For every type of insurance that you purchase, there are a variety of different coverages offered. For instance, if you buy homeowner’s insurance you may want to add extra coverage if you have valuable paintings or jewelry that may not be covered by the basic policy amounts.
The same is true for title insurance.
The standard Owner’s Title Insurance Policy affords basic protections against many title defects such as fraud, forgery, or matters in the public record. For example, the policy includes coverage for recorded liens, real property taxes, or legal documents within the transaction that were executed under an invalid or expired power of attorney.
The title agent’s intent is to research thoroughly the ownership rights of the property, as well as any judgments or liens that may exist that could affect your rights to the property. Then the agent clears or cures those issues to ensure that you have free and clear title to the property when you purchase it.
Although your title agent is diligent in searching out the facts about your property that are in the public record, not everything about your property is “of record.” Therefore, a standard title policy includes exceptions to coverage for certain matters that may be undiscoverable.
An Enhanced Owner’s Policy adds 22 new covered risks that are excepted in the standard policy. The enhanced policy is typically available to purchasers of an owner-occupied one-to-four family residence wherein each insured is a “Natural Person.” The term “Natural Person” is defined under the conditions of the title policy. With the enhanced policy, the policy insures against certain future activities and matters that would not be discoverable by the title agent’s search of the land records.
Coverage under an enhanced policy continues to be subject to the title policy’s conditions, exclusions and exceptions unless it is stated differently in the covered risk itself.
Let’s take a look at the additional coverage offered with an Enhanced Owner’s Policy.
Inflation Coverage
One of the most important benefits of an Enhanced Owner’s Policy is inflation coverage. The amount of insurance automatically increases by 10% of the policy amount each year for the first five years, up to 150% of the amount insured for your home. This occurs, without payment of any additional premium, to cover increases in the value of the insured property.
Building Permit Violation
When you purchase a home, you may not be aware that the former owner failed to obtain a legal permit from the proper government office to put in a swimming pool, add a wing to the house or construct an additional dwelling unit (ADU).
An enhanced policy protects you if you are forced to remove or remedy your existing home, or any part of it (other than boundary walls or fences) because any portion was built by a previous owner without obtaining a building permit. This coverage is subject to a deductible amount and a maximum dollar limit of liability, as shown in Schedule A of the title policy.
Covenants, Conditions and Restrictions
Covenants, Conditions & Restrictions (CC&Rs) list the rights and obligations of a homeowners’ association (HOA). This could include your maintenance obligations, property-use restrictions, assessments and insurance obligations, among others.
Without your knowledge, these CC&Rs may have been violated prior to your ownership, resulting in a financial obligation to the HOA or loss of title. An enhanced policy covers you if you are forced to correct or remedy the existing violation or if the title is lost or taken because of any covenant, condition or restriction, which occurred before you acquired your title, even if the covenant, condition or restriction is excepted in the policy.
Encroachment
If any structures on your new property are encroaching onto your neighbor’s property, for instance if the garage is built partially on the neighboring property, the enhanced policy provides coverage in the event you are forced to remove those structures due to the encroachment. If the encroaching structures are boundary walls or fences, this coverage is subject to a deductible amount and a maximum dollar limit of liability, as shown in Schedule A of the policy.
In addition, the policy provides coverage in the event your neighbor builds any structures, after the policy date, that encroaches onto your land (other than boundary walls and fences).
Enhanced Access
An enhanced policy insures you have actual pedestrian and vehicular access to your property.
Map and Address Inconsistencies
If a map is attached to your policy, the enhanced policy provides coverage if the map does not show the correct location of the land, according to the public records.
Taxes
Sometimes a taxing authority may assess supplemental real estate taxes not previously assessed against the land but covering a period prior to your purchase. This could be due to new construction or a change of ownership that occurred before the policy date. An enhanced policy would cover this liability as well.
Zoning
If a previous owner added structures to the property that violate zoning laws, an enhanced policy provides coverage to you if you are forced to remove or remedy your existing structures, or any part of them, due to those violations. If you are required to remedy existing structures, the amount of insurance is subject to a deductible amount and maximum dollar limit of liability, as shown in Schedule A of the title policy.
In addition, you are insured if it is determined your property cannot be used as a single-family residence because it violates existing zoning laws or zoning regulations.
Final Word
Property ownership is often more complicated than we know, especially if you are purchasing property in an unusual situation, where property has been recently subdivided or where there has been recent construction. If you have any questions or concerns, it may be advisable to enlist the help of a real estate attorney to review all aspects of your purchase. We also invite you to contact a local title insurance agent to learn how the Enhanced Owner’s Title Policy can provide you additional protection for your homeownership rights.
