By Matt McAllister, COO at Statewide Abstract Corp., and Amy Natsoulis, Partner at Cuddy & Feder LLP
Most commercial real estate owners and developers don’t spend much time worrying about title insurance. After all, that’s what lawyers are for, right? However, recent changes to New York title insurance, effective October 1, 2024, deserve attention—particularly for real estate owners and developers.
On October 1, 2024, the Title Insurance Rate Service Association, Inc. (TIRSA) adopted a revision to the Title Insurance Rate Manual, which guides New York State Title Insurance Agencies in issuing policies to real estate owners and lenders. The revised manual introduces new policy forms that enhance readability and clarify previous ambiguities. Notably, standard premium rates remain unchanged.
The most significant change is the prohibition on providing affirmative insurance in title insurance policies. Affirmative insurance, once negotiated as “extra” coverage by borrowers’ or lenders’ lawyers at no additional cost, is no longer available in its previous form. Instead, obtaining this extra coverage now requires purchasing specific endorsements to the title insurance policy. The revised Rate Manual also introduces a range of American Land Title Association (ALTA) Endorsements previously unavailable in New York.
Why This Matters
Most lenders will continue to expect the additional title insurance coverage they are accustomed to, but the process for obtaining it has become more complex. While affirmative insurance was often granted without cost or supporting documentation, the new endorsements can cost up to 5% of the title insurance premium—potentially thousands of dollars.
Moreover, these endorsements come with stricter underwriting requirements. Title companies may require detailed supporting documentation such as an ALTA Survey, a zoning opinion, or a site plan overlaid onto an ALTA Survey. Without this documentation, securing the necessary endorsements could delay or jeopardize your closing.
If there’s one takeaway: start the discussion with your lender early. Identify the endorsements they will require and consult with your title company to ensure you have the necessary documentation to secure these endorsements before closing.
Spotlight on Land Under Development (LUD) Endorsements
The new Land Under Development (LUD) Endorsements—ALTA 9.7, 9.8, 28.3, and 35.3—highlight the importance of this shift. These endorsements provide construction lenders with coverage for violations of covenants and restrictions, damages from encroachments onto adjoining parcels or easements, and issues related to mineral and subsurface substances.
These endorsements are designed for properties that are either vacant and being developed or undergoing additional improvements. To issue these endorsements, title companies require an ALTA-NPS survey of the property along with detailed building and site improvement plans. This process underscores the need for early planning, as these requirements cannot be met at the last minute. The cost for these endorsements is the greater of $500 or 5% of the premium—or $250 when simultaneously issued.
This article was written by Matt McAllister, Chief Operating Officer at Statewide Abstract Corp., and Amy Natsoulis, Partner at Cuddy & Feder LLP. If you have any questions about how these changes may affect your transactions, they are happy to provide further insights.