The land owner is claiming that his property is either worthless or less valuable because his title work did not disclose the easement agreement for installation and maintenance of the water tank. The easement itself was not obvious at his time of purchase because the tank had not been installed. The owner’s claim is against his title insurer.
As an aside, the owners in this position often claim that they would never have purchased their property had they known about the defect of which they now complain, and therefore, the title company should now make them whole by buying the property for what they paid for it. Such claims seem more frequent recently as owners look for way to recover losses dealt by recent market conditions.
The courts have consistently read the measure of loss in situations of this type as follows: "Liability should be measured by the diminution in the value of the property caused by the defect in title as of the date of discovery of the defect, measured by the use to which the property is then being devoted." Overholtzer v. Northern Counties Title Ins. Co., 116 Cal.App.2nd 113, 253 P.2d 116 (1953); Allison v. Ticor Title Ins. Co., 907 F.2d 645, (7th Cir. 1990); 979 F.2d 1187 (7th Cir. 1192).
Your appraisal assignment then is as follows: What is the diminution (loss in value) as determined by what the property was worth without the water tank easement as of its use as the date of discovery, minus what the property would be worth with the easement, as of its use as of the date of discovery.
You didn’t mention the use of this parcel but it is an important consideration.
You have several factors that need to be considered. The value of the land area devoted to the tank itself should be relatively easy to measure. The easement for the tank is not just for the presence of the tank but for ingress and egress to maintain the tank and any water lines to it. Does the presence of the tank diminish in any way the use or enjoyment of the existing land use, for instance, does it reduce the view or present a detrimental view influence?
The view and ingress/egress issues may not be a factor depending upon the use to which the property was being devoted. For instance, the presence of the tank would not diminish the view as much or at all if the land was devoted to a commercial or agricultural use, nor would the effect of ingress/egress associated with the easement.
Your fee for such an assignment should be large enough to make your client fall out of their chair. Typical clients for such work are those property owners making claims of defect against their title insurance policies and the title insurers themselves. The owners are more fee sensitive and often hire the cheapest talent without regard to the issues involved. They often apply more pressure to have the valuation result for an outcome in their favor. As clients, their attorneys are less fee sensitive but are constrained by the pockets of the clients. The attorneys are also less likely to apply pressure. The title insurers make the best clients in this instance because they have already set aside reserves for title claims. To them, your appraisal fee is merely a cost of doing business. In fact, for many title defect claims, the cost of performing the appraisal is greater than loss in value from the title defect itself. In addition, most title insurers understand that courts and juries hate insurance companies. The insurers go out of their way to avoid apply pressure for one result or another.
