Endorsements: Form 2040-06 Instructions

NOTES:

Coverage: Matters of zoning are excluded from coverage under paragraph 1 of the Exclusions from Coverage. This Zoning – Completed Structure Endorsement (ALTA 3.1-06) modifies the exclusions by insuring certain aspects of zoning.

The first paragraph of this endorsement provides that the premises are classified in the particular zone that is specified in the endorsement and it delineates the use or uses that are permitted in that zone. There is no liability under this paragraph of the endorsement based upon: 1) the failure to comply with the requirements of the zoning ordinances; 2) the entry of a final decree of a court invalidating the zoning ordinances, but only if the decree does not also prohibit such use or uses, (i.e., although the zoning ordinance may be held invalid, if the use is allowed to continue, there is no liability under the endorsement); and 3) the refusal any person to purchase, lease, or lend money on the premises in question due to a failure of the specific assurances in the zoning endorsement.

The second paragraph of the endorsement insures indemnifies the insured for loss suffered by reason of the entry of a court order prohibiting the use of the land as described in the endorsement. Furthermore, it indemnifies the insured in the event that such a court order requires an alteration or complete removal of the improvements due to the fact that the improvements violate the zoning ordinance regarding (1) area, width, or depth of the land; (2) floor space area of the building; (3) setback requirements; (4) height of the building; and (5) number of parking spaces.

There is no liability under paragraph 1 of the endorsement based upon the failure to comply with the requirements of the zoning ordinances, and there is no liability under either paragraph 1 or 2 based upon: 1) the entry of a final decree of a court invalidating the zoning ordinances, but only if the decree does not also prohibit such use or uses, (i.e., although the zoning ordinance may be held invalid, if the use is allowed to continue, there is no liability under the endorsement); and 2) the refusal any person to purchase, lease, or lend money on the premises in question due to a failure of the specific assurances in the zoning endorsement.

Procedure: You may issue the Zoning Endorsement 3.1 on Owner’s or Loan Policies if there are improvements on the property. You may not issue it on vacant land or construction projects.

In order to issue this endorsement, examine the zoning maps and ordinances for the municipality in which the property is located (or the county if the property is in an unincorporated area). Determine the zoning designation for the subject property and list that designation in paragraph 1.a. of the endorsement. Then determine, pursuant to the zoning ordinances for that zone, which uses are permitted and list them in paragraph 1.b. of the endorsement.

To give the coverage under paragraph 2 of this endorsement, determine that the improvements on the land comply with all of the zoning ordinances for that zone regarding the following:

1. area, width, or depth of the land;
2. floor space area of the building;
3. setback requirements;
4. height of the building; and
5. number of parking spaces.

To make this determination, you will need to examine a survey. If the survey does not disclose the appropriate information, an on-site inspection may be required. It may be necessary to obtain an architect's or engineer's certification regarding these four items if there are any questions about compliance. This endorsement requires a substantial amount of work and pre- closing planning.

Consult the Commercial Endorsement Rates for the risk premium to remit to ATG on this endorsement.

Zoning coverage involves the assumption of a unique risk. Do not rely upon the zoning coverage provided under a prior policy by another title insurer.

Questions? Contact an Underwriter.