Introduction

Title exceptions are one of the most common hidden causes of closing delays in residential and commercial real estate. They show up on a title commitment or preliminary report as items the title company will not insure unless they are cleared, removed, or expressly endorsed. Although many exceptions are minor and routine, others can add days, weeks, or even months to a transaction if not handled proactively.

How title exceptions appear (Schedule B and the title commitment)

When a title company completes a title search it issues a title commitment (sometimes called a preliminary report). That commitment tells buyers and lenders what will and won’t be insured at closing. Most title commitments use a two-part structure:

  • Schedule A: Names, property legal description, and the proposed policy amounts.
  • Schedule B: Exceptions — the recorded matters and defects the insurer excludes from coverage unless cleared.

Common examples in Schedule B include easements, recorded liens, covenants, rights-of-way, encumbrances, and recorded judgments. Familiarize yourself with Schedule B early; it’s the clearest signal of items that could delay closing.

Common types of title exceptions and why they delay closings

  • Easements and rights-of-way: Utility easements, access easements, and drainage easements are recorded and usually remain exceptions. If an easement prevents planned construction or a desired use, the buyer or lender may require a modification, vacation, or written clarification from the easement holder.

  • Liens (tax, mortgage, mechanic’s, judgment): Most liens must be paid or subordinated before a lender will fund. Unresolved tax liens or federal tax levies are especially serious because they typically take priority over later mortgages and require formal payoff or release documentation.

  • Restrictive covenants and HOA rules: Covenants that limit use or require HOA approvals can affect loan eligibility or property plans. Lenders commonly review HOA documents and may require clarifying letters.

  • Boundary and survey issues / encroachments: A missing or outdated survey can reveal boundary disputes or encroachments that require a new survey or agreement with a neighbor.

  • Recorded but vague documents: Old probate records, abandoned mortgages, or ambiguous instruments often require follow-up research or court action to clarify ownership rights.

Who is affected?

Buyers, sellers, and lenders are all affected:

  • Buyers: Face delays, unexpected costs, or limits on how they can use the property. Buyers typically want an owner’s title policy that insures against covered risks not listed as exceptions.
  • Sellers: May need to clear liens or provide documentation proving the property is transferable.
  • Lenders: Will usually require certain exceptions to be cleared (or insured around) before releasing funds because their mortgage constitutes a major financial exposure.

How title exceptions create delays — real-world timelines

Timing varies by exception type and by state, but here are practical ranges I see in practice:

  • Simple clerical corrections or documentation updates: 1–7 days. Examples include correcting a name spelling on a recorded release.
  • Utility or minor easement clarifications: 1–14 days if a utility company quickly signs an agreement. If a vacation of easement is needed, it can take months.
  • Liens requiring payoff: 3–30+ days, depending on how quickly a creditor issues a release after payment. Federal tax liens or municipal code liens can take longer.
  • Boundary disputes, quiet-title actions, or court clearances: Several weeks to many months depending on litigation or survey requirements.

Common resolution tools and professional strategies

  1. Order the title search early
  • As soon as you have a signed contract, ask your agent or attorney to order title. Early discovery gives time to negotiate remedies.
  1. Read Schedule B carefully and ask for explanations
  • Ask the title officer to explain each exception and its likely impact. Not all exceptions require action; some are standard (e.g., recorded tax parcel numbers) and merely informational.
  1. Require seller-paid clearances in the purchase contract
  • Where appropriate, include a contract clause that the seller must deliver marketable title free of specific liens or that all payoffs will occur at closing.
  1. Escrow holdbacks and payoff instructions
  • If a lien payoff cannot be confirmed before closing, parties can agree to an escrow holdback: funds remain in escrow until the lien is released. Lenders will approve some holdbacks but not all — get lender sign-off early.
  1. Title endorsements and indemnity agreements
  • Title companies can issue endorsements (policy add-ons) that expand coverage for particular exceptions, or sell an indemnity policy to bridge a limited exposure while more permanent resolution is obtained.
  1. Negotiate with lienholders or use reconveyance
  • Contact the creditor or contractor and request a payoff statement in writing. Many construction or mechanic’s liens are cleared rapidly when a contractor is paid or agrees to sign a release.
  1. Use a quiet-title suit or corrective deed when necessary
  • For complex ownership or boundary disputes, a quiet-title action or corrective deed may be needed. These are legal processes that take time and legal counsel.
  1. Get a current survey and HOA package early
  • Lenders and buyers often request updated surveys and HOA documents; obtaining them early reduces last-minute surprises.

