Endorsements: Form 2035-06 Instructions

Form Number/Name

Comt.

Owner’s

Loan

Const.

2035-06: Restrictions, Encroachments, Minerals – Loan Endorsement (ALTA 9-06)

   

X

 

NOTES:

Coverage: This form is the ATG-approved version of ALTA Form 9. This endorsement provides extensive coverage to lenders. This endorsement assures lenders that:

  1. the covenants, conditions or restrictions (CCRs) do not extinguish the mortgage or impair it;
  2. unless shown on Schedule B, there are no violations of the CCRs;
  3. unless shown on Schedule B, there are no encroachments over setback lines;
  4. unless shown on Schedule B, the CCRs do not create an easement;
  5. unless shown on Schedule B, the CCRs do not create a lien for liquidated damages;
  6. unless shown on Schedule B, the CCRs do not provide for a private charge assessment;
  7. unless shown on Schedule B, the CCRs do not create an option to purchase, right of first refusal or a prior approval of a future purchaser or occupant;
  8. unless shown on Schedule B, there are no encroachments onto adjoining land;
  9. unless shown on Schedule B, there are no adverse encroachments (encroachments of improvements from adjoining land onto the insured land);
  10. unless shown on Schedule B, there are no encroachments onto recorded easements;
  11. unless shown on Schedule B, there are no recorded notices of a violation of any CCR’s related to environmental protection;
  12. a future violation of the CCRs will not impair the mortgage;
  13. a future violation of the CCRs will not impair the title if the lender is in title;
  14. if someone else holds the mineral estate, that owner does not have rights to the surface that could cause damage;
  15. if Schedule B does reveal encroachments onto adjoining property, we insure against court orders requiring the encroachment to be moved;
  16. if Schedule B does reveal violations of the CCRs, we insure against court orders requiring the improvement to be moved;
  17. if Schedule B does reveal violations of the setback lines, we insure against court orders requiring the improvement to be moved.

Procedure: This endorsement may only be issued on Loan Policies. This endorsement may be issued on either commercial or residential properties.

Do not issue this endorsement if there is a minerals lease or a mineral severance in the chain of title. Where the minerals have been leased or severed, issue the ALTA 9.3 endorsement instead.

You must take great care in issuing this endorsement. It will require a great deal of work and attention to detail. At a minimum, this endorsement requires you to conduct a thorough review, taking the following steps:

  1. Carefully review any covenants, conditions or restrictions (CCRs) contained in any document in the chain of title. In particular:
    1. the CCRs should not contain any forfeiture or reversion language; if they do, then you may not issue this endorsement;
    2. if the CCRs provide for an assessment, create a lien for liquidated damages, or create an easement, raise those matters on Schedule B;
    3. if the CCRs contain a right of first refusal, or a lien that may take priority over the mortgage, raise these matters on Schedule B and obtain waivers from those who hold those interests; and
    4. if the CCRs create an option to purchase or a prior approval of a future purchaser or occupant, raise those matters on Schedule B and obtain waivers or approvals from those who hold those interests;
  2. Review the subdivision plat to determine easements and building lines.
  3. Obtain a current survey or an Affidavit in Lieu of Survey depending upon the type of property. The member must obtain a current survey for all commercial properties and for residential properties in Cook County and the surrounding counties (DuPage, Kane, Kendall, Lake, McHenry, and Will).  ATG will accept an Affidavit in Lieu of Survey for all loan policies issued in a refinance and for residential property in all other Illinois counties. The current survey should clearly show all improvements as well as all easements, setback lines, and other matters affecting the property. Check to see that there are no violations of the CCRs and no encroachments. If there are any such violations or encroachments, raise them as exceptions on Schedule B. Remember that setbacks may be created by the plat, the CCRs or by ordinance. Make sure you raise exceptions for violations of any setbacks requirements, no matter how created..
  4. If you have raised any encroachments onto adjoining property, any violations of the CCR’s, or any violations of any setback lines, you must determine whether the encroachment or violation falls within our underwriting guidelines to see whether they may be insured over. Underwriting guidelines may be found in the Underwriting Manual or by calling the Underwriting Department.
  5. Under Illinois law, a conveyance or reservation of coal and mineral rights carries with it the implied right to make reasonable use of the surface. Accordingly, examine the chain of title to determine if surface rights have been expressly reserved by the fee titleholder. Unfortunately, this may require a lengthy and fruitless search of the record. Therefore, if surface rights have not been expressly reserved by the fee titleholder, you may not issue this endorsement.

Questions? Contact an Underwriter.