Title issue, strategies to close?

[Chrish M.]

I have had a ANR lot under agreement for 9 months as the buyer. I pulled a permit to build a single family home, lined up the financing, etc. However, I have been unable to close because the seller failed to disclose the litigation between them and a 3rd party abutter who sued him when he started to perform sitework. The seller was doing sitework without a permit so the town stopped him. 

The 3rd party abutter has since sold his home, and the next owner has since sold the abutting home. The town and the seller were both sued by the original 3rd party abutter, this went all the way to superior court over the 2007-present. The town has been made clean and no damages or anything by the superior court. The seller hasn't paid damages and the 3rd party abutter has an opportunity to appeal. 

Long story short the seller's lawyer is saying they can provide a title insurance policy with the following exceptions: 

1.A disclosure of the pending lawsuit to the Buyer;

2.A financial indemnity (only) in the event there is a claim under the policy based upon this lawsuit.

My title lawyer has been advising me the whole time to wait for the litigation to end. My question is, do these title exceptions look acceptable? Is there a risk that I end up not being able to build or to pass title in the future to a buyer? Also, is there a bond that the seller can put up for the price of the lot or any legal contingency? I would like to close because the location is great, the lot is at a good price, but I have never run into this and want to avoid the risks mentioned. 

Thanks,

Chris