Continuation of Owner's Policy Coverage and TIRSA IDA Endorsement Approved for use in New York

By Michael P. Miglino, Sr. Agency Underwriting Counsel

 The New York State Department of insurance has approved a new endorsement for use in transaction involving transfers by an industrial Development Agency (IDA) to the beneficial owner of real property. It has also approved a new section 32 of the Title Insurance Rate Service Association (TIRSA) Rate Manual which provides for the continuation of owner's policy coverage on certain transfers made to an individual(s) or an entity by the Insured under the policy. Both the endorsement and the new TRISA provision became effective for use in the State on January 28. 1999.

IDA Transactions typically involve a transfer. by deed or lease, from the fee owner (the Beneficial Owner) to the IDA. The Beneficial Owner obtains certain tax benefits and or other incentives by reason of the conveyance to the IDA during a period in which the subject property is improved and rehabilitated. When the project is completed. The property is reconveyed to the Beneficial owner for a nominal consideration, restored to the tax rolls as a valuable real property asset and capable of being used to create new employment opportunities in economically disadvantaged areas.

In the past title insurance has generally been required where the IDA comes into title and on mortgages executed by the IDA which are part of the overall transaction. However, when the property is reconveyed back to the Benefical Owner, the need for a new title insurance policy and the payment of an additional premium has been subject to question by many real estate practitioners.

Consequently. a TIRSA Industrial Development Agency Transfer Endorsement was drafted and submitted to the New York State Department of Insurance for approval.

The endorsement basically extends the benefits of the IDA'a title policy to the Benefit Owner upon the reconveyance subject to the Exclusions from coverage. The Exceptions to title in schedule B. and the Stipulations and Conditions contained therein to the Beneficial Owner, but only as of the original date of Policy and without liability as to the validity form, sufficiency and method of transfer of title from the IDA. The charge for the IDA endorsement is $25.00. A copy of the endorsement is attached for your information. The endorsement will be printed and distributed to our offices and agents at the earliest possible date.

The Department of Insurance has also approved the addition of a new Section 32 to the TIRSA Rate Manual. As you are aware, Section 1 of the Stipulations and Conditions in the 10-17-92 ALTA Owner's Policy defines as "insured" as "those who succeed to the interest of the named insured by operation of law as distinguished from purchase including, but not limited to heirs, distributees, devisees, survivors, personal representatives, next of kin, or corporate ot fiduciary successors." The operative phrase in this provision of the Policy is "by operation of law."

With the adoption of Section 32. the 10-17-92 ALTA Owner's Policy will also provide continuation of coverage, without charge and without endorsement, to certain grantees of a conveyance from an "insured", (e.g. a conveyance from a parent company to a wholly-owner subsidary, from a corporation to its stockholders pursuant to a plan of liquidation, from a partnership to its partners upon the dissolution of the partnership, from the named insured in the Policy to a member of the insured's immediate family [limited to parents, brothers and sisters, but not the issue of brother and sisters, of the named insured), or from the named insured to a trust created by the named insured in which all of the beneficiaries, lifetime and remainder, are either the insured or members of the insured's immediate family.

Policy coverage will continue to the grantees enumerated in Section 32 provided that there is no change in the beneficial ownership in the premises as a result of the transfer and that there is for no consideration for the conveyance.

The term, "consideration", for purpose of this Section, excludes the value of any lien or encumbrance remaining on the land or interest thereon at the time of transfer.

Should you have any questions regarding the above-mentioned changes. please do not hesitate to contact Company Counsel.

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