How to read an ANSI encoded file containing special characters

It would seem sensible if you going to have such policies that you would also have team agreed standard encoding. To be honest, I can't see why any team would use an encoding other than "Unicode (UtF-8 with signature) - Codepage 65001" (except perhaps for ASPX pages with significant non-latin static content but even then I can't see how it would be a big deal to use UTF-8).

Assuming you still want to allow mixed encodings then you next need a way to determine which encoding a file was save in so you know which encoding to pass to ReadAllText. Its not easy to determine this from the file however using Encoding.Default is likely to work ok. Since its most likely you have just 2 encodings to deal with, the VS (UTF-8 with signature) and a common ANSI encoding used by you machines (probably Windows-1252).

Hence using

 string content = File.ReadAllText(pendingChange.LocalItem, Encoding.Default);

will work. (As I see Jon has already posted). This works because when the UTF-8 BOM (which is what VS means by the term "signature") is present at the start of the file the supplied encoding parameter is ignored and UTF-8 is used anyway. Hence where the file is saved using UTF-8 you get correct results and where ANSI is used you are most likely also to get correct results.

BTW if you are processing file headers wouldn't ReadAllLines make things easier?.

Use Encoding.Default:

string content = File.ReadAllText(pendingChange.LocalItem, Encoding.Default);

You should be aware, however, that that reads it using the system default encoding - which may not be the same as the encoding of the file. There's no single encoding called ANSI, but usually when people talk about "the ANSI encoding" they mean Windows Code Page 1252 or whatever their box happens to use.

Your code will be more robust if you can find out the exact encoding used.