The transaction is the largest in Alliant National history and demonstrates the underwriter’s commitment to partnering with its agents in the commercial sector.
With its growing national presence across 30 states and the District of Columbia, Alliant National is a well-known residential underwriter. However, it is also a force to be reckoned with in the commercial real estate field. It recently insured a $182 million refinance transaction with Chambers County Abstract of Anahuac, Texas. The transaction was a record breaker for both Alliant National and Chambers County Abstract.
“We were in absolute disbelief,” said Chambers County Abstract examiner Darla Chandler Lastovica, commenting on the size of the transaction. “We didn’t believe it was real until it was all said and done.” Lastovica helped lead the title work on the property.
“Alliant National has insured many commercial properties throughout its history,” said KC West, Senior Vice President and Southwest Regional Manager at Alliant National. “However, we’ve never tackled a property of this size and scope before. While it was a major lift, it was exciting to work on insuring such a large tract of land and to work closely with our partners at Chambers County Abstract.”
The transaction covering the sprawling 550 acre-property in Baytown, Texas, was completed on behalf of Ohio-based JSW Steel. The company is gearing up to renovate its pipe and plate steel mill facility on the site. Chambers County Abstract has a long relationship with JSW Steel, having produced title reports for the company’s law firm since 2014.
This particular transaction dates back to 2019, when JSW Steel opened a $10 million file with Chambers County Abstract. After title was opened, the order sat idle for more than a year until one of JSW’s lawyers informed the office that the transaction had ballooned in size to $182 million.
Aside from its sheer size, the transaction was enormously challenging in other ways. First, it had a complex legal description that included myriad tracts and easements. Second, the description changed over the years, making it a substantial effort to determine what pertained to the property. Despite having completed prior title work, it took considerable effort to review legal descriptions and surveys, verify legal instruments and match these to the various tracts.
Chambers County Abstract, however, is a seasoned player in the commercial real estate market, having worked on many commercial properties, including expansive, multi-tract properties. Having a company well-versed in the process is helpful considering the additional challenges commercial properties can pose over residential. For instance, even single tract commercial transactions can contain more instruments, loans, and longer documents than residential transactions. Multi-tract properties are exponentially more complicated, featuring lengthy legal descriptions, multiple tracts to search and volumes of legal instruments to record. Organizing all these components is “a work of art in its own right,” Lastovica said.
Integral to the success of any given commercial transaction is the role of the underwriter, which must make the final decisions as to whether the property can be insured. As Chambers County Abstract’s underwriter, Alliant National acts as a financial backstop if a title claim or issue were to arise. The relationship between title underwriter and title agent is crucial. Both parties must effectively work together to prevent financial loss. While important to every transaction, title insurance serves a unique role in a commercial context. There can often be multiple liens against commercial properties, so having proper insurance in place is critical to the lender getting an expected lien priority.
Alliant National’s guiding principal is to partner with agents and never compete. In its work with Chambers County Abstract, one can see the powerful and profitable logic in such an approach – for both residential and commercial properties.
Longmont, CO — (January 11, 2022) — Alliant National Title Insurance Company, a unique title insurance underwriter that partners with independent agents to improve their competitive position, is proud to be Certified™ by Great Place to Work® for the sixth year in a row. The prestigious award is based entirely on what current employees say about their experience working at Alliant National. This year, 96% of employees said that when you join Alliant National, you are made to feel welcome.
Great Place to Work® is the global authority on workplace culture, employee experience and the leadership behaviors proven to deliver market-leading revenue, employee retention and increased innovation.
“Great Place to Work Certification™ isn’t something that comes easily – it takes ongoing dedication to the employee experience,” said Sarah Lewis-Kulin, vice president of global recognition at Great Place to Work. “It’s the only official recognition determined by employees’ real-time reports of their company culture. Earning this designation means that Alliant National is one of the best companies to work for in the country.”
“From the inception of our company, we’ve focused on building a culture at Alliant National anchored by our core value of caring — caring about our agents, our communities, and each other,” said David Sinclair, President and CEO of Alliant National. “To receive this certification six years in a row is a gratifying and humbling testament to those collective efforts.”
According to Great Place to Work research, job seekers are 4.5 times more likely to find a great boss at a Certified great workplace. Additionally, employees at Certified workplaces are 93% more likely to look forward to coming to work, and are twice as likely to be paid fairly, earn a fair share of the company’s profits and have a fair chance at promotion.
