AGENCY UNDERWRITING MANUAL. September Updated: July 2014

Transcription

1 AGENCY UNDERWRITING MANUAL September 2013 Updated: July 2014

2 INDEX TO AGENCY UNDERWRITING MANUAL ACCESS 5 BANKRUPTCY SALE OR LEASE OF PROPERTY IN BANKRUPTCY 7 BUILDING LOANS 11 CEMETERY LANDS 12 CERTIFICATION 14 CONDOMINIUMS 16 CONTRACTS 20 CORPORATIONS 22 COOPERATIVES 45 COVENANTS, CONDITIONS AND RESTRICTIONS 50 DECEDENTS' ESTATES 52 DEEDS AND DELIVERY 61 DEED IN LIEU OF FORECLOSURE 64 DESCRIPTIONS 65 DEVELOPMENT RIGHTS 65 EASEMENTS 66 FORECLOSURE 68 IDA TRANSACTIONS 81

3 IDENTITY 81 INFANTS, INCOMPETENTS AND CONSERVATEES 82 JUDGMENTS AND LIENS NAME SEARCHES 89 LEASES 96 LIFE ESTATES 101 LIMITED LIABILITY COMPANIES 103 LIS PENDENS (NOTICE OF PENDENCY) 107 MAPS AND LETTERS PATENT 110 MARKET VALUE POLICY RIDER 110 MECHANICS LIEN(S) 111 MINERALS AND MINERAL INTERESTS 115 MORTGAGES 116 MOUNT VERNON TRANSFER TAX 126 YONKERS MORTGAGE TAX 126 OPTIONS 126 OWNER IN POSSESSION 130 PARTNERSHIP 130 PARTY WALLS 151 POWERS OF ATTORNEY 152 RAILROADS 155 SHORT SALES 156

4 STREETS 157 SURVEYS AND INSPECTIONS 161 TAXES (REAL ESTATE) 165 TAX DEEDS 169 UNINCORPORATED ASSOCIATIONS 170 WATER AND BEACHES 172

5 ACCESS AC01 LACK OF ACCESS Notwithstanding the insuring provisions of the policy to the contrary, the Company does not insure against loss or damage arising by reason of a lack of a right of access to and from the land. AC02 INTERIOR PARCEL HAS NO MEANS OF ACCESS Premises under examination is an interior parcel and does not front or border on any street or road. There is no means by which access to and from said premises to the public highway can be obtained. No easement or right of way by prescription or necessity to and from said premises will be insured. AC03 INTERIOR PARCEL CONVEYED WITH NO EASEMENT ESTABLISHED By Deed dated [1], recorded [2], in [3], made by [4] to [5] an interior parcel, part of the premises originally acquired by the certified owner herein, was conveyed and no easement was established granting access to and from said interior plot described herein. Therefore, policy will except possible easement rights over the premises insured hereunder by the owner of said interior parcel. [1] DEED DATED [2] RECORDED DATE [3] RECORDING INFO [4] GRANTOR'S NAME [5] GRANTEE S NAME AC04 NO ACCESS INSURABLE OVER STREET Right of access over [1] is not insured. [1] STREET NAME OR UNNAMED ROAD