Case examples (anonymized and practice-based)

  • Mechanic’s lien from prior renovation: A title report revealed a recorded mechanic’s lien set by a contractor who hadn’t been paid by the prior owner. We obtained a payoff statement from the contractor and negotiated a seller payoff at closing. The closing delayed three weeks while payment instructions were finalized.

  • Utility easement discovered before fence installation: A buyer planning a fenced yard discovered a recorded utility easement across the rear property. After confirming the easement’s location via a recent survey, the buyer adjusted construction plans. Impact: a one-week delay for final survey and buyer acceptance.

  • Old tax lien with missing release: A county tax lien recorded decades earlier showed no release in the chain. Clearing required contacting the county tax office, producing proof of prior payment, and obtaining a recorded release—an action that took six weeks in this case.

When can you close with exceptions in place?

You can close with exceptions, but understand the trade-offs:

  • Lenders will often insist that high-priority liens and certain exceptions be cleared before funding. If the lender will not accept an exception, clearing or escrow solutions are necessary.
  • Buyers can accept monetary offsets for unresolved exceptions (credit at closing), but they assume the post-closing risk for that issue.
  • In limited cases a lender may accept an escrow holdback, or the title company may provide an endorsement to protect the lender (but endorsements typically have specific limits and conditions).

Professional tips and best practices

  • Communicate: Keep the title officer, lender, buyer, and seller in frequent contact. Timely communication avoids surprises.
  • Document everything: Get payoff statements, releases, and written confirmations directly from creditors and county offices.
  • Include contract contingencies: Use a clear title contingency and allow for time to cure discovered exceptions.
  • Consider an owner’s title policy: An owner’s policy protects you after closing from covered claims (see our primer on title insurance basics).

Common mistakes to avoid

  • Waiting until the week of closing to order title.
  • Assuming title insurance will cover every problem — many items are expressly excluded in Schedule B.
  • Ignoring minor exceptions that could become costly later (e.g., small encroachments that prevent planned improvements).

Frequently asked questions

Q: Can title insurance be issued if exceptions are on the title?
A: Yes — title insurance is often issued that specifically lists exceptions. The policy insures against covered risks that are not listed as exceptions. If an exception is severe, the title company may require the exception be cleared before issuing certain coverages.

Q: What is an owner’s policy versus a lender’s policy?
A: A lender’s (mortgagee) policy protects the lender’s interest in the property up to the loan amount. An owner’s policy protects the owner’s equity and is optional but strongly recommended for buyers. Both policies are based on the conditions in the title commitment.

Q: Who pays to clear title exceptions?
A: That depends on contract negotiations. Many payoffs (mortgages, liens) are seller obligations, but buyers may agree to handle certain items for credit. Always negotiate and document responsibilities in the purchase agreement.

Authoritative resources

Internal resources and further reading

Professional disclaimer

This article provides general information about title exceptions and typical approaches to resolving them. It is educational and not legal advice. For advice tailored to your transaction, consult a licensed real estate attorney, title officer, or your lender.

Final takeaway

Title exceptions are routine but not trivial. The single best defense against closing delays is early discovery: order title immediately after contract signing, review Schedule B with your title officer or attorney, and build time and contingencies into your contract for clearing issues. With clear communication and a proactive plan, most exceptions are resolvable without derailing a sale.