Significant Changes Being Made to Title Insurance Coverage and Costs in New York State

Significant changes in title insurance coverage and costs in New York State will impact both residential and commercial mortgage lenders in the state. These changes emanate from the new Title Insurance Rate Service Association (TIRSA) Rate Manual (7^th Revision) which is effective in New York on October 1, 2024 (Rate Manual).  All title underwriters and agents must follow the new guidelines as of that date for both owner’s and loan policies in connection with residential and commercial properties.  (The rationale within the industry and driving these changes is to have New York title insurance standards conform to title norms within the rest of the country, particularly in the area of “affirmative insurance” which has been a New York-specific practice and which will no longer be available, except through approved Endorsement forms.)

The new Rate Manual reflects the biggest changes to title policies and endorsements in decades.  Here are some of the key changes to be aware of:

1. The current 2006 American Land Title Association (ALTA) Owner’s and Loan Policy Forms with be replaced with the 2021 Form Policies. 
2. Some TIRSA Endorsements have been withdrawn and replaced with an ALTA Endorsement counterpart, while other TIRSA Endorsements have been revised or withdrawn altogether.
3. The pricing for certain Endorsements has been amended and the issuance of certain endorsements may now require additional searches, survey requirements, and/or other due diligence.
4. No-fee affirmative coverage/insurance is prohibited.  Coverage will only be afforded via an approved Endorsement set forth in the revised TIRSA Rate Manual (Rules Section 2(C)(2)).  Most forms of affirmative coverage/insurance previously provided with the 2006 ALTA Policy Forms will be replaced with the issuance of one or more of the TIRSA General Endorsement, ALTA 9, 28 or 35 series of Endorsements summarized below.

A. TIRSA General Endorsement may be used to provide affirmative coverage regarding:

i. Party walls (see, Section 32(B) of the Rate Manual); and

ii. The exercise of specific rights of first refusal or options (see, Section 32(C) of the Rate Manual).

B. ALTA 9 Series (Restrictions, Encroachments and Minerals):

In general, the ALTA 9 Series of Endorsements are known as Restrictions, Encroachments and Mineral (REM) endorsements. 

Some of the items available for consideration for coverage under ALTA 9 endorsements are recorded covenants and restrictions, setback lines, some issues with respect to mineral rights (usually not a down-state concern), certain easements, maintenance of existing improvements and damage to existing improvements.  The title insurer may consider the issuance of an ALTA 9 endorsement if there are minor violations of restrictions, but violations that are not minor must be listed in Schedule B of the title policy.  (The practitioner may have to pursue additional diligence with the title underwriter regarding the availability of endorsements as forms can vary by state and city; investigation with the underwriter may be required and may be determined by the transaction's specific conditions.)

The ALTA 9.1-06, 9.2-06, 9.8-06 and 9.9-06 are only available for Owner’s Policies.

The ALTA 9.3-06, 9.6-06, 9.6.1-06 and 9.7-06 are only available for Loan Policies.

The eight ALTA 9 Series Endorsements are broken down into three groups:

i. CC&R Endorsements (ALTA 9.1-06, 9.2-06 and 9.3-06) provide coverage over Covenants, Conditions and Restrictions (CC&R).

ii. Private Rights Endorsements (ALTA 9.6-06, 9.6.1-06 and 9.9-06) provide coverage over private rights and assessments.

iii. LUD Endorsements (ALTA 9.7-06 and 9.8-06) provide coverage over covenants, conditions and restrictions for land under development.

C. ALTA 28 Series (Encroachments and Easements):

The ALTA 28 series of endorsements covers loss or damage from encroachments and easements and may include coverage for the enforced removal of improvements.  The practitioner should be diligent with respect to the definition of "Improvements" as the specific definition may lead to broader or narrower coverage.  (Exceptions to coverage may be listed in Schedule B for which the insurer it will not provide insurance.)

With respect to practitioners that may be engaged in construction projects, "Future Improvements" can be insured based on "Plans" which will need to be provided to the underwriter for review in advance of closing.   “Plans” will typically include architects’ and engineers’ plans.

There are four ALTA 28 Series Endorsements available for use in both Owner’s and Loan Policies.  As for the Loan Policies, these series 28 endorsements are available, generally described as follows:

ALTA 28-06 – Coverage for loss resulting from damage to an existing building from an easement.

