Endorsements: Form 2061-06 Instructions

NOTES:

Coverage: This endorsement contains the same basic insurance coverage as detailed in Form Condominium Endorsement 1 (ALTA 4-06). The only difference is that this endorsement does not insure the priority of the lien of the insured mortgage over future condominium assessments. Rather, it insures the lender against loss or damage by reason of the priority of any lien for condominium charges or assessments which exist at date of policy over the lien of the insured mortgage.

Paragraphs 1 and 2 of the Condominium Endorsement 2 (ALTA 4.1-06) insure that the property set forth in Schedule A is in fact condominium property validly created and subject to the Condominium Property Act.

Paragraph 3 of the endorsement insures that there are no present violations of any building and use restrictions referred to in the condominium declaration and that any present or future violation will not give rise to a forfeiture or reversion of title.

Paragraph 4 insures against loss or damage as result of any charges or assessments provided for in the condominium statutes and documents that are due and unpaid at the Date of Policy.

Paragraph 5 insures that the property listed in Schedule A is a separate taxable entity for the purpose of imposing liens of real property taxes, special assessments and other state and local charges.

Paragraph 6 insures against any loss or damage sustained due to encroachments by existing improvements, including unintentional encroachments of the common elements upon any unit or of any unit upon the common elements or another unit.

Paragraph 7 provides protection against any loss or damage arising by reason of the failure of title due to the exercise of a right of first refusal, which could have been exercised at the Date of Policy.

This endorsement is the ALTA 4.1-06 form.

Procedure: This endorsement may be issued Loan or Owner's Policies. It provides coverage to owners of condominium units and to mortgage lenders. This endorsement may be issued only after the relevant aspects of the condominium project in which the unit is located have been considered.

To issue this endorsement, take the following steps:

1. If you do not have a prior policy then review the condominium plat and declaration to see that it complies with statutory law. Once you have completed your review, fax copies of the documents and commitment to the Underwriting Department for a co-exam. If you have a prior policy insuring the unit, then you do not need to complete this review;

2. Review the condominium bylaws and declaration to verify that any violation of building and use restrictions contained therein will not result in a forfeiture or revision of the title to the condominium unit

• Identify what building and use restrictions the condominium declaration creates,
• Verify that the condominium declaration does not state that the remedy for a violation of a building or use restriction is a forfeiture or reversion of title,
• Check the plat of survey to see that none of the restrictions have been violated;

3. Determine that there are no unpaid charges or assessments at the time of the recording of the mortgage. The condominium declaration and bylaws should be reviewed to determine whether any charges or assessments may be assessed to the condominium unit and a statement should be obtained from the Condominium Association stating that there are no unpaid charges or assessments;

4. Verify with the county assessor that the condominium unit and its percentage interest in the common elements are being separately assessed for property taxes, special assessments, and other state and local charges;

5. Check for encroachments by existing improvements, including unintentional encroachments of the common elements upon any unit or of any unit upon the common elements or another unit. Reference to the plat of survey should be sufficient to determine whether or not any such encroachments do exist;

6. Obtain a statement from the Condominium Association indicating that a right of first refusal, which could have been exercised at date of policy, has been waived or does not exist.

If after reviewing the relevant documentation it is determined that one or more of the coverage may not be applicable, it may be possible to issue a modified version of this endorsement which deletes those coverages that may not apply. Contact an underwriter when making revisions to this endorsement.  

Questions? Contact an Underwriter.