TITLE POLICY ENDORSEMENTS: WHAT ARE THEY?

Mon, 05/14/2018 - 8:52am

An endorsement is something that changes the terms of the coverage in the title policy.  It is an attachment to the policy that generally offers more coverage from what is included in the policy.  Each endorsement has its own Procedural Rule and Rate Rule to follow to be able to issue the endorsement.  

To determine which endorsements are applicable, the property type has to be reviewed and determined to be residential or non-residential property.  This can get a little confusing because a legal definition is applied – not necessary current use or zoning.  

What is “residential real property?”

This is an important topic to discuss as many of the endorsements have rules as to whether or not they can be issued on residential real property.  

Residential Real Property

Any real property which has improvements thereon designed principally for the occupancy of from one to four families (including individual units of condominiums and cooperatives) and either: 

(a) situated in a platted subdivision of record, or 
(b) consisting of five acres or less. 

OR

Any real property which has improvements thereon designed principally for the occupancy of from one to four families and:

(1) consisting of more than five acres but not more than 200 acres; and
(2) used for agricultural production by individual insureds.  (according to the information known by the Company at the time of issuance of the policy of title insurance). 

Following this rule, an empty “residential” lot is considered “non-residential for purposes of determing the cost of the endorsement (because there are no improvements on the lot) and 100 acre dairy farm with a one to four family residence is considered to be “residential.”

Non-Residential Property 

Any real property that does not qualify as residential property.

T-19.1: Restrictions, Encroachments, and Minerals Endorsement

One of the more commonly attached endorsements to the Owner’s Title Policy is the T19.1 endorsement.  This can be issued on residential or non-residential property.  For residential property the cost is 5% if purchased with Survey Deletion a/k/a Area and Boundary Coverage (as discussed in previous Closer’s Corners).  If purchased on its own it is 10%.  For non-residential properties the charge is 10% and 15% respectively.  

What does the T19.1 do and what should an agent tell their client about the coverage? 

First, agents should be careful about going into too much detail in describing title policy coverage so as to avoid making legal representations, but it is good to have a general explanation and then you can refer them to your trusted escrow officer at Texas National Title.  The applicable provisions of the endorsement are included below. 

A good way to remember what coverage is included in the T19.1 is “M.E.R.”: 
M – Minerals
E – Encroachments 
R - Restrictions.  

Insurance Provisions for Minerals 

In general the minerals portion of the T19.1 includes provisions for damage to the improvements on the property that is caused from a future exercise of a right to use the surface of the property for extraction or development of minerals.  This coverage becomes more important under the new TREC contract where minerals can be more easily excepted from conveyance. 

Insurance Provisions for Encroachments

The Encroachment section includes provisions for certain encroachment issues on a property.  Common examples are: 

  • Removal of an improvement because it violates a setback line shown on the plat or in the real property records; 
  • Encroachment of the improvements into an easement; 
  • Encroachment of the improvements into neighboring land; 

In order to issue this coverage Texas National Title must be presented with the survey and a current T-47 (if we are using an existing survey).  If that survey shows existing encroachments then the coverage in the T19.1 may need to be modified.  

Insurance Provisions for Restrictions 

This coverage generally provides coverage for enforcement of the existing restrictions.  Some examples are: 

  • Current violation of the restrictions that existed at closing but was not disclosed by the HOA; 
  • First rights of refusal; 
  • Unpaid assessments;

Example of Premium charged for the T-19(1) endorsement

As an example of the cost of this type of endorsement, the additional T-19 coverages described above would be a one-time charge of $226 on a policy insuring a home for $350,000.

This Closer’s Corner is intended to be a general overview of the T19.1 Endorsement that is available to be attached to an Owner’s Title Policy.  To review the endorsement in full a copy can be located here: https://www.tdi.texas.gov/title/documents/form_t-19-1.pdf

Our closing teams are very knowledgeable about title policies and endorsements.  While we cannot provide legal advice for a specific transaction we can always talk about our insurance products and help our clients get a general understanding of the coverage that can be obtained by a buyer.  A prudent real estate agent wants to be able to inform the client of their options and then direct them to Texas National Title for more in-depth information.