Bulletin: MU000048

Dear Associates:

This Bulletin will address the specific situation where parties to a Contract for Deed attempt to establish legal access to real property by creating an easement in the terms of a Contract for Deed, but fail to grant the rights in the deed given in fulfillment of the contract.

Generally, Contracts for Deed are used as a form of owner financing of real estate. An owner and a buyer enter into an agreement in which the owner agrees to give the buyer a deed after the buyer pays the owner a certain amount of money. The contract often requires the buyer to make payments over time until the entire amount is paid in full. During the term of the contract for deed, the buyer is entitled to possession of the real estate and may be required to keep the property insured and pay the real estate taxes.

Under both Montana and Idaho law, once the parties have executed a binding contract for deed for the sale of land, equitable title vests in the purchaser and the vendor holds legal title only as security for payment of the balance of the purchase price. A deposit of a deed in escrow, to be delivered to the purchaser upon completion of payments, does not give the purchaser full legal and record title until all the payments are made.

In order to create a valid insurable easement for access, there must be a dedication, grant, or reservation and conveyance in a Deed or other instrument capable of conveying title in the chain of title for real property. A grant or conveyance of an easement in a Contract for Deed is not sufficient to create an easement for ingress and egress to a particular parcel of property for the purpose of issuing a Commitment or Policy of title insurance. Instead, the deed executed in fulfillment of the contract must contain a grant of the easement to create a specific right to ingress and egress which is insurable under the Policy.

COMPANY POLICY: If the Contract for Deed contains an easement, restrictions or covenants, you must set out the easement, restrictions or covenants created by the notice of contract in Schedule B of the commitment and policy. You may not insure that an express easement exists when the fulfillment deed on the contract fails to transfer expressly the rights referenced in the contract or notice of contract. If you do not see an easement for ingress and egress in the chain of title or if a valid easement is not created in the fulfillment deed on the contract at closing, you must take exception to lack of legal access on the policy and commitment.

IF YOU HAVE ANY QUESTIONS REGARDING THE ISSUES RAISED BY THIS BULLETIN, PLEASE CONTACT YOUR LOCAL UNDERWRITING PERSONNEL.