ALTA ENDORSEMENTS FROM A TRANSACTIONAL APPROACH: To Infinity and Beyond. Chicago Title February 2017

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1 ALTA ENDORSEMENTS FROM A TRANSACTIONAL APPROACH: To Infinity and Beyond Chicago Title February 2017

2 IMPORTANT NOTE This is an overview of these endorsements, and is not intended to provide full analysis of every endorsement and the potentials for coverage or recovery thereunder Each endorsement is subject to the full terms and conditions of the policy, all other aspects of the policy, and the full terms, conditions, exceptions, and coverages provided for in each individual endorsement and policy as a whole. 2

3 What is it? A title policy is a contract of indemnity. Condition 8 This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured Claimant who has suffered loss or damage by reason of matters insured against by this policy. An endorsement is: A provision added to an insurance contract whereby the scope of its coverage is restricted or enlarged. 3

4 Endorsements in Court (or: why the language is what it is) Nationwide vs. Commonwealth (PA) Right of Prior Approval ALTA 9: unless expressly excepted in Sch B Alliance Mortgage Company v. Rothwell (CAL) Affirmative statement of facts rather than indemnity if inaccurate 4

5 Nationwide v Commonwealth Is this a right of first refusal or the prior approval of a future purchaser or occupant?... provided, however, that in no event shall Buyer use the Property and/or the building for any of the purposes listed on Exhibit 3 [listing the types of stores already in the Mall]; and provided further, however, that Buyer shall not change the use of the Property from a variety or general merchandise store (as described above) without prior written consent of Seller (which shall not be unreasonably withheld or delayed if the proposed use otherwise satisfies the foregoing requirements of this sentence.) 5

6 Nationwide v Commonwealth Aug 31, F.3d 304 The US Court of Appeals, Third Circuit reverses the District Court, saying: We thus hold that Commonwealth bore the burden of detecting the restrictions stated in the Declaration, and had to list those restrictions explicitly as exceptions to avoid covering loss from them. Feb 3, 2011 New revisions of all ALTA 9 series endorsements were adopted by the ALTA Board of Governors. 6

7 Nationwide v Commonwealth Feb 17, WL (E.D. PA) Two weeks after the ALTA adopted the new forms, the District Court handed down its opinion on remand from the Third Circuit. In short, the Court finds that the ALTA 9 Endorsement provides insurance coverage for any loss arising from any instrument referenced in Schedule Bthat contains both covenants, conditions, or restrictions, as well as, among other items, an option to purchase, a right of first refusal, or a prior approval of a future purchaser or occupant. The Endorsement does not restrict its coverage to specific provisions within such instruments. 7

8 Drafting and Revising Endorsements Alliance Mortgage Company v. Rothwell, 10 Cal. 4th 1226, 44 Cal. Rptr. 2d 352 (1995) Distinguished between guarantee of a state of facts rather than indemnity insurance. 8

9 Alliance Mortgage v. Rothwell Insurance of a state of facts The Alliance Mortgage Policy said: The Company assures the insured that at the date of this policy there is located on said land 4 unit Residence known as 447 Haight Street, # 1, 2, 3, 4, San Francisco, California The Company hereby insures the insured against loss which said Insured shall sustain in the event that the assurance herein shall prove to be incorrect. Also beware of : The Company insures the Insured against loss or damage sustained by reason of any incorrectness in the assurance that, at Date of Policy:... The Company assures the Insured against loss or damage sustained by reason of any incorrectness in the following assurance that:... This policy affirmatively insures... 9

10 After Alliance Mortgage v. Rothwell ALTA Endorsements were revised to this formula (copied from the current ALTA 3.1) 1. The Company insures against loss or damage sustained by the Insured in the event that, at Date of Policy, a. according to applicable zoning ordinances and amendments, the Land is not classified Zone 10

11 Affirmative Additional Coverage: Company insures Alliance Mortgage Co. v. Rothwell as a result of entry of a final decree by a court of competent jurisdiction ruling that the conveyance insured is void or voidable or subject to a forfeiture or reversion of title solely as a result of *. as a result of an entry of a final decree by a court of competent jurisdiction ruling that the Insured Mortgage lacks priority, is unenforceable, or is invalid solely as a result of *. as a result of invalidity, unenforceability, or loss of priority of the Insured Mortgage solely as a result of *. **** the easement will not interfere with the intended use of the land or the improvements located thereon for an easement. the easement will not adversely affect the land and that the improvements are not located within the easement. the exercise, maintenance or attempted enforcement of the easement will not cause loss or damage. against enforced removal of improvements constructed or to be constructed on the property as a result of the enforcement of the easement. 11

