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Access Endorsements

Insuring provision number 4 insures against no right of access to and from the Land. However, this basic coverage assures only some type of legal access and issues still exist as to the quality, character and location of the access.

The ALTA 17-06 Endorsement is designed to be issued where there is direct access to a publicly dedicated roadway. It provides coverage in the event (i) the Land does not abut and have both actual vehicular and pedestrian access to and from a named Street, (ii) the Street is not physically open and publicly maintained, or (iii) the Insured has no right to use existing curb cuts or entries along that portion of the Street abutting the Land.

Not all property physically abuts a dedicated street and the owner must rely on an easement to obtain access to a publicly dedicated roadway. In this situation it would be wise for the insured to have the easement which provides access insured as well as the fee interest in the property being purchased or financed. In this situation the ALTA 17.1-06 would be the proper endorsement. This endorsement insures the in insured in the event that; (i) the easement identified in Schedule A (the "Easement") does not provide the other land described in Schedule A (the fee parcel), both actual vehicular and pedestrian access to and from a named street (the "Street"), (ii) the Street is not physically open and publicly maintained, or (iii) the Insured has no right to use existing curb cuts or entries along that portion of the Street abutting the Easement.

Assignment Endorsements

These endorsements are often issued when a mortgage has been assigned by a separate document. These endorsements will only be issued when the notes secured by the insured mortgage have been properly endorsed and delivered to the insured at Date of Endorsement.

The Assignment Endorsement (ALTA 10-06) changes the name of the Insured to the assignee of the insured mortgage. The endorsements also insures against loss or damage by reason of the failure of the assignment to vest title to the insured mortgage in the named insured and that there are no prior modifications, partial or full reconveyances, release, or discharge of the lien of the insured mortgage recorded prior to the Date of Endorsement in the Public Records other than shown in the endorsement. This endorsement does not change the effective date of the policy.

Unlike the ALTA 10 endorsement, the ALTA 10.1-06, Assignment and Date Down Endorsement, down dates coverage as to taxes and assessments, lack of priority, and notices of federal tax liens or bankruptcies except to the extent shown on the endorsement.

Mortgage Modification Endorsement

It has become increasingly popular among lenders to deal with changes in an ongoing loan by modifying the existing mortgage rather than refinancing with a new mortgage. This normally results in a substantial cost saving to the borrower. The lender is concerned that the priority established by the original mortgage is is maintained. In such a situation the lender will look for an ALTA 11-06 Mortgage Modification Endorsement to insure against loss or damage by reason f the invalidity or unenforceability of the lien of the insured mortgage as a result of the modification and against lack of priority of the mortgage, as of the date of the endorsement over defects, liens or encumbrances on the title except to the extent shown on the policy. This endorsement does contain a bankruptcy exclustion.

Future Advance Endorsements

It is not unusual for loans to contemplate future advances for construction costs, or revolving lines of credit or future disbursements under a letter of credit. In these situations the lender will want to have the priority and enforceability of these future advances insured. Depending on the specifics of the transaction the lender may obtain an ALTA 14-06, ALTA 14.1-06 or an ALTA 14.2-06 Endorsement. All of these endorsements allow the coverage to rise and fall as loans are repaid and re-advanced so the insured lender does not find itself underinsured.

The ALTA 14-06 provides broad coverage and insures priority for all advances except those made after a petition or relief under the Bankruptcy Code has been filed, taxes or assessments subsequent to the date of the policy, federal orstate environment protection liens, violations of usury or other consumer credit protection or truth-in-lending laws or any mechanic’s or material men’s lien.

The ALTA 14.1-06 Endorsement unlike the ALTA 14-06 conditions the insurance of priority of the future advances upon lack of knowledge of intervening matters. The ALTA 14-2-06 Endorsement is used in connection with mortgages secured by letters of credit.

Variable Rate Endorsements

When the loan contains a variable interest rate feature the lender should request whichever type of variable rate endorsement best fits the transaction.

The basic endorsement (ALTA Form 6.0-06) and all of its variations insure against loss or damage due to: (1) the invalidity or unenforceability of the lien of the insured mortgage resulting from loan provisions providing for changes in the rate of interest and (2) loss of priority of the mortgage lien as security for the unpaid principal balance and interest as charged in accordance with the loan terms caused by changes in the rate of interest. All of these endorsements define “changes in the rate of interest” to include only those changes calculated pursuant to the formula provided for in the insured mortgage as of the closing date and exclude violations of usury, consumer protection and truth in lending laws.