6 COMMENTS TO ACCESS EXCEPTIONS: The insuring provisions of the June 17, 2006 ALTA Owner s and Loan Policies protect the Insured against loss or damage sustained by reason of the lack of access to and from the land insured under the policy. If a parcel has no right of access, it is said to be landlocked. The access insured in the above-referenced policy is legal access, not physical access. While an Insured may have legal access to the insured property, the coverage afforded under the ALTA policy does not guarantee that the physical access to the land is unimpaired or is the type needed for the intended use of the property. (Note: the Tirsa Owner s Extended Protection Policy, i.e., TOEPP, adopted for use in New York on and after January 11, 2001, provides some title protection for pedestrian and vehicular access to an insured premises, but that policy is available only in limited instances. Company Counsel should be consulted with respect to access coverage under the TOEPP Policy.) Whether the land under examination has access must be determined by a review of the deeds in the chain of title or by reference to a survey. Where the record description abuts the sideline or centerline of a street, the existence of access is assumed. Where the land is not adjacent to a public street or road, an examiner or reader has to look for an appurtenant easement that creates a right of access to the public street or road. (In the latter case, an examination of the parcel burdened by the appurtenant easement will be required.) COMMENT TO AC01 - LACK OF ACCESS The June 17, 2006 ALTA Owner s and Loan Policies with Standard New York Endorsement insures access to and from the land. Consequently, where a review of the title or survey indicates that the land under examination has an access problem, an exception for the lack of access must be taken in Schedule B of the Policy. COMMENT TO AC02 - INTERIOR PARCEL HAS NO MEANS OF ACCESS Where the premises to be insured is landlocked because it is separated from the street or highway by another parcel, it has no means of legal access and the above exception would be applicable. If a parcel is landlocked, the owner of the landlocked parcel would have to obtain an easement over adjoining property in order to give the landlocked parcel access to the public street or road. COMMENT TO AC03 - INTERIOR PARCEL CONVEYED WITH NO EASEMENT ESTABLISHED Where part of the premises originally acquired by the certified owner was conveyed to another and created an interior parcel which did not establish an easement granting access to and from that interior

7 parcel, the policy will except possible easement rights in favor of the owner of the interior parcel over the premises to be insured. COMMENT TO AC04 - NO ACCESS INSURABLE OVER PRIVATE STREET Where the premises to be insured does not abut a public street or road and there are no easements providing access over the private street or road, access over that road or street is not insured. BANKRUPTCY SALE OR LEASE OF PROPERTY IN BANKRUPTCY BK01 BANKRUPTCIES FOUND The following bankruptcy(ies) appears to be against the party in the chain of title and/or the purchaser/borrower. [See printout(s) herein.] If this bankruptcy is not against the party in the chain of title and/or the purchaser/borrower, a specific affidavit should be obtained and social security number provided. BK02 NUMEROUS DOCKETS FOUND Bankruptcy search herein discloses numerous dockets filed vs. [1]. Company requires proof that the case numbers are not against our record owner. Company reserves the right to raise additional exceptions. [1] DEBTOR S NAME BK03 AUTOMATIC STAY (PRESENT); PERMISSION TO FORECLOSE An automatic stay is in force pursuant to Bankruptcy Law. Permission of the Court must be obtained in order to permit the foreclosure of the Mortgage. BK04 AUTOMATIC STAY (FUTURE); PERMISSION TO FORECLOSE The Bankruptcy Reform Act of 1978, 11 U.S. Code Section 362 provides for an automatic stay of all judicial proceedings against a debtor who is the subject of a petition filed in the Bankruptcy Court. Policy to be issued pursuant to this report will except any loss or damage by reason of the stay.

8 BK05 JUDGMENTS V. DEBTOR - DEBTOR & CREDITOR LAW 150 The judgment(s) against [1] returned herein appear to have been invalidated, surrendered, or set aside in the Bankruptcy Proceeding No. [2] in the Bankruptcy Court, [3] District of New York. An order must be obtained pursuant to Section 150 of the New York Debtor and Creditor Law directing that an unqualified discharge be marked on the judgment docket. [1] NAME OF DEBTOR [2] BANKRUPTCY INDEX # [3] DISTRICT BK06 SALE OR LEASE OF PROPERTY IN BANKRUPTCY [1], has filed for relief under Chapter [2] of the U.S. Bankruptcy Code. [1] NAME OF DEBTOR [2] CHAPTER # BK07 MORTGAGE OF PROPERTY IN BANKRUPTCY [1], may be in Bankruptcy at the present time. [1] NAME OF DEBTOR BK08 CONFIRMATION OF PLAN/CHAPTER 11 OR 13 Title is in an owner who is subject to a Chapter 11 or Chapter 13 Bankruptcy proceeding. The Plan of Reorganization and amendments thereto, and order(s) confirming said Plan, must be submitted for examination prior to closing. BK09 LOSS FOR DEED BEING SET ASIDE Policy will except any loss, claim or damage including but not limited to the cost of defense, due to the possibility the Deed from [1] to [2], dated [3] and recorded [4] in [5] may be set aside due to the bankruptcy of [6] in the Bankruptcy Court. [1] GRANTOR [2] GRANTEE [3] DEED DATE [4] RECORDING DATE [5] CRFN/REEL/LIBER&PAGE [6] DEBTOR S NAME

