Title Company Wrong, but Buyer has No Recourse

  Question: Our family has owned a convenience market in Glendale for more than 30 years. The lot next door to us has always been vacant. I remember my father saying years ago that if this lot was developed we might have a problem with parking. Last year we were notified that the owner of that lot submitted plans to Glendale to develop a beauty salon on that lot.  Although a beauty salon, or almost any business, on that lot would be better for us than a vacant lot, I was concerned about what my father said about parking. I contacted a title insurance company to get a preliminary title report. This preliminary title report, for which I paid $300, showed that there was no parking problem between our two lots. Therefore, we did not oppose the construction of the beauty salon, which is scheduled to open in two months. The owner of the beauty salon, now has shown me a recorded parking easement over our property that gives the beauty salon owner the right to have 20 parking spaces on our property. The loss of our property for 20 parking spaces will cause significant damage to our business. When I contacted the title insurance company to ask for some compensation for the loss of our property because of their mistake, the title insurance company admitted their mistake but said that they had no liability. What gives? Why did I pay the title insurance company $300?

  Answer: A title insurance company will generally not have liability for a mistake made in a preliminary title report and will only have liability if a title insurance policy is issued. Arizona Revised Statutes, Section 20-1562(5). The reason: For only a nominal amount such as your $300 payment, the title insurance company should not have liability without payment of the full premium for a title insurance policy. Therefore, you probably have no claim against the title insurance company.