ALTA Form 6.1-06 is used where it is necessary for the lender to comply with particular rate statutes and regulations and specifically excludes loss or damage resulting from any failure to comply with such requirements. ALTA Form 6.2-06 should be used with respect to loans which feature negative amortization since it provides coverage for any loss of priority caused by interest on interest and increases in the unpaid principal balance of the loan resulting from the additions of unpaid interest.

Comprehensive Endorsement

The comprehensive endorsement (ALTA 9.0-06) Restrictions, Encroachments, Minerals Endorsement) is one of the most commonly requested endorsements to a loan policy and provides protection against loss or damage sustained by reason of any inaccuracies in the assurances that:

a. there are no covenants, conditions, or restrictions under which the lien of the mortgage could be divested, subordinated or extinguished, or its validity, priority or enforceability impaired; and

b. Unless expressly excepted in Schedule B;

i.) Present violations on the Land of any enforceable covenants, conditions, or restrictions, or existing improvements on the land described in Schedule A that violate any building setback lines shown on a plat of subdivision recorded or filed in the Public Records.

ii.) Any instrument referred to in Schedule B as containing covenants, conditions, or restrictions on the Land that, in addition, (A) establishes an easement on the Land, (B) provides a lien for liquidated damages, (C) provides for a private charge or assessment, (D) provides for an option to purchase, a right of first refusal, or the prior approval of a future purchaser or occupant.

iii.) Any encroachment of existing improvements located on the Land onto adjoining land, or any encroachment onto the Land of existing improvements located on adjoining land.

iv.) Any encroachment of existing improvements located on the Land onto that portion of the Land subject to any easement excepted in Schedule B.

v.) Any notices of violation of covenants, conditions, or restrictions relating to environmental protection recorded or filed in the Public Records.

Any future violation on the Land of any existing covenants, conditions, or restrictions occurring prior to the acquisition of title to the estate or interest in the Land by the Insured, provided the violation results in:

a. the invalidity, loss of priority, or unenforceability of the lien of the Insured Mortgage; or

b. the loss of Title if the Insured shall acquire Title in satisfaction of the Indebtedness secured by the Insured Mortgage.

Damage to existing improvements, including lawns, shrubbery, or trees:

a. that are located on or encroach upon that portion of the Land subject to any easement excepted in Schedule B, which damage results from the exercise of the right to maintain the easement for the purpose for which it was granted or reserved;

b. resulting from the future exercise of any right to use the surface of the Land for the extraction or development of minerals excepted from the description of the Land or excepted in Schedule B.

Any final court order or judgment requiring the removal from any land adjoining the Land of any encroachment excepted in Schedule B.

Any final court order or judgment denying the right to maintain any existing improvements on the Land because of any violation of covenants, conditions, or restrictions, or building setback lines shown on a plat of subdivision recorded or filed in the Public Records.

A comprehensive endorsement is also available for an Owner’s Policy. ALTA has adopted ALTA Form 9.1-06, for unimproved land and ALTA Form 9.2-06 for improved land.

The ALTA 9.3-06 endorsement, in addition to the coverage provided in ALTA 9.0-06 endorsement, insures the lender against damage to existing and future improvements by reason of mineral development.

Similar to the ALTA 9.3-06 Endorsement, the ALTA 9.4-06 and 9.5-06 provide owners with coverage against existing and/or future improvements by reason of mineral development on unimproved or improved land respectively.

Contiguity and Survey Endorsements

Coverage insuring the insured that two or more parcels are contiguous may be requested when the land to be insured consists or might consist of an assemblage of two or more parcels. Although contiguity endorsements are often requested, a better solution for this situation is a request for a new perimeter description of the assembled properties. The policy will insure title to all of the land inside the new perimeter description. Since the goal is to insure title to all of the property within the perimeter without any gaps or gores, the direct approach may be best.

There are two contiguity endorsements available. The ALTA 19.06 is used when there are multiple parcels being insured and the insured want the assurance that the parcels are contiguous to each other. The second contiguity endorsement is the ALTA 19.1-06. This endorsement is used when the insured wants assurance that the parcel being insured is contiguous to another parcel that is not being insured.

The ALTA 25-06 Survey Endorsement, insures the policyholder that the land described in the policy is the same land as shown on the survey identified in the endorsement.

The ALTA 25.1-06 Same as Portion of Survey Endorsement insures the policyholder that the land described in the policy is the same as that specified portion of land shown on the survey identified in the endorsement.