9 COMMENTS TO BANKRUPTCY EXCEPTIONS: COMMENT TO BK06 - SALE OR LEASE OF PROPERTY IN BANKRUPTCY A) A final Court Order must be obtained on notice to all creditors authorizing the sale of the premises. In order to insure without exception to the judgments and other liens set forth in this commitment, it will be necessary for the Order to authorize the sale/lease free and clear of all liens and judgments, and that the proceeds of the sale/lease are subject to the further order of the court. If the Order does not provide for the sale/lease free and clear of all liens and judgments, such liens will be excepted from policy unless otherwise disposed of. B) The Deed/Lease must recite (1) the full consideration for the sale; (2) the Order pursuant to which the sale/lease is being made, including the date of the Order, venue and index number of the action. C) The form of the Order must be approved by the Company. D) The sale/lease must be made in strict compliance with the Order. E) A certified copy of the Order must be submitted to the Company for recording along with the Deed. COMMENT TO BK07 - MORTGAGE OF PROPERTY IN BANKRUPTCY A) A final Court Order must be obtained on notice to all creditors authorizing the Mortgage. In order to insure without exception to the judgments and other liens set forth in this commitment, it will be necessary for the Order to authorize the Mortgage superior to all liens and judgments. If the Order does not provide for the priority of the Mortgage to all liens and judgments, such liens will be excepted from policy unless otherwise disposed of. B) The Mortgage must recite the Order pursuant to which the Mortgage is being made, including the date of the Order, venue and index number of the action. C) The form of the Order must be approved by the Company. D) The Mortgage must be made in strict compliance with the Order. E) A certified copy of the Order must be submitted to the Company for recording along with the Mortgage. ADDITIONAL INFORMATION: In order to insure title to real estate that is being sold by a debtor in bankruptcy, we must obtain certain fundamental information regarding the nature of the bankruptcy case. We must know the identity of the debtor, i.e., is it an individual, partnership, corporation, or other entity allowed to file under the

10 Bankruptcy Code? We must know the chapter under which the petition was filed, and whether it was voluntary or involuntary. The authority and capacity of the debtor to deal with the property depends on whether or not a trustee has been appointed. Many of these questions can be answered by obtaining a copy of the docket sheet from the bankruptcy clerk and examining the entries. Only after we have a snapshot of the bankruptcy case can we determine what requirements to make in our title commitments. Sales free and clear of liens and other interests. Do you need a bankruptcy order in the first place? 1. How do you know if your property is subject to bankruptcy jurisdiction? For the most part, it is easy to determine if your property is subject to the jurisdiction of the bankruptcy court. A name search of your seller will reveal the filing if your seller is local. Many times, the contract of sale will tell you that it has been executed by a trustee or debtor-in-possession. However, in many cases, there is no record of the pending proceedings, and no indication from your title order. If you have any indication that your seller is in bankruptcy, you must make further inquiries. 2. Is your property "Property of the estate"? Under 11 U.S.C. 541, the estate is comprised of all legal or equitable interests of the debtor in property as of the commencement of the case. It includes real property, personal property, inchoate property, and marital property in certain cases. a. Partnership property. In states that have adopted the "entity" theory of partnership under the Uniform Partnership Law, all property held in the name of the partnership would be included in the bankruptcy estate of the partnership. Under this theory, a bankruptcy filed by one or more of the partners would not affect the title of the property held by the partnership, since the interest held by the individual partners is their interest in the partnership, not in the real estate. In contrast, however, in "aggregate" theory states, the property is considered to be held by the partners, so that a bankruptcy filed by one of the partners would affect the title to the real estate. b. Unlisted property. Property which is not listed on the schedules and not administered in the bankruptcy remains subject to all liens and claims that were on it prior to the bankruptcy filing.