12 Selected Endorsements 3 series Zoning 8 series Environmental 9 series CCR s 13 series Leasehold 14 series Future Advances 15 series Non Imputation 17 series Access 18 series Tax Parcel 19 series Contiguity Coinsurance 25 series Same as Survey Subdivision 28 series Easements/Encroachments Identified Risk 35 Series Subsurface Substances 36 Series Energy Project Policy Authentication 40 Series Tax Credit 41 series Water 46 Option Pari Passu 11 Series Modification 12

13 Governmental Regulation ALTA Standard Policy Exception: Exclusion from coverage for loss or damages sustained by reason of any law, ordinance or governmental regulation which restricts, regulates or prohibits the occupancy or use and enjoyment of the land as well as the character or location of improvements situated on the insured property. ALTA 3 series and Alta

14 ALTA Endorsement Form 3 06, and For unimproved land specific zoning and uses No liability for: Lack of compliance The invalidity of the zoning ordinances and amendments until after a final decree of a court of competent jurisdiction adjudicating the invalidity, the effect of which is to prohibit the use or uses. The refusal of any person to purchase, lease or lend money on the estate or interest covered by this policy. 14

15 ALTA Endorsement Form 3 06, and For a completed structure Same coverage as 3 06, above, and is subject to the same limitations. It also insures against losses from court orders which: Prohibit use of the Land for specified purposes allowed by the zoning because certain physical characteristics of the Land violate the ordinance; and Require removal or modification of the structure located on the Land due to these violations. Can include insurance with regards to adequate parking 15

16 ALTA Endorsement Form 3 06, and For a completed structure Extends the coverage available in the Endorsement Form Coverage now be given for Land on which proposed buildings are to be built or constructed, IF the proposed building is built or constructed according to site and elevation plans identified therein. 16

17 Site Plan 1 17

18 Site Plan 2 18

19 Zoning info from where? New ALTA/ACSM surveys say title companies provide. Here in NC we do not. Cities won t give compliance letters. We usually need more than just we know of no violations. Engineering firm? Surveyor? Attorney? CAUTION: Risky to opine on who is entitled to notice without full title exam 19

20 ALTA Endorsement Forms 26 06: Subdivision Endorsement Require: Attorney's or surveyor's opinion that the property is in compliance with applicable ordinances, unless: 1. Greater than 10 acres & no street right of way dedication is involved (exempt from subdivision regulation under N.C.G.S. 153A 335, Counties, and N.C.G.S. 160A 376, Cities and Towns); Some counties/cities have 5 acre limits (Mecklenburg) 2. Separate parcel for many years through multiple conveyances. 3. Other options? 20

21 Coverage Lender Owner Covenants, Conditions & Restrictions (not private rights) Private rights (assessments, options, rights of first refusal & rights of prior approval of purchasers or occupants) The New Forms in the ALTA 9 Series (Land Under Development) (current violations) (Unimproved) (Improved) (Land Under Development) Encroachments over boundaries or onto easements Mineral & subsurface rights (Land Under Development) (current violations) ALTA 28 series (Land Under Development) (current violations) ALTA 35 series ALTA 28 series ALTA 35 series 21

22 9 06, , Forms 9 06, and most closely resemble the coverages given under the old loan policy endorsement forms. The revised 9 06 is used for existing Improvements The new is used for Land under development, by expanding the coverages to Future Improvements, as defined therein. The is used when violation of a Covenant could result in forfeiture or reversion, but there is no current violation. The revised has no mineral or encroachment coverage 22

