Bulletin: AZ000005

Dear Associates:

Recently, the ALTA residential owner's policy has been the subject of much discussion. The Arizona Association of Realtors ("Realtors") has made a change to their standard real estate contract form and it now incorporates a preprinted requirement that an ALTA residential policy be issued to the purchaser. The Realtors have apparently done this in order to provide as much protection for their buyers as possible. An added benefit to the Realtor is that this clause in the contract helps protect them from lawsuits. Whatever the reason, it is becoming increasingly common for an ALTA residential owner's policy to be requested.

As a result, Stewart underwriters have received numerous inquiries from our agents for guidance in the issuance of these policies. There is an excellent discussion of ALTA residential policies in the Stewart Underwriting Manual under the section "Residential Policy".

The following guidelines should be observed when considering the issuance of an ALTA residential owner's policy.

The property must be one-to-four unit residential property. This policy is not to be issued on commercial property or residential property with more than four units. It can be issued to a non-owner occupied or on vacant land for which a 1-4 residential unit will be built. It is imperative that on vacant property, local zoning be reviewed to determine if it allows for a 1-4 residential unit.

Policies must be limited to property that has been subdivided into lots by either a subdivision map or a parcel map. Unsubdivided property is not eligible for the ALTA residential policy unless we are provided with a survey.

There may be areas within a county where there are known underwriting risks involving encroachments, etc.. If you are aware of these areas, do not issue the ALTA residential policy without the specific underwriting approval of an STG underwriter.

It is recommended that an INSPECTION should be made in each instance of issuing the ALTA-R if under $500,000 (see #5 below). If between $500,000 and $1,000,000, an inspection is required. Please see #5 below if over $1,000,000. Particular attention should be made to determine where the boundary pins are since insurance is being provided against the forced removal of encroachments. (See #6(d) below).

It must be ascertained whether or not there has been recent construction. The ALTA residential policy contains specific coverage for mechanic's liens, even if they record after the issuance of the policy. In such cases, underwriting must examine the seller's ability to cure liens as is necessary in every "early issue" situation. Be particularly careful in issuing the ALTA-R in a new subdivision to satisfy yourself there is no work in progress.

Any policy request with a liability exceeding $1,000,000 must be accompanied by a survey.

The following exceptions must be taken in every issuance of an ALTA residential policy.

Water rights, claims or title to water whether or not they are shown by the public records.

Any rights, interests or claims of parties in possession of the land which are not shown by the public records.

Any easements or liens not shown by the public records. This exception does not limit the lien coverage in Item 8 of the Covered Title Risks.

Any facts about the land which a correct survey would disclose and which are not shown by the public records. This exception does not limit the forced removal coverage in Item 12 of the Covered Title Risks.

Any request to delete one or more of the above listed exceptions must be submitted to STG underwriting personnel for approval.

The ALTA residential owner's policy should be issued in accordance with the guidelines provided herein upon specific request only. The following note should appear in all preliminary reports and/or commitments issued.

Note: If an ALTA residential owner's policy is requested and if the property described above is determined to be eligible for this policy, the following Exceptions from Coverage will appear in the policy:

Water rights, claims or title to water whether or not they are shown by the public records.

Any rights, interests or claims of parties in possession of the land which are not shown by the public records.

Any easements or liens not shown by the public records. This exception does not limit the lien coverage in Item 8 of the Covered Title Risks.

Any facts about the land which a correct survey would disclose and which are not shown by the public records. This exception does not limit the forced removal coverage in Item 12 of the Covered Title Risks.

If you have any questions concerning the issuance of an ALTA residential owner's policy, contact STG underwriting personnel.