have been located in a properly performed title search, making the underwriter liable for loss or damage incurred due to missing the document.
A similar situation popped up in Texas, where the owner purchased approximately 130 acres of land and a title insurance policy. Later, the owner discovered a timber company cutting trees on the property, who claimed to have a recorded timber deed. But, what they actually had was a wild deed—meaning it did not come from a previous record owner and therefore was not a part of the chain of title.
In this instance, the title insurance underwriter was not liable when sued for the loss of the trees. Wild deeds do not impart constructive notice on purchasers, so they do not fall within the title insurance policy’s definition of public records.
Because the timber company’s interest in the property did not come from a person or entity with actual rights to the trees, their unauthorized entry onto the property was a trespass. Trespass is a tort that does relate to the legal ownership of land. Accordingly, there was no liability for the underwriter as the dispute did not relate to rights in real property.
In North Carolina, a plaintiff purchased the timber rights to 712 acres of land and a title insurance policy. However, the owner later discovered that 179 acres of the property were subject to a municipal ordinance that prohibited timbering.
The owner sued the title insurance provider for the economic loss, but their title insurance policy actually contained an exclusion for government regulations restricting the use of land.
Ordinances are a form of government regulation and do not fall within a title insurance policy’s definition of public records, unless they are recorded and indexed against the property. That was not the case here, so the Court held that the plaintiff was not entitled to compensation under the title insurance policy.
So if you’re looking to invest in your own little forest paradise, make sure you understand the exceptions and exclusions within your title policy. Have any other questions about timber rights? Feel free to send us questions at firstname.lastname@example.org.
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