23 and Future Improvements Receipt of (1) architect s or engineer s Plans (survey, site, elevation & other drawings) for specific Future Improvements contemplated; (2) a current and accurate survey of the Land; (3) verification from Plans and current survey that current Improvements and Future Improvements create no violation of any covenants, conditions or restrictions; no violation of any building setback lines; no encroachments of an Improvement or Future Improvement located on the Land onto adjoining land or onto that portion of the Land subject to an easement; no encroachment onto the Land of improvements appurtenant to adjoining lands; and that the contemplated Future Improvements will not create any such violation or encroachment; (4) certification from attorney that (a) to the best of attorney's knowledge the covenants, conditions or restrictions have not been violated and will not be violated by the Future Improvements, (b) no third party currently has the present or future right to any minerals located on the Land or, if any, that they require repair of any surface damage caused by exercise of those extraction and development of subsurface rights; and (5) owners' association dues and special assessments, if any are applicable, are paid current through closing. 23

24 9.6 0, , and Private Rights These forms address the existence of Private Rights within instruments which provide for covenants, conditions or restrictions (CCRs) and are excepted on Schedule B. These Private Rights are defined as: Option to purchase Right of first refusal Right of prior approval of a future purchaser or occupant Private Charge or assessment (not in 9.9) 24

25 Requirement For issuance of ALTA Endorsement Form (Private Rights Loan Policy) (Revised 4/2/13): Receipt of certification from attorney that (1) Title to the Land does not reveal an option to purchase, right of first refusal or right of prior approval of a future purchaser or occupant (whether in covenants, conditions or restrictions, or in a separate instrument) with priority over the lien of the Insured Mortgage or the recording information for any instrument by which any such right has been waived or subordinated of record to the Insured Mortgage and (2) owners' association dues and special assessments, if any are applicable, are paid current through closing. 25

26 Each endorsement (as applicable): Excepts to Exclusions, Exceptions and Conditions of the policy itself Defines Covenant as a covenant, condition, limitation or restriction in a document or instrument in effect at Date of Policy. Defines Improvement specifically, depending on the coverage Excludes private rights other than the (loan policy) and (owner s policy) Excludes, among other things, leases, obligations for maintenance, repair or remediation, environmental protection covenants not recorded in the Public Records normally searched in a title examination, where applicable, physical issues (contamination, explosion, fire fracturing, vibration, earthquake or subsidence), and negligence in extracting mineral or other subsurface rights (on loan policy endorsements providing mineral rights coverage). No longer provides owner s coverage for encroachments (now available to owners through separate specific underwriting of the ALTA Endorsement Form 28 series) and No longer provides owner s coverage for minerals and other subsurface rights (now available to owners only through separate specific underwriting of the ALTA Endorsement Form 35 series). 26

27 ALTA 28 Series Easements and Encroachments ALTA Endorsement Form (Easement Damage or Enforced Removal) ALTA Endorsement Form (Encroachments Boundaries and Easements) ALTA Endorsement Form (Encroachments Boundaries and Easements Described Improvements) ALTA Endorsement Form (Encroachments Boundaries and Easements Land Under Development) 27

28 Alta 28 Easements and Encroachments and Existing Buildings Designated improvements carve out encroachments not covered Described Improvements & Land Under Development Requirements Survey Information on Easement Type and Location Age of Easement v. Age of Improvement Size or amount of encroachment Can easement still be used Cost of moving easement or improvement 28

29 ALTA 28 and ALTA 28.1 ALTA 28: [if]exercise of the granted or reserved rights to use or maintain the easement(s) in Exception(s) results in: damage to OR enforced removal or alteration of existing building located on the Land. ALTA 28.1: Improvement = existing building Loss or damage from Improvement encroaching not excepted in Sch B. Enforced removal or relocation of Improvement by easement holder use or maintenance Enforced removal of Improvement encroaching onto adjoiner CAN except certain identified exceptions. 29

30 Pay Attention to Non Coverage 4. This endorsement does not insure against loss or damage (and the Company will not pay costs, attorneys fees, or expenses) resulting from the encroachments listed as Exceptions of Schedule B. 30

31 31

32 ALTA 28.2 and ALTA when the encroachment of a specific improvement is meant to be covered and is specifically designated in the endorsement 28.3 encroachments that will exist in specific future improvements as disclosed on a site plan. Coverages Loss from an encroachment by an Improvement onto a neighboring property or onto an easement area within the insured Land, other than as disclosed in Schedule B exceptions. Loss from an encroachment by a neighboring Improvement onto the insured Land, other than as disclosed in Schedule B exceptions. Enforced removal of an insured Improvement based upon the encroachment into the easement area or onto neighboring property. 32