Alliant National distinguishes itself from competitors by combining strong underwriting capability with independent agents’ in-depth knowledge of local markets. The result is a nationwide network with deep roots in local communities, and a wealth of expertise that is flexible, nuanced, and continuously growing.
The Independent Underwriter for the Independent AgentSM – Alliant National believes in empowering people to thrive. The company protects the dreams of property owners with secure title insurance and partners with 600+ trusted independent title agents as a licensed underwriter in 30 states and the District of Columbia.
ABOUT GREAT PLACE TO WORK CERTIFICATION™
Great Place to Work® Certification™ is the most definitive “employer-of-choice” recognition that companies aspire to achieve. It is the only recognition based entirely on what employees report about their workplace experience – specifically, how consistently they experience a high-trust workplace. Great Place to Work Certification is recognized worldwide by employees and employers alike and is the global benchmark for identifying and recognizing outstanding employee experience. Every year, more than 10,000 companies across 60 countries apply to get Great Place to Work-Certified.
ABOUT GREAT PLACES TO WORK®
Great Place to Work® is the global authority on workplace culture. Since 1992, they have surveyed more than 100 million employees worldwide and used those deep insights to define what makes a great workplace: trust. Their employee survey platform empowers leaders with the feedback, real-time reporting and insights they need to make data-driven people decisions. Everything they do is driven by the mission to build a better world by helping every organization become a great place to work For All™.
Extend your security bubble further than your business’s front door.
Managing cybersecurity risk is an arduous task for any organization, one that becomes even more challenging when trying to extend your security to vendor relationships. However, it has never been more important. Not only are cyber threats on the rise, but the U.S. Securities and Exchange Commission (SEC) made ensuring operational resiliency and information security one of its 2021 priorities.
Thankfully, last year the agency published a report on the due diligence companies should practice when dealing with vendor relationships. Covering the monitoring of vendors, contracts, customer information policies and other issues, the guidance provides much-needed advice for these complex business partnerships. Let’s explore some of its main tips, takeaways and findings for addressing security concerns with your vendors.
Why Does Information Security and Operational Resiliency Matter?
According to the SEC’s 2021 Examination Priorities report, breaches in information security can in fact “have consequences that extend well beyond [a] firm,” adversely impacting “other market participants.” The report further explains that, due to the radical increase in remote operations in response to the COVID-19 pandemic, cybersecurity concerns have been elevated further, requiring closer scrutiny of endpoint security, data loss, remote access, use of third-party communication systems and, of course, vendor management.
Understand Your Liability
It is a common misconception that if your vendor experiences a data leak, the onus is on them. Not true. State laws typically lay responsibility at the feet of the entity that collected the customer information in the first place. They usually limit vendor requirements to informing you that a data breach or hack has occurred. To safeguard yourself and your business, ensure that your vendor contracts explicitly detail how your customers’ data needs to be handled, what to do in the event of a breach and the expected timeline for dealing with any disruptions.
Vendor Management Programs
You likely already have some experience working with vendors, as well as an understanding of how time consuming such relationships can be. Unsurprisingly, adding cybersecurity concerns into the mix creates an additional set of concerns that need to be managed. Establishing a program that addresses security concerns and expectations at the beginning of the working relationship can help. This program should cover safeguards, how to evaluate vendors, independent audits and processes for terminating and/or replacing vendors.
Understanding and Monitoring Vendor Relationships
One positive finding from the SEC is that many advisers and their personnel already demonstrate a clear understanding of privacy and cybersecurity contract terms. Furthermore, these advisers display an awareness of the risks inherent to outsourcing work to vendors and best practices for limiting such risks. One way that companies accomplish this is through continuous monitoring of vendor relationships, making sure to stay apprised of any changes in the vendor’s services or personnel.
Ongoing Work
Despite this good news, firms cannot simply assume that their data protection policies are fully up to snuff or even rest on their laurels. Instead, they must treat vendor security as an ongoing, habitual process.
As the SEC noted, designing a vendor management program is a great place to start. Then, be sure to implement it. Build security requirements into your initial vendor contracts and make them as specific as possible. Run regular security audits, using questionnaires if necessary to rigorously evaluate your vendor’s security practices. You can also demand system and organization controls (SOC) for any vendor you choose to work with, requiring them to conduct a SOC for cybersecurity audit on an annual basis. Lastly, you and your company should be performing access and security reviews daily, always staying vigilant for unusual activity.
