Commercial Endorsements Bill Pratt November 15, 2018 The webinar - PowerPoint PPT Presentation

Welcome to today’s webinar! Leasehold & Other Commercial Endorsements Bill Pratt November 15, 2018 The webinar will begin shortly.

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ATTORNEY INFORMATION Because of opinions expressed by the Texas Department of Insurance (TDI) concerning rebates, legal credit is available only to:  Attorneys who own title agencies that are Stewart Title Guaranty Agents  Attorneys employed by a title insurance agent licensed with Stewart Title Guaranty or Stewart entities  Fee attorneys who have an Escrow Officer license through a Stewart Title Agent or Stewart entity We welcome any other lawyers to listen, but cannot provide continuing education credit to you. 3

Leasehold & Other Commercial Endorsements: What Is On A Lender’s Checklist Bill Pratt Vice President, TX Underwriting Counsel SW Regional Underwriting Office Stewart Title Guaranty Company

Commercial Endorsements An “endorsement” is a provision added to an insurance contract that changes the terms and application of the contract. It generally provides the insured with additional coverages. Although we refer to these as “commercial” endorsements, they may be actually used in any transaction where the buyer and lender are knowledgeable about the coverages available. It is common for a high dollar residential transaction to be handled just like high dollar commercial transaction.

Commercial Endorsements In Texas all of our title insurance policy forms, including endorsement forms, are promulgated or created by the Texas Department of Insurance. Use of any other forms is not allowed. The Procedural Rules in the Basic Manual set out when we can issue various endorsements. If the terms of the transaction don’t meet the requirements of the Procedural Rules, the endorsement can’t be issued. The Rate Rules in the Basic Manual set out the charges or premiums that are to be collected for issuance of the endorsements.

Commercial Endorsements Procedural Rule P-1 contains definitions of terms that are used in the Basic Manual. Within the Basic Manual when these terms are used, they are not capitalized. Most of the legal documents we review have defined terms capitalized. The most commonly used defined term in the rules is “residential real property”, which is defined in Procedural Rule P-1 u. Many commercial endorsements can only be issued if the property is NOT residential real property.

Commercial Endorsements • Residential real property - 1. Any real property which has improvements thereon designed principally for the occupancy of from one to four families (including individual units of condominiums and cooperatives) and either (a) situated in a platted subdivision of record, or (b) consisting of five acres or less, or 2. Any real property which has improvements thereon designed principally for the occupancy of from one to four families and consisting of more than five acres but not more than 200 acres used for agricultural production by individual insureds (according to the information known by the Company at the time of issuance of the policy of title insurance).

Commercial Endorsements T- 4 Leasehold Owner’s Policy Endorsement ALTA 13 CLTA 119.5 Premium No charge Procedural Rule P-9 (a) (1) When an Owner's Policy of Title Insurance (Form T-1) is to be issued on a leasehold estate in the land, the Company shall attach to the said Owner's Policy (Form T-1) the Leasehold Owner's Policy Endorsement. .

Commercial Endorsements T- 4 Leasehold Owner’s Policy Endorsement What does it do? It modifies the provisions relating to computing loss or damage under the terms of the policy and adds additional items of loss that are covered by the policy. Guidelines: Review a copy of the lease and all amendments. Record a copy of the lease or a recordable memorandum of lease Add an exception to the term and conditions of the lease to Sch. B of the title policy. .

Commercial Endorsements T- 4 Leasehold Owner’s Policy Endorsement Guidelines continued: . If this is an existing lease, obtain an estoppel certificate from the lessor that the lease is in effect, that we have a full copy of the lease and any amendments, the lessee is in compliance with the terms of the lease and there are no defaults under the lease. If the existing is being assigned, verify the assignment has been approved by the lessor and any other with an interest, such as a lender on the fee. Do a full examination of the fee title to establish the lessor has good title. .

Commercial Endorsements T- 4 Leasehold Owner’s Policy Endorsement Guidelines continued: . All title exceptions that predate the recording of the lease or the memorandum of lease should be shown on Sch. B, together with any exceptions the lessee has consented to or joined in creating. .

