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Www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA How to Conduct a Title Review Presented by Dennis A. Ostgard WPPA Spring.

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Presentation on theme: "Www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA How to Conduct a Title Review Presented by Dennis A. Ostgard WPPA Spring."— Presentation transcript:

1 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA How to Conduct a Title Review Presented by Dennis A. Ostgard WPPA Spring Meeting Pasco, WA 2009

2 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Forms of Title Reports Preliminary commitment –Owner’s vs. lender’s policy –Standard vs. extended coverage Litigation guaranty Trustee’s sale guaranty Policy of Insurance of Record Title (PIRT) Abstracts or chain of title reports Seller’s policy

3 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Purposes of Title Review Due diligence (evaluate title risks) Obtain an appropriate title policy –A title commitment is not a representation as to the condition of title.

4 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA ALTA Policies Most commonly used Current form: 2006 Previous forms withdrawn –1992 forms –1970 forms with 1984 amendments

5 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA 2006 ALTA Forms: Summary of Changes Generally improved coverage –Covered Risks expanded –New and expanded definitions –Elimination of provisions that limited coverage –Claims handling less onerous –Automatic increase in amount of insurance –Some creditor’s rights coverage Downsides? –Creditors rights remains an issue –Mandatory arbitration limits increased

6 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Title Endorsements 44 ALTA endorsements for use with 2006 policy forms –Names and numbering have changed –Some earlier endorsements now moot Other endorsements may be available

7 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Leasehold Coverage Former 1975 Leasehold Policies were of limited value –Failure to address leasehold improvements –Failure to fully address business relocation concerns 2001 Leasehold Endorsements –ALTA Leasehold Owner’s Endorsement –ALTA Leasehold Lender’s Endorsement

8 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Take-Aways Use 2006 ALTA Forms with appropriate endorsements Lenders should request creditor’s rights endorsement Consider requesting waiver of arbitration

9 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Coverage Formula + Covered Risks (insuring provisions) – Exclusions +/– Schedule A – Schedule B General Exceptions – Schedule B Special Exceptions + Schedule B-II Special Exceptions (lender’s policy) +/– Notes and Conditions + Endorsements = COVERAGE

10 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Title Review – Overview Your objectives –Identify title risks and determine which are acceptable –Resolve issues –Obtain affirmative coverage, if appropriate Cooperative exercise –Insurer is not an adversary

11 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Title Review – Surveys Full title review is challenging without a current survey Ordering an ALTA survey –2005 ALTA/ACSM Minimum Standard Detail Requirements –Designate Table A optional items –Provide names of parties for certification

12 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA What to look for in the survey Date – need update? Commitment – references current version? Certification – as required? –include owner, lender and title company Minimum detail – as specified? Legal description – match title commitment and legal documents? Boundaries, easements and set-backs – locate and check for encroachments Access – vehicular access to public street Utilities – to extent possible, verify all necessary utilities are located on the property or in abutting roadways

13 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Surveys – Practice Tips New construction? – have survey reviewed by architect or engineer to ensure future improvements will not encroach Designate items to be corrected if time and expense are warranted

14 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Title Review – Schedule A Date – update needed? Policy info – as agreed? Vesting – title vested in seller or borrower? Legal description –Match the transaction documents? –Match the survey? –Include appurtenant easements?

15 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Title Review – General Exceptions Vary by jurisdiction and insurer; standard GE’s include: –survey and boundary issues –rights or claims of persons in possession –unrecorded construction liens Eliminate or narrow by purchasing extended coverage –survey exception will be narrowed to specified defects

16 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Title Review – Special Exceptions Review underlying instruments –problem of illegible instruments Items that do not affect title to insured estate –expired items –items that only benefit but do not burden –items that affect other property or estates Items that will be discharged at closing Select candidates for removal or affirmative coverage

17 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA What to look for in the title review Verify legal and physical access –ALTA policies insure only legal access –legal and physical access at specified location may be insured by endorsement Interference with intended use –Restrictive covenants Interference with improvements –Easements (e.g., under buildings) –Mineral reservations –Setbacks

18 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA What to look for in the title review Encroachments –onto adjacent property, easements or setbacks –onto purchased property Cost-shifting provisions –Cost sharing agreements and assessments –Mitigation covenants –Deferred taxes (e.g., open space)

19 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA What to look for in the title review Particular liabilities or obligations –Pre-closing breach of running covenants –Notices of legal violation –Unanticipated obligations Others?

20 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Resolving title issues Obtain releases from satisfied lien holders Bond around construction liens Affirmative coverage by endorsement (form or custom) Add clarifying note (e.g., this exception does not affect title to the insured estate)

21 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Resolving title issues Removal or affirmative coverage may require –lien release or other recordable instrument –title affidavit –indemnity –estoppel –letter from government agencies re satisfaction of obligations –assurances from surveyor

22 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Summary: Approaches to resolving issues Transfer risk to insurer Transfer risk to seller –indemnity or post-closing covenant –holdback or other security Accept risk – with reduction of purchase price – based on assurances Usually better to solve the problem –Accepting or transferring risk leaves potential claim outstanding –Effect on future transactions

23 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Conclusion To be effective as a title reviewer, you must: –Know the property –Know the client’s objectives –Anticipate issues that may arise in the future –Cooperate to resolve issues –Document your review (see sample title review memo)

24 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA References Paul L. Hammann, 2006 ALTA Policy and Endorsement Forms (2007) forms.pdf John C. Murray, Benefits of the New Leasehold Endorsements for Owner’s and Loan Policies (2005) _Murray_Reference/Title_Insurance/leaseholdpolicy.pdf Title Insurance in Washington: Improving Competition and Consumer Choice, Report of the Title Insurance Review Task Force (2007) John C. Murray, Creditors’ Rights Coverage in Title Policies: Does Deletion of the Exclusion Imply Coverage? (2007) _Murray_Reference/Title_Insurance/title-perspective.pdf

25 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA Thank you!


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