Endorsements are used to expand or otherwise modify the coverage of a title insurance policy on real property. There are various title insurance policies made available to owners of real property by title companies including standard coverage, ALTA (American Land Title Association) extended coverage, ALTA residential and ALTA homeowner’s coverage. The ALTA policies and other forms of title insurance policies most likely provide adequate coverage for most real estate transactions, without the necessity of expanding coverage through the use of endorsements. However, if a transfer is not basic, or, if there are issues particular to a specific transaction, the policy coverage may need to be expanded in order to protect the homeowner, the seller or the lender involved in the transaction. Endorsements can modify any part of the policy, although endorsements are most typically used either to extend or expand the title policy for more comprehensive coverage in order to address a particular title issue affecting, or potentially affecting, the real property.
The following are some of the endorsements most commonly used by both buyers and lenders in real estate transactions:
Environmental Protection Lien: This endorsement does not, in fact, provide coverage for environmental protection. Rather, this endorsement provides affirmative coverage ensuring that no document in the public records, affecting the real property, shows an environmental lien or notice of enforcement of a lien. From a lender’s perspective, the Environmental Protection Lien Endorsement also ensures that there are no Federal Super Fund lien statutes in the state where the property is located that could affect the priority of the lien for the deed of trust or insured mortgage.
Assessments: This endorsement is designed for use with the ALTA Lenders Policy to provide the insured lender with protection against loss sustained by reason of any assessments for items such as street improvements, which have priority over the lien of the deed of trust or insured mortgage, and which are either under construction or completed as of the date of the endorsement.
Survey: This endorsement is designed for use with the ALTA Owners Policy and provides assurance to the title policy holder that the land is the same as that delineated on the plat of survey attached to the policy.
Contiguous Land: This endorsement is also designed for use with an ALTA Owners or Lenders Policy for contiguous land concerns. Commonly, this endorsement would be requested when a purchaser acquired land adjacent to property already owned by the purchaser and it is intended that the two parcels be used together. Under these circumstances, ownership by a third party of a strip between the two parcels could frustrate the proposed issues. The Contiguous Land Endorsement may be issued determining that the two parcels at issue have a common boundary. At times, making this determination requires a survey of the property in question.
Federal Truth in Lending: This endorsement covers a lender for a loss arising from a judicial determination terminating the lien of the insured mortgage (deed of trust), under the rights provided by the Federal Truth in Lending Act or Consumer Credit Protection Act to cancel a contract.
Zoning: Unimproved Land: This endorsement insures certain zoning matters as they relate to unimproved property. The endorsement specifies the zoning classification and the use(s) permitted for the property. Issuance of this coverage requires an examination of the applicable zoning ordinances and amendments to determine the particular zone and permitted uses of the real property covered by the title policy.
Zoning: Improved Land: Like the endorsement covering zoning matters for unimproved land described above, this endorsement describes the zoning classification and permitted uses for improved property. In addition, however, this endorsement provides coverage against loss resulting from a court order prohibiting the insured use or compelling the removal or alteration of a structure or improvement on the land due to certain specified zoning violations, including floor space or setback requirements according to applicable law or regulation. This endorsement is available only on already improved property when a determination can be made regarding the zoning classification of the property, permitted uses of the property and any zoning restrictions as to building and building site size.
Access: This endorsement provides assurances to the insured that (a) the named street is a physically open public street, (b) that the property in question abuts the street and (c) that there is nothing to prohibit access from the property to the street.
Fairway Endorsement. When purchasing title insurance, if the owner of the property is a limited liability company (LLC), the entity should consider requesting a Fairway endorsement which protects against any lapse of coverage resulting from a change in the membership of the limited liability company or from any resulting dissolution. The Fairway endorsement provides that the title insurer will not deny coverage under a title policy issued to a limited liability company based on the following: (a) the admission, substitution, or withdrawal of any individual or entity as a member of the insured, or (b) a change in any member’s interest in the capital or profits of the LLC, or (c) a change of a managing or non-managing member in the insured limited liability company, where the business of the insured limited liability company continues after such event.
Foundation: This endorsement is used with the ALTA lenders policy where a construction loan previously has been insured and the lender, prior to making an advance, requires assurance from the title insurer that the foundations do not encroach upon adjoining lands or violate existing covenants, conditions and restrictions affecting the property. Typically, following a physical examination of the property, the endorsement may be issued which will assure the lender that (a) the foundations of the structure under construction on the subject property are within the boundary lines of said property, and (b) the location of the foundations do not violate the covenants, conditions and restrictions referred to in Schedule B of the title policy.
Condominiums: This endorsement insures that (a) the condominium being insured qualifies as a condominium by its creating document under applicable state statutes, (b) there are no violations of the restrictive covenants which will cause a forfeiture of title, (c) the liens for homeowners’ association assessments will not have priority over the lien evidenced by the deed of trust covering the property, (d) there will be no loss or damage to the insured by reason of the insured’s interest not being separately assessed, (e) there are no encroachments affecting the property that will cause loss or damage to the insured owner or lender, and (f) there is no right of first refusal to purchase the property that will create a loss to the insured. This endorsement is available for issuance if a review of the laws, the condominium declarations map and related documents indicates all of the listed assurances can be made and given by the title company.
