There’s no question that title insurance provides both owners and lenders peace of mind in real estate transactions. However, there are instances when additional coverage is needed in order to expand and reinforce that peace of mind. That’s where title endorsements enter the picture.
A title endorsement modifies an existing title insurance policy by providing an addition to or limitation of coverage attached to the policy. In other words, endorsements tailor title policies to fit the needs of the insured for specific transactions. While endorsements sometimes affect residential real estate purchases, they most often impact commercial transactions due to their highly complex nature.
No two commercial closings are completely alike, and each comes with its own set of specifications. Protecting yourself and your property from many risks involved in commercial closings begins with carefully considering your title insurance coverage options, including endorsements.
There are approximately 80 endorsement forms approved by the American Land Title Association (ALTA) from which commercial buyers, with the help of their attorneys and title companies, may select additional coverage.
Lenders may require buyers to purchase certain endorsements that insure them against loss or damage, such as when improvements on a property turn out to be a violation of someone’s rights. Other endorsement selections are voluntary and dependent upon the property and the coverage it may need.
Let’s explore some of the most commonly issued endorsements affecting commercial real estate:
- Zoning – The ALTA 3 Series endorsements apply to the applicable zoning classification and authorized use of land. For example, 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 zoning ordinances.ALTA Endorsement 3.1-06, Zoning-Completed Structure, ensures the zoning classification and authorized uses of improved property, while ALTA Endorsement 3.2-06, Zoning – Land Under Development, is designed for unimproved land with the intention of improvements being constructed according to specific plans and specifications.
- Mineral Rights – The ALTA 35 Series and the ALTA 9 Series, commonly known as the “Comprehensive Endorsement” because it consolidates into a single endorsement many of the coverages often requested or required by institutional lenders, includes coverage for damage resulting from the exercise of mineral rights. Specifically, they cover damage or loss if the structure must be altered or removed because an existing right allows an entity to use the land for the extraction or development of certain minerals or other substances.
- Access and Entry – The ALTA Endorsement 17-06, Access and Entry, and 17.1-06, Indirect Access and Entry, are often referred to as the “Access” endorsements. The first 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. The second pertains to the insured land not being contiguous to a right-of-way.
- Same as Survey – ALTA Endorsement 25-06. called the Same as Survey, provides coverage in the event that the land identified on the survey described in the endorsement is not the same land as described in the policy. This endorsement requires the receipt and examination of a current and reliable survey. In some cases, it may be issued with a prior survey and an affidavit from the property owner.
- Contiguity – The ALTA Endorsement 19-06, Contiguity – Multiple Parcels, and 19.1-06, Contiguity – Single Parcel, apply when the owner and lender want to be sure that two parcels they own or are taking a mortgage against are contiguous, with no gaps, gores, or overlaps causing them to become detached from one another. The first endorsement is used where both parcels are insured under the policy, and the second is used where a parcel that is insured by the policy is contiguous to a parcel that is not insured.
It’s important to note that purchasing endorsements for commercial title insurance policies requires the assistance of an experienced real estate attorney, who can evaluate the land, structure and loan terms to provide the highest possible level of title insurance protection. In addition, your legal counsel can explain the costs and tax implications associated with your endorsements.
Let Vanguard’s Expertise Protect Your Most Important Investments
At Vanguard Title Co., our commercial team is well versed in the complex world of title endorsements, and we can provide you with options to help you determine which endorsements will best protect your investment. We’re uniquely poised to handle commercial closings due to our in-house legal counsel that enables us to evaluate risk and give practical solutions along the road to closing.
Plus, our foundational partnerships with the nation’s largest underwriters provide pricing and insurability options. We’re ready to partner with you to guard your real estate projects against unforeseen problems.