11 BUILDING LOANS BL01 BUILDING LOAN AGREEMENT TO BE FILED Building Loan Agreement pursuant to Section 22 of the Lien Law must be filed at or before the time of recording of the mortgage to be insured. BL02 PENDING DISBURSEMENTS CLAUSE Pending disbursement of the full proceeds of the loan secured by the mortgage described herein, this policy insures only to the extent of the amount actually disbursed plus interest accrued thereon, but increases as disbursements are made in good faith and without knowledge of any defects in, or objections to, the title, up to the face amount of the policy. Title shall be continued down to the date of each disbursement and the Company shall furnish to the mortgagee a continuation report, stating whether since the date hereof or since the date of the last preceding continuation report any lines or encumbrances have been recorded, whether any taxes, assessments, or other charges of whatever nature which have become due and payable have been paid, whether there are any survey variations, encroachments, or violations of setback and whether there are any additional title exceptions or objections. BL03 SURVEY UPDATES REQUIRED This is a building loan transaction. As of this date there are no survey variations, except as set forth above. Before any further advances are made, the survey should be redated. Otherwise the policy will except any changes since the date of said survey. COMMENTS TO BUILDING LOAN EXCEPTIONS: If the insured loan will not be fully disbursed at closing and is not a credit line mortgage, you should be very careful to determine the structure of the loan and the conditions for disbursement of the loan proceeds. Strict compliance with Section 22 of the Lien Law is required in order to preserve the priority of an insured building loan mortgage over mechanics' liens filed after the recording of the mortgage but before the disbursement of the full amount of the loan. Lenders will sometimes attempt to say that a loan is fully disbursed into an escrow account for the benefit of the borrower and will then disburse the escrowed funds at various stages of completion of construction. Courts will ignore semantics and look at the structure of the loan in order to determine whether it is a building loan within the scope of the Lien Law in order to determine priority. If you are asked to insure a loan that is to be

12 disbursed for construction, even if it is not characterized as a building loan, and the lender does not want to file a building loan agreement, you should consult with Company Counsel immediately. COMMENT TO BL01 - BUILDING LOAN AGREEMENT TO BE FILED Strict compliance with Section 22 of the Lien Law is required in order to preserve priority of a building loan mortgage over mechanics' liens. Section 22 requires that a building loan agreement must be filed at or prior to the recording of the building loan mortgage. It is important for the people in your office who are responsible for recording understand that they must not record the mortgage if the building loan agreement is rejected. The building loan agreement must contain a true statement under oath, verified by the borrower, showing the consideration paid, or to be paid, for the loan described therein, and showing all other expenses, if any, incurred, or to be incurred in connection therewith, and the net sum available to the borrower for the improvement. COMMENT TO BL02 - PENDING DISBURSEMENTS CLAUSE This exception must be included in all policies insuring building loan mortgages. Title should be run out prior to each disbursement pursuant to the building loan agreement, and any liens that have been filed subsequent to the last draw must be dealt with prior to any additional disbursements. This exception can be deleted from the policy when the loan is fully disbursed. COMMENT TO BL03 - SURVEY UPDATES REQUIRED This exception is included to protect the Company from survey matters that arise after the date of the policy. The survey exception should be revised when an updated survey showing the constructed improvements has been furnished to the Company. CEMETERY LANDS CM01 LAND FOR CEMETERY TO BE SOLD The premises under examination appears to be held by a Cemetery Association for cemetery purposes. Proceedings are required to be brought in the Supreme Court, [1] County authorizing the sale of such Cemetery land and showing compliance with all of the statutory provisions regulating the same and use of Cemetery lands.