33 Alta 28 Easements and Encroachments Common sense analysis Can you locate the easement Does the easement hit an improvement Does the easement only serve this lot Does it cross this lot to serve other lots 33

34 34

35 ALTA 11 Series: Modifications ALTA Insures modification does not impair validity, enforceability or priority of mortgage as of date of endorsement Does not date down ALTA Also, insures against a specific matter not being subordinate ALTA Also, adds intervening matters Adds new money Additional Amount of Insurance 35

36 ALTA 11: Modifications What is being modified Note Deed of trust Amount Extension/due date Interest rate which way? Concern is novation changes priority 36

37 CAUTION: Modifications with Structural Changes Transfer/assumption/guarantees New or additional parties Release of obligors Capitalizing interest Additional caps or advances Changes in interest rate Maturity of existing lien expired Advance/Obligations period expired Additional collateral Released collateral change in size of project 37

38 Modifications and Novation NC case law is fairly vague. Novation is a substitution of a new contract or obligation for an old one which is thereby extinguished novation implies the extinguishment of one obligation by the substitution of another. Tomberlin v. Long New Money? Minor extension or reduction of interest rate? Anthony Marano Co. 38

39 Modifications Additional Requirements: (1) Recorded modification of note/obligation and deed of trust, signed/acknowledged by: Record owner(s) of land and spouses Obligors on indebtedness (2) Attorney s certification of current ownership of the Indebtedness (3) Attorney s certification of Title to the Land through Modification (4) Other updated underwriting matters depending on modifications involved and intervening interests, such as mechanics liens, endorsement requirements, recent improvements since survey, subordinate liens & amendments, modifications to the deed of trust or note/obligation itself 39

40 INTERVENING MATTERS 40

41 ALTA 14 Series Future Advance Future Advance Mortgage (as defined in the policy) Requires compliance with N.C.G.S or N.C.G.S Re advances No in NC 41

42 Future Advance Endorsements ALTA Endorsement Form 14 ( Future Advance Priority) Assures continued priority of future advances. Preferred for North Carolina Knowledge of intervening defect, lien, encumbrance won t render advance uninsured ALTA Endorsement Form 14.1 (Future Advance Knowledge) Provides the same coverage as Form 14, but excludes coverage for advances made after insured has knowledge of an intervening lien, encumbrance or other matter affecting title. 42

43 ALTA 15 Series Non Imputation Coverage over matters known to specified parties that would otherwise be excluded from coverage on the basis of imputed knowledge used when the entire beneficial interest of the entity holding Title and named as the insured on Schedule A has been transferred for value used when only a portion of the beneficial interest of the entity holding Title and named on Schedule A as the insured has been transferred and the incoming beneficial owner is identified on the form as an additional insured used when the incoming beneficial owner requests to be the insured in its own policy, and its interest has been transferred for value. 43

44 ALTA 15 Series Non Imputation Exclusions from Coverage 3(a) and (b) in the ALTA Owner s Policy and ALTA Loan Policy exclude from coverage matters created, suffered, assumed, or agreed to by the insured or known to the insured, but not to the Company, and not disclosed by the public records. These endorsements were created to prevent the assertions of these exclusions as defenses to coverage for matters that would be imputed knowledge. Rarely, if ever, issued in conjunction with a loan policy. 44

45 ALTA 15 Series Non Imputation What we care about most 44A liens Yes we care about other stuff, but.liens! NO PROTECTION FROM THE MLA No transfer of land for value OPINION No coverage for liens (at least the way they exist in NC) anyway under the endorsement BUT, don t think that many incoming equity purchasers agree, so we underwrite it as a risk 45

46 ALTA Endorsement Forms & Access ALTA Endorsement Form 17 (Direct) Access and Entry Owner & Lender Requires: Survey Direct Access COMPARE: ALTA Endorsement Form 17.1 (Via Easement) 46

47 Insuring Access Actual vehicular access vs. Bare legal access 47

48 ALTA Endorsement (Access and Entry) Assures PEDESTRIAN and ACTUAL VEHICULAR access Requires verification and current survey reflecting: Name of the public street Street is in fact physically open public street, maintained by a public authority (city or state) Land abuts street Access is not prohibited or limited, either legally (such as controlled access) or physically (i.e. no physical impediment to vehicular or pedestrian access) Right to use existing curb cuts or entries 48