The hard truth is that, in our digital-first world, we all must work a bit harder to stay safe online and protect the integrity of our customers’ data. But by doing so, you will have a more resilient organization and satisfied client base.
In a hot housing market, many buyers have turned to cash offers to get a leg up on the competition. Cash offers are often much more attractive to a seller, and it is not difficult to understand why. Cash can provide a pathway to a faster closing process. It frequently gives sellers more confidence. These offers even waive the requirement of having to conduct an appraisal.
Cash offers can also generate a bit of a confusion. For instance, how does eschewing a lender affect other parts of the closing process like a title search and insurance? Does it eliminate the need for insurance? If not, how and when should a cash buyer pursue title work? In this blog post, we will examine these questions.
Is Title Insurance Necessary for Cash Buyers?
Title insurance is critical for a buyer to have regardless of whether there is a mortgage. Without a title search and resultant policy, no one is looking into who owns the property and what its issue may be. When a buyer obtains a mortgage, a title search is routine. But the contract and the obligation exist only between a lender and the title company – the buyer has no direct protection. If a defect exists, the title company is not duty-bound to fix it; instead, the buyer/owner could be liable for a lien or another defect.
For example, consider a scenario where a home seller has a first mortgage for $100,000. A new buyer has obtained a loan for $125,000, and the property is worth $200,000 (in other words the buyer has invested $75,000 of their money). Meanwhile, there is a second valid but unknown mortgage of $50,000 against the property.
The lender uses this to assert their right to foreclosure and to take the property away. In such a scenario, the title company is required to defend the lender and protect their lien. The same can not be said for their relationship with the buyer. Instead, the buyer/owner must pay the unknown mortgage because they gave warranties of title to their lender.
Failing to do so could trigger a default. The lender, however, will not suffer losses. Under their title policy, there is enough equity to pay the newly discovered $50,000 mortgage and the lender’s debt. Without an insurance policy, the purchaser of the property could lose the title and, ultimately, their equity. They would be forced to pay the $50,000 to maintain ownership.
In each case, the seller is likely liable to the buyer for the $50,000, but when title insurance comes into play, the insurer will not only pay the loss but sue or pursue the seller for recoupment. But when there is no title insurance to speak off, all the costs fall on the buyer if they decide to sue the seller – who may not be able to pay even if the suit is successful. The same situation can develop in the case of a scam. If the seller is a bad actor and does not own the property, a buyer can wind up with nothing if no record search is conducted.
What should be clear from that example is that, for just a nominal cost, title insurance can offer an easy remedy if there is something wrong. More importantly, it allows the buyer to know of any issues before investing money in the property. Title insurance also does not impede the advantages inherent in making a cash offer. As noted, one clear advantage of a cash offer is that it can speed up the closing process. Conducting a thorough title search does not disrupt this accelerated timeline. Typically, title work can be completed in 2-4 days and, depending on what is found, a commitment can be issued shortly afterward.
How and When Should Cash Buyers Procure Title Insurance?
When considering title insurance, an interesting question emerges regarding who gets to select the title insurance provider: broker, buyer or seller? To some extent, who does the referral and who pays for it is a matter of local practice. Typically, the party that pays makes the choice, but not always.
If possible, purchasers should maintain control over the issuer of the insurance. The buyer should want to know everything they can about the title’s status. Additionally, if the insurance provider is selected by the seller, there is the possibility that they may try to show that the title has few to no problems.
When searching for an agency, a buyer or realtor should vet the agency issuing the title commitment and verify that they are in good standing by obtaining that verification from the insurer. There is a universal ID that the American Land Title Association (ALTA) maintains and will verify an agency’s legitimacy. The insurer can also be contacted directly to verify their legitimacy. Phone numbers for the insurer are typically on the commitments or an online verification may be available at the insurer’s website.
During a cash transaction, it is important to obtain a commitment to issue a policy from a reputable title agency or insurer as soon as possible. Receipt should provide an opportunity under the contract for purchase and sale to review and make objections – although there is usually a time limit. However, obtaining it right before closing does not allow time to object to an unacceptable defect.
To Buy or Not to Buy Title Insurance
It is not a requirement under the law that a cash buyer procures title insurance, so they can choose not to obtain it. However, there is no circumstance where skipping title insurance would be a good idea. Plus, with it being a relatively minor investment in the most expensive of jurisdictions, having the security that a thorough title review provides is more than worth the cost. You simply cannot put a price on peace of mind, and having a valid title policy is a great way to protect your all-cash investment.
