For many years, the American Land Title Association has developed title insurance forms for voluntary use by member title insurance underwriting companies. Before a new form is adopted, it first must be approved by a vote of the ALTA Active membership. Proposed new forms are continually being developed and existing forms are reviewed by the Association's Title Insurance Forms Committee under the authority of the elected ALTA Board of Governors.
ALTA forms represent an ongoing effort by the Association to keep title insurance coverage responsive to the needs of customers and consistent with the requirements of regulatory authorities.
This information presents a brief sketch of the ALTA forms existing in 1990. It is designed to provide a quick glimpse, but in no way purports to include a comprehensive explanation of these forms.
All basic ALTA policy forms include coverage insuring against the unmarketability of title and the lack of a legal right of access to and from the land. Also, these policies provide, subject to their conditions and stipulations, that the Company will pay for counsel to represent the insured as to any claim based on a matter covered by the policy.
The following are profiles of the current ALTA forms:
Insures a lender making a loan secured by a mortgage on land with respect to the title of the subject property, and with respect to the validity and priority of the mortgage lien. Coverage usually is in the amount of the mortgage loan and the amount of coverage decreases as the mortgage is paid.
Insures an owner with respect to the title to the subject property. The policy can be used for residential or commercial properties, or various other interests in real estate. The coverage remains in effect as long as the insured, or heirs or devisees of the insured, retain an interest in the subject property or remain liable under warranties given in the sale of that property. The minimum amount of coverage is generally the full purchase price of the real estate, including an improvements to the property that constitute real property.
Required by law in some states. Informs real estate purchasers that mortgagee title insurance is being issued to protect the lender in a transaction (and that the mortgagee policy does not protect the owner), and the purchaser has the option to buy separate owner's title insurance for the purchaser's protection. There is a provision on the form for the purchaser to specify whether or not owner's title insurance is desired.
Insures a lender making a loan secured by a mortgage on a "leasehold estate" with respect to the title to the subject property, and with respect to the validity and priority of the mortgage lien. The policy includes a definition of the "leasehold estate" and provides a basis for valuation of the leasehold estate for claims purposes. The policy specifies various miscellaneous items of loss in the event of eviction that are peculiar to a "leasehold estate" - including the reasonable cost of removing and relocating personal property up to 25 miles, rent or damages that may be due to someone with superior title, the fair market value of any sublease under the insured leasehold, or damages that the insured's borrower may be obligated to pay any sublessee because of any breach of the sublease caused by eviction.
Insures a lender making a loan secured by a mortgage on land for the purpose of financing construction on the land with respect to the title to the subject property and with respect to the validity and priority of the mortgage lien. This policy is similar to the ALTA Loan Policy except that no mechanic's lien coverage is furnished by the base policy, but rather by one of four endorsement forms designed to be used, depending on state law, with the ALTA Construction Loan Policy.
Endorsement A insures the lender against the lack of priority of the mortgage lien over any statutory liens for service, labor or material which were provided prior to a specified date, which were related to the land, and for which the insured has advanced funds. Endorsement B insures the lender against the lack of priority of the mortgage lien over any statutory lien for services, labor or material furnished before or after date of policy - but only for that portion of the loan proceeds secured by the mortgage and advanced at date of policy. Endorsement C insures the lender against the lack of priority of the insured mortgage over any statutory lien for services, labor or material furnished for that portion of the loan proceeds secured by the insured mortgage and advanced at date of policy or subsequently, but before the filing of a statutory lien or right of lien in the public records. Endorsement D insures the lender against lack of priority of the insured mortgage over any statutory lien for services, labor or material furnished before or after policy date. All endorsement forms exclude liability for loss or damage by reason of the failure of the lender to comply with or enforce the provisions of any construction loan agreement which relate to advancing the proceeds of the loan.
Insures the owner of a one-to-four family residential dwelling, residential lot, or condominium unit. This is a "plain language" policy designed for consumers and is often used, where appropriate, instead of the ALTA Owner's Policy. The policy specifies 14 covered title risks and, unlike the ALTA Owner's Policy, provides limited survey coverage and limited zoning coverage, if no exception is taken to these matters.
Insures the lender making a mortgage loan on a one-to-four family residence or condominium unit. The policy is an abbreviated short form version of the current ALTA Loan Policy, incorporating all of the terms and provisions of the ALTA Loan Policy, which is designed to be delivered to the lender at closing. The policy contains blanket exceptions to taxes, covenants and restrictions, easements, reservations of mineral rights, and offers certain affirmative assurances with respect to survey matters. The policy also includes an Addendum, which can be used to set forth additional exceptions or to limit the affirmative assurances. The policy is designed so that certain ALTA endorsement forms may be specified, and thus incorporated, by checking appropriate boxes.