ALTA 28.1-06 – Coverage against loss and enforced removal of an improvement onto adjoining land; and coverage for encroachment of an improvement on adjoining land onto the subject land.

ALTA 28.2-06 – Coverage against loss and enforced removal of "specifically itemized" improvements.

ALTA 28.3-06 – Coverage against loss and enforced removal for an encroachment of any improvement or future improvement onto adjoining land or onto a portion of the Land subject to an easement; and encroachments onto to the subject Land (for Land Under Development only).

We note that while Affirmative Insurance previously provided pursuant to the norms of New York State practice typically provided coverage for “any loss or damage by reason of . . .”, the current endorsements provide coverage for “loss or enforced removal of existing buildings or Improvements . . .”  While the change may not have significant impact in actual coverage or claims experience, we note that the “new” coverage language is somewhat more restrictive than the affirmative coverage being phased out.

D. ALTA 35 Series (Minerals and Subsurface Substances):

There are four ALTA 35 Series Endorsements available for use in both Owner’s and Loan Policies (ALTA 35, 35.1, 35.2, and 35.3), which provide coverage relative to minerals and other subsurface substances.  The ALTA 35.3 is for land under development.  While these endorsements are not typical within much of the down-state New York region, we can provide additional information on these endorsements as the need may arise.

E. Survey Readings. The current understanding within the industry is that the use of survey readings within Schedule B will still be available, but that the descriptive language within such survey reading may be more limited than what has previously developed in New York over the years; in other words, the survey reading may be limited to detailing potential exceptions to boundaries, lot lines, etc., but may no longer contain a description of the improvements.  However, the ALTA 25-06 (Land Same As Survey) remains available.  That endorsement, coupled with the use of a survey reading within Schedule B should continue to provide coverage which practitioners typically seek in New York.

The descriptions of the above endorsements are a sampling of the major endorsements available which will provide a close substitute for the “affirmative insurance” previously provided in New York state.  In addition to the above endorsements, the extensive series of ALTA endorsements – as well as certain TIRSA endorsements – (such as the “New York” endorsement (gap), mortgage tax, variable rate, condominium, leasehold, etc.) will continue to remain available.

Title Policies: The 2021 Policies (Owner’s and Loan Policy) will contain numerous revisions, some key changes are highlighted below:

a) New Covered Risk added: Insurer will not deny liability because the policy is issued electronically or lacks any signature.  Since this coverage will be in the Policy Jacket, the Policy Authentication Endorsement has been withdrawn. 

b) There are several new definitions (i.e., Affiliate, Consumer Protection Law, Discriminatory Covenant, Enforcement Notice, Government Mortgage Agency or Instrumentality, Obligor, PACA/PSA Trust and State), which practitioners are encouraged to review.

c) Several other definitions have been revised (i.e., Entity, Indebtedness, Insured, Land and Public Records).

d) The preambles of Schedule B and Schedule B-II have been revised.

e) Discriminatory Covenants – The 2021 ALTA Policies will include the following language in Schedule B:

“Some historical land records contain Discriminatory Covenants that are illegal and unenforceable by law.  This policy treats any Discriminatory Covenant in a document referenced in Schedule B as if each Discriminatory Covenants is redacted, repudiated, removed, and not republished or recirculated.  Only the remaining provisions of the documents are excepted from coverage.”

Lenders (and counsel for owners) will need to determine what coverages they will require under these revised policies and endorsements, and what new estimates of costs will need to be quoted to borrowers and owners.  In addition, for residential loans, lenders may need to adjust the estimated title insurance costs on Loans Estimates and the final costs on Closing Disclosures provided to borrowers under the Truth in Lending Act and those Lenders are encouraged to contact their closing counsel regarding endorsements that will be required and the costs thereof.

The Title Underwriters have indicated that there will be some growing pains in implementing these changes, and our firm will be closely monitoring the situation so we can assist our clients going forward.   

The revised Rate Manual can be accessed here.

This advisory is a general overview of these changes and is not intended as legal advice. If you have any questions about this advisory, please feel free to contact John T. Curran at (516) 357-3734  or via email at JCurran@cullenllp.com or Matthew P. Cullen at (516) 296-9137 or via email at MCullen@cullenllp.com.