49 ALTA Endorsement (Indirect Access and Entry) Verification and current survey reflecting: Identification of private access easement to be insured Name of the public street to which easement provides access Recorded easement instrument Title certification of easement exceptions in Schedule B including easement instrument & matters affecting easement Street is in fact physically open public street, maintained by a public authority (city or state) Land abuts easement & easement abuts street Access over easement onto street is not prohibited or limited legally (such as controlled access) or physically (i.e. no physical impediment to vehicular or pedestrian access) Right to use existing curb cuts or entries, if any, along the easement or street. 49

50 Access Easements One Further Thought OVERBURDENING 50

51 ALTA Endorsement Forms & Tax Parcel(s) Certification from attorney that: 1. all of insured land is covered within the tax parcel number(s) assigned to said land and 2. the number(s) do(es) not include any additional land. NOTE: ALTA 18.1 provides some assurances regarding easements. 51

52 Alta Multiple Tax Parcel Replaces old Tax Foreclosure endorsement Insures against loss if tax parcel numbers do not include all the Land Insures Easement will not be extinguished by a tax foreclosure of servient tract 52

53 Alta Multiple Tax Parcel (but not easements) Insures against loss if tax parcel numbers do not include all the Land Does NOT provide any easement coverage 53

54 Modified Tax Parcel Endorsements Breaking out after the new year must have significant verification that the tax parcel will be broken out The Company insures that the property described in Schedule A is not taxed together with any other real property (or will not be as of January 1, 2018), and constitutes, (or will constitute as of January 1, 2018), a separate taxed parcel for real property taxes levied by the City of Charlotte and Mecklenburg County, North Carolina. A portion of a tax parcel The Company insures against loss or damage sustained by the Insured by reason of the Land being taxed as part of a larger parcel of land other than PIN XXXX XX XXXX. 54

55 ALTA Endorsement Forms 19 06, & Contiguity ALTA Endorsement Form 19 (Contiguity Multiple Parcels) Identifies parcels and boundaries ALTA Endorsement Form (Contiguity Specified Parcels) Identifies parcels only Contiguity between multiple insured separate parcels Owner & Lender Requires: Multiple parcels Survey COMPARE: ALTA Endorsement Form 19.1 (Contiguity Single Parcel) Contiguity between insured parcel and some other parcel 55

56 ALTA Endorsement Forms Survey Endorsement 1. Legal description matches survey OR 2. Certification from the attorney or from the surveyor that the property shown on the survey and described in the composite legal description is the same property as that described in the multiple legal descriptions covered by the prior policy. 56

57 Survey Coverage Lender survey coverage without a survey Underwriting Philosophy Risk Survey required to give lender coverage amount of loan certain endorsements Survey Access Contiguity Easements others 57

58 Draft or Preliminary Survey 58

59 ALTA 13 Series Leasehold Attaches to the policy to create coverage for tenants Includes the value of improvements in the calculation of losses resulting from eviction based on a matter insured by the policy Some coverage for specified out of pocket construction costs for improvements on the land is also provided Creates a differentiation of the method of calculation of loss under the policy Is not available in conjunction with the ALTA 36 series endorsements 59

60 60

61 ALTA 23 Coinsurance A single physical policy when co insurance with other underwriters is involved Allocation of liability by endorsement from each co insurer The 2 (or more) policies must agree in all aspects, except amount, with the policy written by the lead underwriter. If any disagreement as to underwriting or coverages, then the endorsement cannot be issued. 61

62 Best New Endorsement: ALTA 34 IDENTIFIED RISK COVERAGE All purpose basic format for affirmative coverage, conforming to Alliance case Potential Requirement: For issuance of ALTA Endorsement Form Identified Risk Coverage (Adopted 8/1/11): Verification of the particular "Identified Risk" for which affirmative coverage is requested, and determination on appropriate coverage based on applicable Company underwriting procedures, including but not limited to review and approval by Company counsel. 62

63 1. As used in this endorsement Identified Risk means: [insert description of the title defect, restriction encumbrance or other matter] described in Exception of Schedule B. 2. The Company insures against loss or damage sustained by the Insured by reason of: a. A final order or decree enforcing the Identified Risk in favor of an adverse party; or b. The release of a prospective purchaser or lessee of the Title or lender on the Title from the obligation to purchase, lease, or lend as a result of the Identified Risk, but only if i. there is a contractual condition requiring the delivery of marketable title, and ii. neither the Company nor any other title insurance company is willing to insure over the Identified Risk with the same conditions as in this endorsement. ALTA