13 Policy will except: (A) Right of lot owners and others in and to the Cemetery land and easements in their favor over the premises under examination for the purpose of visitation. (B) Right of parties and lot owners created by instruments filed or recorded with the cemetery corporation. (C) Right of parties entitled thereto to keep therein the bodies and remains of deceased persons now interred therein. (D) Right of the Supreme Court and Attorney General of the State of New York to supervise the removal of bodies or remains from Cemetery lands but policy does not insure that any bodies or remains may be removed therefrom. [1] COUNTY CM02 PORTION OF PREMISES IS A BURIAL GROUND No title is insured to so much of the premises herein described as constitutes a burial ground, nor is the right of way to reach the same insured, but policy excepts possible easements in favor of others to reach the same. There may be bodies and remains of deceased persons interred therein and there are or may be rights and easements in favor of others to maintain and visit said burial ground and to inter bodies and remains therein or to remove bodies or remains therefrom. COMMENTS TO CEMETERY LANDS EXCEPTIONS: COMMENT TO CM01 - LAND FOR CEMETERY TO BE SOLD There may be instances where a cemetery association or entity wishes to abandon an old cemetery and to sell the land on which it exists. There are restrictions on a cemetery organization s ability to move the remains of deceased persons buried therein. In New York, cemetery corporations are considered to be Type B Not-for-Profit Corporations. This exception requires that a court order be obtained authorizing the sale of the cemetery lands and that there has been compliance with all statutory requirements regulating cemetery use. COMMENT TO CM02 - PORTION OF PREMISES IS A BURIAL GROUND This exception is raised whenever the Company is aware of evidence that any portion of the premises under examination is or had previously been used as a cemetery or burial ground. We do not insure title to such land nor do we insure any easements in favor of others to reach, maintain or visit such lands.

14 CERTIFICATION CT01 NAME ON APPLICATION DIFFERS FROM RECORD Title has been certified as found of record. The application shows title in (x). If there has been any change in ownership by deed, death or otherwise, proof of such fact must be submitted to the Company prior to closing. Title will be recertified accordingly and additional exceptions may be raised. Specific Certifications: Where property devised to more than one person in fee, certification in Executors (x), devisees, subject to the prior exercise of power of sale by (x), as Executor(s) of the Last Will and Testament of (x), deceased. This does not apply to a specific disposition of property. Therefore, there is no statutory power of sale WITH RESPECT to any property specifically disposed of to one or more devisees. In such instances, certification cannot be made for a conveyance by the fiduciaries, except in those rather rare instances where the Will itself contains a specific power of sale that is not restricted WITH RESPECT to specific devises. In general, this form of certification should only be used WITH RESPECT to devises made in the residuary clause of the Will. Certification in a Referee in a foreclosure action Title can be conveyed by (x), referee, in action entitled Supreme Court, (x) County, (x), plaintiff, against (x) and others, defendants, pursuant to judgment of foreclosure and sale dated (x), entered and filed in the office of the County Clerk on (x). This exception is used to recertify title, after a foreclosure action has resulted in entry of a final Judgment of Foreclosure and Sale. Where items on a title report are omitted because of certification in a referee Title can be conveyed by the referee as certified herein. If title is not to be made in the manner certified, then, after proper searches are made, title must be recertified and a new title report and objections, if any, issued. This exception is raised simultaneously with above exception to cover the possible contingency that title may possibly not be made through a deed from the Referee in Foreclosure. In such event, any items in the title report which were omitted by reason of certification in the Referee as cut off in Foreclosure must be reinstated, the title completely recertified and a new report with whatever title objections remain, issued. Closers are cautioned not to attempt to close a title certified in a Referee, unless they are taking title directly from said Referee. In all other instances they must be advised to contact the underwriter. Certification in Distributees, or in the alternative in the Administrator of an Estate

