LEASEHOLD POLICIES

ATG has adopted the American Land Title Association's new leasehold policy endorsement forms. The Leasehold Owner Endorsement, ATG Form 2081, changes an Owner Policy (OPA) into a policy insuring a tenant's interest in real estate, known as an Owner Policy Leasehold (OPL). The Leasehold Mortgagee Endorsement, ATG Form 2082, changes a Mortgagee Policy (MPA) into a policy insuring a mortgage on a tenant's interest in real estate, known as a Mortgagee Policy Leasehold (MPL).

ATG has retired its former OPL and MPL policy jackets. Effective immediately, to insure a leasehold interest in real property, attach proper endorsements to the standard OPA or MPA. The endorsements are available at the members-only portion of our website, www.atgf.com. (Contact Suzy Auteberry, 800.252. 5206, ext. 130; [email protected], for your password and ID number to access the members-only section.)

The leasehold endorsements may only be used to insure either a tenant's interest in real property, or a mortgage signed by a tenant. The lease and mortgage must be recorded. If you are asked to insure the interest of a landlord, you do not need to use the leasehold endorsements. The only step necessary to insure a landlord is to raise an exception on Schedule B for the terms and conditions of the lease.

The endorsements add the following provisions to the policy:

  1. The value of the leasehold interest for claim loss pursuant to a covered eviction includes the present value of the remaining lease term of the leasehold estate and any tenant leasehold improvements existing on the date of the eviction, less the amount of remaining rent not due on the lease.
  2. The endorsement adds coverage for the following losses that may occur due to a covered eviction:
  • The reasonable cost of removing personal property for the first 100 miles, including damage resulting from the move;
  • Rent or damages due the person with paramount title;
  • Rent due the lessor after eviction;
  • The fair market value of any lease or sublease of the land made by the insured;
  • Damages due any lessee or sublessee of the insured as a result of the eviction;
  • Reasonable costs to obtain a new, comparable leasehold;
  • If tenant leasehold improvements are not substantially completed at the time of eviction, the actual cost incurred by the insured, less the salvage value, for the tenant leasehold improvements up to the time of eviction.

As you may notice from these provisions, the endorsements have been revised to provide better coverage for commercial leases. When using the endorsements, you need to make a few modifications to the Schedules to accommodate a leasehold interest, as follows:

  1. On the Schedule A, #2, strike out "fee simple" and show the names of the tenants, "as tenants under a lease by and between _____, as lessees, and _____, as lessors, dated _____, and recorded _____, as doc. no. _____." The lease must be recorded.
  2. The proposed insured must determine the appropriate Amount of Insurance.
  3. On Schedule B, raise an exception for the terms and conditions of the lease described on Schedule A.

If you have any questions about using the leasehold endorsements, please contact the ATG Underwriting Department: 800.252.0402 or 312.372.8361; Fax: 217.359.2014 or 312.372.1501; E-mail:[email protected].

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