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09.06.2016 Title Endorsement Basics By: Elizabeth Hodge Carr & Erin B. Fleeger

Title insurance is issued using standardized forms of policies and endorsements. The most commonly used forms for commercial properties are those promulgated by the American Land Title Association (ALTA), a nationwide title insurance industry group.  A title endorsement is an addition to or limitation of title insurance coverage that is attached to a title insurance policy.  Endorsements provide coverage that tailors the policy to fit the needs of the insured for a specific transaction.  There are approximately 80 ALTA-approved endorsement forms from which the insured may select additional coverage. While endorsement forms are standard, requirements for each vary. 

In order to ensure full coverage, it is of utmost importance that you are aware of the specifics that an underwriter will require before issuing a particular endorsement and that you provide for ample lead time to fulfill these requirements.  Your coverage is only as good as your endorsement.  Some endorsements require no additional submissions to the underwriter and may be of interest if your timeline and budget permit.  Below are some of the most commonly issued endorsements, a basic explanation of the coverage they provide, and the requirements necessary for issuance.

ALTA 3 Series

The ALTA 3 Series endorsements, the “Zoning” endorsements, to a loan or owner's policy provide insurance as to the applicable zoning classification and authorized use of the land.

The ALTA Endorsement 3-06, Zoning Unimproved Land, is designed for vacant land.  It provides insurance against loss or damage sustained due to the failure of the land to hold a particular zoning classification and against certain specified uses not being permitted under the zoning ordinance(s) in effect.  Underwriting requirements may include the following:  review of the zoning maps and ordinances, zoning report, zoning compliance letter, attorney’s opinion or owner’s affidavit with respect to current use and no knowledge of violations.

The ALTA Endorsement 3.1-06, Zoning-Completed Structure, is designed for improved property and insures the zoning classification and authorized uses under that classification.  This endorsement also insures against a final court order prohibiting the present structure, and requiring removal or alteration of the present structure, because of violation of the zoning ordinance as to area, width or depth of the land as a building site, floor space area of the structure, setback of the structure, height of the structure, or number of parking spaces.  The underwriting requirements generally include those required for ALTA 3-06, as well as evidence of issuance of an occupancy permit in the case of recent construction.

The ALTA Endorsement 3.2-06, Zoning – Land Under Development, is designed for unimproved land with the contemplation of improvements being constructed according to specific plans and specifications.  Underwriting requirements include the submission of site plans and specifications for review. 

Environmental Protection Liens

The ALTA Endorsements 8.1-06 and 8.2-06 are commonly referred to as Environmental Protection Lien and Commercial Environmental Protection lien, respectively.  These endorsements insure against loss or damage sustained due to any recorded environmental liens not otherwise shown as an exception to title in Schedule B of the policy.  Endorsement 8.1-06 is available only for loan policies that cover residential property and requires a customary search of the land records.  Endorsement 8.2-06, on the other hand, is available for loan or owner’s policies, applies only to commercial property, and necessitates no additional underwriting requirements.

Restrictions, Encroachments, Minerals

The ALTA 9 Series offers a variety of coverages related to divestment of mortgage liens, violations of restrictions and encroachments.  This endorsement is commonly known as the “Comprehensive Endorsement” because it was designed to consolidate in a single endorsement many of the various coverages often requested or required by institutional lenders.

The ALTA Endorsements 9-06 and 9.7-06, Restrictions, Encroachments, Minerals – Loan Policy, are available only for loan policies.  These endorsements address violations of covenants, conditions, limitations or restrictions, existing encroachments, damage resulting from the exercise of mineral rights and a final court order requiring the removal of an encroachment because of a violation of setback lines.  The ALTA Endorsement 9.7-06 is designed specifically for land under development and adds coverage relative to improvements to be constructed on the land based upon plans and specifications.  Further, ALTA Endorsement 9.10-06, commonly referred to as Restrictions, Encroachments, Minerals – Current Violations – Loan Policy, provides the same coverage as ALTA 9.0, except that the coverage includes current violations at the Date of the Policy on an “as needed” basis.

The ALTA Endorsement 9.3-06, Covenants, Conditions and Restrictions – Loan Policy, is similar to the 9-06 and only applies to loan policies.  It does not, however, insure over encroachments or damage resulting from the future exercise of any right to use the surface of the land for the extraction or development of minerals. 

