Bulletin: NY000509

In Nationwide Life Insurance Company v. Commonwealth Land Title Insurance Company 687 F.3^rd 620, 2012 , the Court held the insurer liable under an ALTA 9 Endorsement where certain covenants contained in an instrument set out in Schedule B were not “expressly excepted” in Schedule. 

The TIRSA 9 Endorsement, which only may be issued for a loan policy, contains the same provisions at the heart of the Nationwide case.  The following guidelines must be observed. 

1)    Restrictions:

(a)  Review all restrictions. Verify that there are no forfeiture provisions. If there are forfeiture provisions, verify that the forfeiture provisions are expressly subordinate to the lien of the insured mortgage.  If not, except to the specific item in Schedule B.

(b)  Review all restrictions. Verify that any maintenance lien is expressly subordinate to the lien of the insured mortgage and that prior assessments are paid before closing. If not, except to the specific item in Schedule B.

(c)  Review all restrictions. Verify whether the existing use materially violates the restrictions. If the use violates the restrictions, except to the violation in Schedule B.

(d)  Review all restrictions. Verify whether the restrictions create maintenance liens, easements, options, or rights of first refusal to purchase. If any of these provisions appear in the restrictions, separately and explicitly except to those provisions in Schedule B. For example, separately except to "maintenance lien set forth in . . ."

2)    Encroachments:

(a)  Review the survey and confirm that it reflects the current improvements.  Except in Schedule B to any encroachments over building lines, property lines, or easements.

(b)  If improvements encroach over more than one half of the width of an easement, secure underwriter approval.

(c)  If improvements encroach over adjoining land or onto a road, secure underwriter approval.

(d)  If improvements encroach over setback lines by more than one foot, secure underwriter approval.

3)    Minerals:

In order to provide the coverage of paragraph 3(b) because of development of minerals, comply with one of the following requirements:

(a)  verify that there are no outstanding minerals (other than royalties) or that surface rights have been waived;

(b)  on single family residences within platted subdivisions, you may provide the coverage even if there are outstanding minerals unless you know that the subdivision has actual mineral development;

(c)  on apartment complexes, you may provide the coverage even if there are outstanding minerals unless you know that the immediate area has actual mineral development;

(d)  on office buildings and shopping centers, you may provide the coverage even if there are outstanding minerals unless you know that the immediate area has actual mineral development;

4)    Notices of Violation of Environmental Covenants.

If a notice of violation of an environmental covenant has been recorded, except to it in Schedule B.

5)    Preferable an ALTA Survey or equivalent is required to locate the building and the covenants/restrictions/encroachments. 

The underwriting guidelines contained herein have been provided for general reference. The facts, circumstances, and location of the subject property should be considered when determining the issuance of the requested form or TIRSA 9 Endorsement.  Please contact Agency Legal Services with any questions or issues.