This form offers a lender in one-to-four family residential and condominium transactions the protection of the current ALTA Loan Policy through the Master Policy, which is supplemented by an ALTA Residential Loan Certificate for each particular mortgage loan insured. The Residential Loan Certificate is similar to the ALTA Short Form Policy and sets forth blanket exceptions to taxes, covenants and restrictions, easements, reservation of minerals or mineral rights, which are followed by certain affirmative assurances desired by lenders in connection with these exceptions including specified affirmative assurance with respect to survey matters. As with the Short form Policy, the Master Policy also includes an Addendum. The Residential Loan Certificate is also designed so that it may incorporate by reference certain ALTA endorsement forms.
An owner's policy, very similar to the regular ALTA Owner's Policy, designed to insure title in the United States of America or a U. S. governmental agency. This policy has an additional insuring provision insuring against loss or damage by reason of the failure of the title report or commitment to name any party who has an interest in the land, which was disclosed by the public records immediately prior to the filing of the lis pendens or Declaration of Taking by the U.S.A. The policy does not insure the validity of sufficiency of the condemnation proceeding, and it contains a provision by which the Attorney General of the United States may undertake the defense of any claim, provided that certain notices and opportunities to suggest defenses are given to the company.
A preliminary commitment to issue a title insurance policy or policies subject to their provisions, conditions and stipulations. This commitment form sets forth requirements that must be complied with prior to issuance of the title insurance policy; it also details exceptions to coverage as of the date of the commitment which will be included in the policy, although additional exceptions may need to be included at the time of issuance of the policy.
A simplified "plain language" version of the ALTA Commitment Form-1966.
Insures a lender against loss as a result of an assessment for street improvements under construction or completed at date of policy, which may gain priority over the lien of the insured mortgage.
Insures a lender against loss resulting from a determination that the lien of the mortgage has been terminated or the title acquired by the lender (in foreclosure) has been defeated by a valid exercise of the right of rescission pursuant to the Federal Truth-in -Lending Act, and that the right of rescission existed because neither the credit transaction nor the right of rescission was exempted or excepted by Regulation Z.
Insures the lender that the vacant land described in the policy is zoned in a specific classification, and lists one or more of the uses allowed by that classification.
Insures the lender that the improved land described in the policy is zoned in a specific classification, and lists one or more of the uses allowed in that classification. Also affirmatively assures that the improvements comply with the zoning classification regarding use, building site dimension, floor space, setback, and height.
Insures a lender securing its loan with a mortgage lien on a condominium unit that (i) the unit is part of the condominium unit; (ii) the condominium documents comply with state requirements; (iii) there are no violations of restrictive covenants, and any violations of the covenants will not cause a forfeiture or reversion of title; (iv) the mortgage has priority over liens for charges and assessments; (v) the unit will be assessed for real property taxes as a separate parcel; (vi) there is no obligation to remove any improvements due to encroachments; (vii) there has been no prior right of first refusal which could defeat the title.
Insures a lender securing its loan with a lien on a unit in a PUD that (i) there are no violations of restrictive covenants, and any violation of the covenants will not cause a forfeiture or reversion of title; (ii) the mortgage has priority over liens for charges and assessments by any homeowner's association; (iii) no existing structure will have to be removed because of any encroachments; (iv) there has been no prior right of first refusal which could defeat the title.
Insure a lender against the invalidity, unenforceability, or loss of priority of the lien of the insured mortgage as a result of changes in the rate of interest pursuant to a formula provided for in the insured mortgage.
Insures a lender against the invalidity, unenforceability, or loss of priority of the lien of the insured mortgage as a result of changes in the rate of interest, interest on interest, or increases in the unpaid principal balance of the loan resulting from the addition of unpaid interest pursuant to a formula provided for in the insured mortgage.
Insures the lender that the manufactured housing unit (a mobile home), affixed to the land, is included in the definition of term "land" used in the policy and, accordingly, the lien of the insured mortgage attaches to the manufactured housing unit.
Insures the residential lender against loss of priority to (a) an environmental protection lien, federal or state, filed in the public records as defined in the endorsement at date of policy and (b) an environmental lien provided for by a state statute (super lien) in effect on the date of the policy, except those statutes listed in Paragraph (b) of the endorsement.
This endorsement offers the lender a variety of additional affirmative assurances including, but not limited to, assurance that there are no covenants, conditions, or restrictions under which the lien of the mortgage can be divested, subordinated or extinguished, or its validity, priority or enforceability impaired; insurance against present violations of covenants, conditions, or restrictions; insurance against encroachments and against damage to existing improvements which encroach upon easement areas or damage resulting from the right to use the surface of the land for the extraction of minerals.
These forms were developed to allow the title industry to respond to information requests from real estate purchasers and lenders relating to the chain of title to a particular property. Purchasers and lenders make these requests as part of their investigation of prior ownerships and uses of real property, in order to facilitate their establishment of an "innocent landowner" defense under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) as amended. The defense is important to avoid cleanup liability for toxic waste after the purchaser or lender acquires an interest in the property. Subject to the terms of the relevant application, applicants under their guarantees or certificates will receive copies of the documents that they specify in the application they would like to be furnished from the public records as defined. The Recorded Document Guarantee is an insurance form issued only by title insurers; the Recorded Document Certificate may be issued either by title insurers or title insurance agents.