The ALTA Endorsements 9.1-06 and 9.2-06, Covenants, Conditions and Restrictions – Owner’s Policy, are available only for owner’s policies.  Endorsement 9.1-06 applies only to unimproved property, and Endorsement 9.2-06 applies to improved land.  These insure against violations of any covenant, condition or restriction, other than as disclosed in Schedule B of the policy. Endorsement 9.2-06 also adds coverage against enforced removal of an improvement resulting from a violation of a setback line.  In addition, ALTA Endorsement 9.8-06 is similar to 9.1-06 and 9.2-06, except that it adds coverage for contemplated improvements on the land as shown on specific plans and specifications.  ALTA Endorsement 9.8-06 is commonly referred to as Covenants Conditions and Restrictions – Land Under Development – Owner’s Policy. 

The requirements for the issuance of the endorsements above vary from jurisdiction to jurisdiction and may include an acceptable survey and evidence that any covenants that affect the property are not being violated.

The ALTA Endorsement 9.6-06, Private Rights – Current Assessments – Loan Policy, is available only for loan policies.  This endorsement provides coverage against private charges or assessments, options to purchase, rights of first refusal or a right of prior approval by a future purchaser/occupant, but is limited to loss or damage arising from a private charge or assessment due and payable at the date of the policy.

The ALTA Endorsement 9.9-06, Private Right – Owner’s Policy, is available only for owner’s policies and provides coverage against loss or damage sustained due to the enforcement of any Private Rights in a Covenant, such as options, rights of first refusal or prior approval, that causes a loss of the Insured Title.

Access and Entry

The ALTA Endorsement 17-06, Access and Entry, and the ALTA Endorsement 17.1-06, Indirect Access and Entry, are commonly referred to as the “Access” endorsements.  Both of these endorsements are available for owner’s and loan policies.  ALTA Endorsement 17-06 provides coverage against loss or damage suffered as the result of the insured land not having physical access to a public right-of-way via an access easement shown in the policy as an insured interest or suffered as the result of the limitation of the right of access via existing curb cuts or entries to a public right-of-way.  ALTA Endorsement 17.1-06, on the other hand, provides coverage against loss or damage suffered as the result of the insured land not being contiguous to a public right-of-way, as well as not having physical access to a public right-of-way, and the limitation of the right of access via existing curb cuts or entries to a public right-of-way.  These endorsements may be issued upon submission of a current survey of the insured land showing the land abutting a public right-of-way with curb cuts and entries thereon or contiguous to an insured access easement that abuts a public right-of-way.  The endorsement may also be satisfied by a title search of the property.

Tax Parcel

The ALTA Endorsement 18-06, Single Tax Parcel, and the ALTA Endorsement 18.1-06, Multiple Tax Parcel, are available for owner’s and loan policies.  These endorsements provide coverage in the event that the land described in Schedule A does not constitute a distinct tax parcel or parcels for real estate tax purposes, separate and apart from other property.  This will not likely be available if you are subdividing property or creating a new parcel in a transaction, as no tax parcel number will have been issued.  No additional underwriting requirements, beyond a title search, are necessary to issue this endorsement.

Contiguity

The ALTA Endorsement 19-06, Contiguity - Multiple Parcels, and the ALTA Endorsement 19.1-06, Contiguity - Single Parcel, are available for owner's and loan policies.  These endorsements are most commonly requested when the real estate is described as more than one parcel in Schedule A of the policy.  The endorsement provides insurance that there are no intervening parcels, gaps or gores.  In order to issue this endorsement, the title company usually must review a reliable survey that confirms the contiguity of the parcels, depending on the complexity.  Many locations require that the survey be drawn to ALTA standards and be certified to the title company.

Same as Survey

The ALTA Endorsement 25-06 is commonly called the Same as Survey.  This endorsement is available for loan and owner’s policies and provides coverage in the event that the land identified on the survey described in the endorsement is not the same land as described in Schedule A of the policy.  This endorsement is available upon receipt and examination of a current and reliable survey.  Depending on the circumstances, some underwriters may issue this endorsement with a prior survey and an affidavit from the owner of the property indicating that no changes to the property affecting the accuracy of the survey have occurred. 

Subdivision

The ALTA Endorsement 26-06 offers coverage over any loss resulting from failure of the land in Schedule A to be a separate and lawfully created tract of land pursuant to applicable state and local laws.  This endorsement is available upon receipt and examination of a current and reliable survey together with state and local subdivision requirements.

Endorsements can provide you or your client with much needed additional coverage depending on your circumstances.  It is important to ensure that your endorsements are complete and accurate, as your coverage is only as good as the terms of the endorsements.  Further, it is important to consider which endorsements require additional deliveries to the underwriter that involve additional lead time and which endorsements have no underwriting requirements.  Be sure to consider these underwriting requirements and associated costs and time involved to issue each of the endorsements discussed above when preparing for your transaction.