Commercial Endorsements T- 4R Residential Leasehold Owner’s Endorsement ALTA 13 CLTA 119.5 Premium No charge Procedural Rule P-9 (a) (1) When a Residential Owner's Policy of Title Insurance -- One-To-Four Family Residences (Form T-1R) is to be issued on a leasehold estate in the land, the Company shall attach the Residential Owner's Leasehold Endorsement (Form T-1R) to the Residential Owner's Policy -- One-To-Four Family Residences (Form T-1R).

Commercial Endorsements T-5 Leasehold Loan Policy Endorsement ALTA 13 CLTA 119.5 Premium No charge Procedural Rule P-9 (b) (5) When a Loan Policy (Form T-2) is to be issued on a leasehold estate in the land, the Company shall attach to the said Loan Policy the Leasehold Loan Policy Endorsement (Form T-5). .

Commercial Endorsements T-5 Leasehold Loan Policy Endorsement What does it do? Like the owner policy endorsement, this modifies the provisions relating to computing loss or damage under the terms of the policy and adds additional items of loss that are covered by the policy. Guidelines: Same as the owner policy endorsement. .

Commercial Endorsements T-23 Access Endorsement ALTA 17 CLTA 103.11 Premium Rate Rule R-30: $100 per policy Procedural Rule P-54 What does it do? Insures access to an identified road, that the road is open and publicly maintained, and that there is actual physical pedestrian and vehicular access. May be issued with an owner policy or loan policy. .

Commercial Endorsements T-23 Access Endorsement Guidelines: Property cannot be residential real property. Property must have existing improvements. Verify property abuts the road by survey, review of maps or examination Verify there is actual vehicular and pedestrian access to the property by survey, review of maps or inspection. Verify road is public and open to traffic. Insuring provisions can be deleted if the risk is not acceptable. .

Commercial Endorsements T-25 Contiguity Endorsement ALTA 19 CLTA 116.4 Premium Rate Rule R-32: $100 per policy Procedural Rule P-55 What does it do? Insures two or more insured parcels of property are contiguous along defined lines or boundaries and there are no gaps between the parcels. May be issued with a owner policy or a loan policy. .

Commercial Endorsements T-25 Contiguity Endorsement Guidelines: Property cannot be residential real property. The properties described as contiguous must all be insured in the policy. Verify by survey or other satisfactory maps that the parcels are contiguous. Care must be exercised in describing how the parcels of property are contiguous. Insurer may add appropriate exceptions. .

Commercial Endorsements T-25.1 Contiguity Endorsement ALTA 19 CLTA 116.4 Premium Rate Rule R-32: $100 per policy Procedural Rule P-55 What does it do? Insures four or more insured parcels of property or irregularly shaped parcels are contiguous and there are no gaps between the parcels. May be issued on an owner policy or a loan policy. .

Commercial Endorsements T-25.1 Contiguity Endorsement Guidelines: Same as for the T-25. This is a form designed for insuring the multiple parcels or irregularly shaped parcels are all contiguous to each other .

Commercial Endorsements T-16 Loan Policy Aggregation Endorsement Also known as a “tie - in” endorsement ALTA 12 CLTA 117 Premium Rate Rule R-11 j: $25 Procedural Rule P-9 (b) (13) What does it do? Only available for loan policies. The endorsement aggregates the amounts of insurance in separate listed loan policies into one aggregate amount for all the listed policies, making is as if one policy had been issued for all the different sites. .

Commercial Endorsements T-16 Loan Policy Aggregation Endorsement Guidelines: A Stewart underwriter must approve issuance of the endorsement. Two or more policies have to be issued by the companies involved in the transaction. The stated amount of indebtedness in the deeds of trust must equal the aggregate amount of insurance in the endorsement. If necessary, the amount of insurance may be limited to the statutory single risk limit of Stewart ($554,496,316.00). .