64 ALTA Endorsement Form 35 series: Mineral and Other Subsurface Rights 64

65 ALTA 35 Series Coverage was previously provided in the ALTA 9 series endorsements Doesn t amend any portions of the policy, just adds coverage. Only for damage caused by the enforced removal based upon the right to use the surface of the land to extract or develop mineral interests. It is not appropriate for other mineral interests. 65

66 Form Improvement means a building on the Land at Date of Policy. Form Improvement means a building, structure located on the surface of the Land, and any paved road, walkway, parking area, driveway, or curb, affixed to the Land at Date of Policy and that by law constitutes real property, but excluding any crops, landscaping, lawn, shrubbery, or trees. Form Improvement means each improvement on the Land at Date of Policy specifically described and itemized on the exhibit attached to the endorsement. Form Improvement and Future Improvement are included in the coverage. Improvement means a building, structure located on the surface of the Land, and any paved road, walkway, parking area, driveway, or curb, affixed to the Land at Date of Policy and that by law constitutes real property, but excluding any crops, landscaping, lawn, shrubbery, or trees. Future Improvement means a building, structure, and any paved road, walkway, parking area, driveway, or curb to be constructed on or affixed to the Land in the locations according to certain Plans identified in the endorsement and that by law will constitute real property, but excluding any crops, landscaping, lawn, shrubbery, or trees 66

67 ALTA 36 Series Energy Projects Include multiple contiguous tracts typically fee, leasehold, easement Severable improvements coverage Often request additional measure of loss coverage ALTA 13 series and ALTA 31 series are NOT available when these endorsements are involved Approval within Chicago Title is required at higher levels than usual 67

68 ALTA 36 Series Energy Projects Leasehold/Easement Owner Leasehold/Easement Loan Leasehold Owner Leasehold Loan CCR s / Land Under Development Owner CCR s/land Under Development Loan Encroachments Fee Owner Fee Loan 68

69 For issuance of ALTA Endorsement Form (Energy Project Leasehold/Easement Owner s) (Adopted 4/2/12): Receipt of (1) verification that the Land for the energy project includes leasehold and easement rights which are a common component of energy projects; (2) verification of recordation of satisfactory Lease (or memorandum thereof) evidencing the Leasehold Estate in the Land to be insured, including any covenants, conditions or restrictions contained in the Lease; (3) verification of recordation of satisfactory Easement to be insured, including any terms, covenants, conditions or restrictions contained in the Easement; (4) architect s or engineer s Plans (survey, site, elevation & other drawings) for specific Future Improvements contemplated; (5) a current and accurate survey of the Land; (6) verification that the Lease and Easement provide for the removal by the Insured of Severable Improvements (i.e. property affixed to the Land at Date of Policy or to be affixed in the locations according to the Plans, that would constitute an Electricity Facility but for its characterization as personal property, and that by law does not constitute real property because (a) of its character and manner of attachment to the Land and (b) the property can be severed from the Land without causing material damage to the property or to the Land); and (7) in order to calculate the additional Amount of Insurance for this coverage, the additional potential losses and costs of removal and relocation of those Severable Improvements for which coverage is provided by this endorsement, in the event of Eviction due to a defect, lien, encumbrance or other matter covered by the Policy affecting the title to the Land. Prior approval by Company underwriting counsel is required. 69

70 Energy and Imputation Most of the substantial sized closings of these projects involve nonimputation endorsements (ALTA 15 series). Since the policy is often issued towards the end, but not after, of construction, be very aware of the potential necessity for a lien exception. As the final policy is usually insuring a transfer of the equity interest of the landholder, there is NO PROTECTION on the owner s policy from LiensNC.com. We cannot rely just on that site for the appropriate waivers should insurance over liens be requested. (Side Opinion, again While a general understanding of the ALTA would reveal that the party buying in to the equity has full knowledge of the ongoing work and contracts (more than we do), that does not change our underwriting of this due to the fact that the additional insured may argue that they have lien coverage.) 70

