Madison Abstractions

September 2007

Feature Article

Exploring Tirsa Owner’s Extended Protection Policy (“TOEPP”)

The TIRSA Owner's Extended Protection Policy ("TOEPP") is a new form of Owner's Title Insurance Policy approved for use in New York State. The policy was intended as an option to the existing Owner's Policy rather than a mandatory replacement, yet although recognized as such in its intent, there is growing controversy with respect to how it is being presented. With a number of additional key coverages contained in the TOEPP policy, some title insurers are selling it as a standard policy to their clients with an option to revert back to the existing Owner’s Policy and the associated reduced cost should they 1) determine it, and 2) desire it.

“We are positioning the TOEPP benefits as a recommended option in certain specific circumstances...just as it was intended,” says Jeffrey K. Hass, Esq., CEO of Madison Abstract, Inc. “Going the extra mile to present and explain those benefits at the front-end reduces skepticism and builds relationships which is what we do best,” Hass noted.

TOEPP carries a charge of 120% of the regular owner's rate, and provides additional title insurance benefits for purchasers of 1 to 4 family residences in the State of New York. It is not available for vacant land, commercial use, or multi-family (greater than 4-families and office buildings). The most significant benefits in the coverage afforded under TOEPP are as follows:

1. Market Value Rider Coverage - the amount of the insurance set forth in Schedule A of the policy will automatically increase by 10% for the first five years after the date of the policy. The change will be effective on the Policy's anniversary date.

2. Protection against supplemental real estate tax assessments not previously assessed against the premises for any period prior to the policy date because of construction or a change in ownership status or use that occurred before the policy date.

3. The Policy will protect against actual loss sustained by the Insured's inability to use the land because its use as a single-family residence violates a zoning law or regulation. (Limited zoning and building coverage provided for in the policy is subject to a schedule of deductible amounts and maximum dollar liabilities, which are set forth in Schedule A of the policy. ) There are four relevant provisions you may wish to familiarize yourself with:

A. Subdivision Law Violation Coverage - the Insured is protected against actual loss by reason of a violation of a subdivision law or regulation, existing as of the date of the policy which
1. prevents the insured from obtaining a building permit, or
2. forces the correction or removal of the violation, or
3. because of said violation, someone else has a legal right to, yet refuses to perform a contract of sale, or to lease or make a mortgage on the land.

The deductible amount is $2,000; the maximum liability is $10,000

B. Building Permit Coverage - the Insured is protected against loss sustained by the forced removal of structures, other than boundary walls and fences, because they were built without obtaining a building permit from the proper government office, as existing at policy date.

The deductible amount is $4,000; the maximum liability is $25,000

C. Zoning Coverage - the Insured is protected against actual loss by reason of the forced removal of structures, other than boundary walls and fences, because they violate an existing zoning law or regulation existing at the policy date.

The deductible amount is $4,000; the maximum liability is $25,000.

D. Encroachment of Boundary Walls or Fences - the Insured is protected against actual loss by reason of the forced removal of structures , existing at the date of policy, because they encroach onto a neighbor's land.

The deductible amount is $1,500; the maximum liability is $5,000.00.

4. Post Policy Coverage - the Insured is protected against actual loss arising after the date of the policy where someone, other than the Insured, purports an interest in the insured’s property by:

A. having a lease, contract or option rights in the Insured's land,
B. claiming rights in the Insured's land arising out of forgery or impersonation,
C. having an easement on the Insured's land, or
D. reason of a defect in title.

The enhancements in the TOEPP policy are significant enough to warrant the recommendation of the title insurance company, considering for example, that forgery represents 39 percent of all title claims, but with an extra $ 1,634 worth of fee premium added unto a $2,000,000 purchase in New York, a bill incorporating such a premium upfront may be interpreted as presumptuous…devious even, by an already frazzled purchaser. A very taut housing bubble doesn’t help the situation either, therefore, it is certainly prudent for a company to maintain favor in the eyes of its clientele in this regard for when the bubble finally pops.

For more detailed information regarding the TOEPP Policy, please call one of our counsel members at 914/725-7200.

Leisa Premdas

Industry News

Home Equity Loans
Home Equity Loans have become a very popular choice for emergency funding within the consumer marketplace of late, and with good reason. The fact is, they work much the same way as credit cards, but with more advantages. Not only are the interest rates themselves (8+ %) much lower than those on credit cards (14+ %), but the interest paid on the loan’s balance is typically tax deductible. They offer variations in rates, loan period, and lender flexibility for rate locks. Although targeted for emergency situations, experts recommend that borrowers open the line of credit before the emergency happens so it is readily available when it happens. Self-employed individuals without disability insurance may find these loans a viable option for longer-term protection in the event disaster strikes. Borrowers should keep in mind that almost all equity lines adjust in accordance with changes in the prime rate of interest. Though a great source for emergency funds, home equity loans are becoming increasingly difficult to obtain. “The recent credit crunch has curtailed the granting of many HELOCs especially those done on a low documentation basis,” says Ken Polin of Banner Mortgage Group in Scarsdale, NY. “However, if the HELOC is not the appropriate vehicle for a homeowner, other options need to be examined on a case by case basis with a reputable mortgage professional,” Polin added. Alternatives include but are not limited to second mortgages, refinance of an existing mortgage, and cross collateralization.