Subdivision and Tax Endorsement

In addition to zoning matters the first exclusion to coverage also excludes loss or damage sustained by reason of governmental regulations restricting, prohibiting or relating to a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part. A lender must be sure that the property that is encumbered by the mortgage can be foreclosed upon and conveyed without having to obtain lot split or subdivision approval, which approval generally requires the involvement of the borrower (which probably will not be very cooperative at that point) and/or approval by governmental agencies (which can be costly and time consuming).

Similarly, an owner may want to be assured that when he decides to convey or encumber the property that he can do so without having to absorb the costs and delays involved with subdividing or splitting the land.

The ALTA 26-06 Subdivision Endorsement insures against loss or damage sustain by reason of the failure of the land to constitute a lawfully created parcel according to the subdivision statues and local subdivision ordinances applicable to the property described in the commitment.

Like the Subdivision Endorsement, the Tax Parcel Endorsement is designed to provide some assurance that the property described n the title policy can be conveyed without having to obtain additional approvals. The ALTA 18-06 endorsement is to be used when Schedule A contains a single parcel. The ALTA 18.1-06 is when the land is comprised of multiple legal descriptions and multiple tax parcels.

Enviromental Protection Endorsement

Insurance against the existence of environmental protection liens is available in both commercial and residential transactions.

In residential transactions the ALTA 8.1-06 Endorsement is available in connection only with a loan policy. This endorsement insures the priority of the mortgage over existing or subsequently recorded federal or state environmental protection liens, except with respect to environmental protection provided for by certain statues identified in the endorsement.

In commercial transactions the ALTA 8.2-06 Endorsement is available in connection with both and owner’s and a loan policy. This endorsement insures against loss or damage sustained by reason of a federal or state environmental protection lien that , at the Date of Policy, is recorded in the public records or filed in the records of the clerk of the federal district court in which the land is located, unless expressly excepted in Schedule B of the policy.

Zoning Endorsements

Matters arising from any law, ordinance or governmental, regulation (specifically including zoning matters) are excluded from the coverage of the policy. Owners and lenders can obtain a certain degree of comfort with respect to zoning matters in a number of different ways. A letter directed to them from the appropriate official of the applicable zoning authority addressing the zoning of the property and various matters relating to whether the property and the uses thereof comply with zoning requirements. However, the scope of the letters which zoning officials are willing to provide varies widely. These range from extremely detailed letters which often can be obtained from officials of small suburban municipalities to letters from officials of large cities which only identify the zoning classification of the property. The insured will usually be without recourse if the letter is incorrect. Others rely solely upon their own review of the survey and the applicable zoning code or upon a zoning opinion if there is an attorney involved in the transaction who is in a position to issue such an opinion.

However, an owner or lender may be unable to achieve sufficient comfort on zoning matters from such other sources. In those situations, there are two types of zoning endorsements to loan policies which are available to provide some title insurance as to zoning matters.

Alta Form 3.0-06 is a zoning endorsement issued with respect to unimproved property. This endorsement insures against loss or damage suffered by the insured by reason of the property being zoned other than as shown on the endorsement. It also provides insurance as to the use or uses which are allowed under the zoning classifications shown on the endorsement, subject to compliance with any conditions, restrictions, or requirements contained in the zoning ordinances, including the securing of necessary consents or authorization as a prerequisite to such use or uses. The endorsement also insures against the invalidity of the zoning ordinances and amendments thereto, but based only on a final judicial decree which in effect prohibits the use set forth in the endorsement.

The ALTA 3.1-06 endorsement is issued with respect to property which is improved. This endorsement provides the same coverage as the ALTA 3.0-06 endorsement but also covers loss or damage arising from a final judicial decree which:

a. prohibits the use of the land, with any structure presently located thereon, for a permitted use shown in the endorsement; or

b. requires the removal or alteration of the structure on the basis of a violation with respect to;

i) area, width or depth of the land as a building site for the structure;

ii) floor space area of the structure

iii) setback of the structure from the property lines of the land; or

iv) height of the structure

v) parking

Zoning endorsements are considered by most title insurers to be high liability endorsements and require a substantial amount of work on the part of the title company; therefore, a substantial charge is imposed for their issuance. Rather than imposing such a significant additional cost on the borrower, owners and lenders often waive the zoning endorsement requirement when dealing with completed improvements as to which no change in use is contemplated and rely instead upon the other types of comfort discussed above.