71 Energy, Zoning, and Tax Parcel Often the solar farm will be located in an area with no zoning, or with no zoning that applies to solar farms. 99% of the time the project will be governed by a conditional use permit allowing the solar farm. If the conditional use permit is recorded, it should be listed in Schedule B as an exception. Be very aware of the tax parcel vs. the insured description. OFTEN the leased or developed area is much smaller than the fee holder s tax parcel, making a regular ALTA 18 impossible. As such, we typically modify the tax parcel endorsement, as seen previously in this presentation, as follows: The Company insures against loss or damage sustained by the Insured by reason of the Land being taxed as part of a larger parcel of land other than PIN XXXX XX XXXX. 71

72 ALTA Policy Authentication Modifies the coverage and Conditions 14 (c) of the Policy which requires an authentication by an authorized person. Provides coverage to the Insured if a policy is issued electronically, or does not have a signature which may be required by the form of policy cover used. 72

73 ALTA 40 series Tax Credit Endorsement ALTA 40 coverage runs to the investor, therefore the Insured must consent to an assignment of proceeds under the policy Policy amount would include any such coverage and the policy would be reduced by any payment under it. Insured under the policy, and the Tax Credit Investor, must consent in writing on the face of the endorsement to the assignment of benefits under the endorsement. ALTA 40.1 Runs ONLY to the investor The amount of coverage must be indicated and additional premium collected for it at the appropriate rate. 73

74 ALTA The Company insures against loss or damage, not exceeding the Amount of Insurance, sustained by the Tax Credit Investor by a reduction in a Tax Credit that is caused solely by a defect, lien, encumbrance, or other matter insured against by the policy, subject to the limitations in Section 8(a) of the Conditions. The Company has no liability to the Tax Credit Investor under this endorsement until: a. its liability and the extent of a loss insured against by the policy have been definitely fixed in accordance with the Conditions; and b. the Tax Credit Investor establishes the reduction in the amount of a Tax Credit. 74

75 ALTA For purposes of this endorsement only: a. Tax Credit Investor means. b. Tax Credit means a tax credit in effect at Date of Policy pertaining to the Land that is available to the Tax Credit Investor under an applicable section of the Internal Revenue Code or other applicable law. c. Additional Amount of Insurance means $. It is in addition to the Amount of Insurance stated in Schedule A and is applicable only to loss or damage payable to the Tax Credit Investor under this endorsement. 3. The Company insures against loss or damage, not exceeding the Additional Amount of Insurance, sustained by the Tax Credit Investor by a reduction in a Tax Credit that is caused solely by a defect, lien, encumbrance or other matter insured against by this policy. The Company has no liability to the Tax Credit Investor under this endorsement until: a. its liability and the extent of a loss insured against by the policy have been definitely fixed in accordance with the Conditions; and b. the Tax Credit Investor establishes the reduction in the amount of a Tax Credit. 75

76 ALTA 41 Series Water Very similar to the ALTA 35 series (minerals) The Company insures against loss or damage sustained by the Insured by reason of the enforced removal or alteration of any [ Improvement or other defined term] resulting from the future exercise of any right existing at Date of Policy to use the surface of the Land for the extraction or development of water excepted from the description of the Land or excepted in Schedule B. 76

77 Endorsement (Water Buildings), insures as to damage to buildings on the Land at Date of Policy. (Similar to ALTA Form 35 06) Endorsement (Water Improvements), insures as to damage to defined Improvements (including building and surface structures) on the Land at Date of Policy. (Similar to ALTA Form ). Endorsement (Water Described Improvements), which insures as to damage to Improvements listed in the endorsement or attached as an exhibit that are on the Land at Date of Policy.(Similar to ALTA Form ). Endorsement (Water Land Under Development), which insures as to damage to Improvements and Future Improvements to be constructed on or affixed to the Land in the locations according to the Plans.(Similar to ALTA Form ). 77

78 ALTA Pari Passu The endorsement modifies the standard priority and enforceability of the lien of the Insured Mortgage by recognizing the nature of the sharing of priority pursuant to the Intercreditor Agreement. The other mortgage(s) involved must be recorded and shown as exceptions in Schedule B, part I. The Intercreditor Agreement must be recorded and shown as a Schedule B, part 1 exception. If the terms creating the sharing of priority is in the second mortgage itself, or an amendment to an already recorded mortgage, the instrument containing the pari passu provisions should be set out a second time as a separate exception. 78

79 > Endorsements 79