15 (x) as Distributees of the Estate of (x), deceased, subject to the prior exercise of the power of sale by (x), as Administrator of the Estate of (x), deceased. Where property is devised to a presently indeterminate class-certification in Executors alone Title can be conveyed by (x) and (x) as Executors of the Last Will and Testament of (x), deceased. Where title is devised in trust, which is still operative-certification in Executors and Trustees Title can be conveyed by (x) and (x), as Executors of and Trustees under the Last Will and Testament of (x), deceased. Certification in infants, incompetents or conservatees Certification where real property is held under the New York Uniform Gift to Minors Act/Uniform Transfers to Minors Act Title can be conveyed by (name of custodian) as custodian for (name of minor) under the New York Uniform Gift/Transfers to Minors Act (whichever is applicable). Certification upon completion of proceeding to sell incompetent s/conservatee s property Title can be conveyed for (insert name), an incompetent/conservatee, by (insert name), his committee/his conservator, pursuant to Order of the Supreme Court (name) County, dated/entered/filed for the sum of ($) to (insert name), the purchaser in the contract ratified by said order. Certification of title in an infant (name of certified owner), an infant Proceedings are required pursuant to the Surrogates Court Procedure Act, to authorize the sale/mortgage/lease of real property of (name), infant. When completed, same must be examined and considered and title recertified for closing.

16 CONDOMINIUMS COND01 COPIES OF DECLARATION AND BY-LAWS For Information Only the Declaration of Condominium and By-Laws of the Condominium regime are not furnished as part of the report and should be surrendered by the seller to the purchaser, however, said documents are available from this Company upon specific request and payment of an additional charge. COND02 COMPLIANCE WITH THE DECLARATION The terms of the Declaration of Condominium relative to the transfer of title or the making of a mortgage must be complied with. COND03 GENERAL CONDO EXCEPTION Terms, provisions, covenants, restrictions, conditions and options contained in and rights and easements established by the Declaration of Condominium and By-Laws dated [1], recorded [2] in [3], but policy will insure against loss or damage occasioned by the premises not being a part of a condominium validly created pursuant to Article 9-B of the Real Property Law, as amended. [1] DECLARATION DATE [2] RECORDING DATE [3] CRFN/REEL/LIBER&PAGE COND04 APPORTION TAX LOT & BLOCK NUMBER The tax lot and block numbers must be apportioned for each unit in the Condominium. COND05 DEED TO STATE INTENDED USE Closing Deed must contain a statement of the use for which the unit is intended, as required by Section 339-o, Subdivision 3 of the Real Property Law. COND06 LIENS MUST BE RELEASED The Mortgage(s) and other lien(s) must be released of record pursuant to Section 339-r of the Real Property Law.

17 COND07 MORTGAGES MUST BE SUBORDINATED TO DECLARATION The Mortgage(s) and UCC-1 Financing Statement(s) returned herein must be unconditionally subordinated to the Declaration of Condominium dated [1], recorded [2], in [3]. [1] DATE OF DECLARATION [2] RECORDING DATE OF DECLARATION [3] CRFN/REEL/LIBER&PAGE COND08 BOARD OF MANAGERS POWER TO SELL/LEASE Power of Attorney as set forth in the purchase agreement from the insured to the Members of the Board of Managers of the Condominium and their successors in office must be submitted for recording. COND09 RIGHT OF FIRST REFUSAL IN DECLARATION If the Condominium Declaration and By-Laws contain a provision requiring prior approval of the sale or mortgage by the Board of Managers or a Right of First Refusal, then upon a conveyance, devise or mortgage of the unit, a certificate, executed and acknowledged by the Board of Managers, stating that compliance has been made by the owner with provisions for the approval of any sale or mortgage, or Right of First Refusal, or that said provisions have been duly waived by the Board, should be furnished. COND10 CONDO UNIT COMMON CHARGES Upon a conveyance or mortgage of a condominium unit, a certificate from the Board of Managers that there are no unpaid common charges or other liens against the unit through the date of closing, arising by reason of the nonpayment of common expenses should be furnished. COND11 LIEN OF CONDO COMMON CHARGES Lien of Common Charges in the amount of $[1] filed on [2] must be disposed of. [1] AMOUNT OF CHARGES [2] DATE OF FILING COND12 SURVEY READING CONDO WITH RESPECT to Condominium Unit No [1], the title to which is to be insured herein, policy excepts any state of facts which an accurate survey and inspection would show, but this policy insures that any encroachment of a portion of the unit structure upon other units or upon the common elements may remain undisturbed as long as same shall stand. [1] UNIT NUMBER

18 COND13 SURVEY READING CONDO (BUILDING AND LAND) A survey made by [1] dated [2] (covering premises and more) shows the land and building on which Unit No. [3] in Building No. [4] referred to herein forms a part. With respect to Unit No. [3] in Building No. [4] which is insured hereunder, policy excepts any state of facts an accurate survey and inspection of the unit would show, but policy insures that any encroachment of the insured unit upon adjoining units or the common elements may remain undisturbed, as long as same shall stand. Survey made by [1] dated [2] shows the following: [1] NAME OF SURVEYOR [2] DATE OF SURVEY [3] UNIT NO. [4] BUILDING NO. COND14 SUBORDINATE MORTGAGE / UNPAID COMMON CHARGES If the Mortgage to be insured hereunder is a subordinate Mortgage affecting a condominium unit, policy excepts the statutory priority afforded to unpaid common charges, including charges accruing after the recording of the Mortgage, together with the interest thereon. See, Section 339-z of the Real Property Law. COND15 NEW CONDO WHERE DECLARATION HAS NOT BEEN RECORDED The Declaration of Condominium must be recorded, pursuant to 339-n of the Real Property Law, together with the By-Laws, as required by RPL 339-v. Prior to recording, the Declaration and By- Laws must be reviewed by the Company, and additional exceptions may be raised. Before the first conveyance, a unit floor plan must be filed in the County Clerk's office pursuant to RPL 339-p, which contains the unit designation certified by the appropriate taxing authority as conforming to the official tax lot number. Tax lot numbers for each unit in the condominium must be separately apportioned. The terms, conditions and provisions of the Declaration and By-Laws of the condominium are excepted. COND16 CONSOLD W/SECOND MORTGAGE / FUTURE COMMON CHARGES Company excepts future liens for unpaid common charges which may gain priority over (the portion of the Mortgage to be consolidated with the existing first Mortgage) (the second Mortgage insured herein).

19 COMMENTS TO CONDOMINIUM EXCEPTIONS: COMMENT TO COND03 - GENERAL CONDO EXCEPTION This is the general exception under which we properly except all of the provisions of the Declaration of Condominium, but then go on to insure against any loss or damage occasioned by the premises not being part of a condominium validly created pursuant to Article 9-B of the Real Property Law. Article 9-B is known as the Condominium Act and contains over 30 sections, numbered, following the alphabet from 339-d to 339iii. This exception is raised whenever we are insuring title to a unit in a condominium, validly created pursuant to Article 9-B of the Real Property Law. COMMENT TO COND04 - APPORTION TAX LOT & BLOCK NUMBER This exception addresses the issue of proper tax lot apportionment. Each individual condominium unit must have its own block and tax lot number. COMMENT TO COND05 - DEED TO STATE INTENDED USE This exception addresses the requirement imposed by Section 339-o, Subdivision 3 of the Real Property Law. That provision of the RPL requires that the closing deed must contain a statement of the use for which the unit is intended. COMMENT TO COND06 - LIENS MUST BE RELEASED This exception addresses the requirement that Mortgage(s) and other lien(s) must be released of record pursuant to Section 339-r of the Real Property Law. COMMENT TO COND09 and COND10 - RIGHT OF FIRST REFUSAL IN DECLARATION and CONDO UNIT COMMON CHARGES These exceptions are raised so that upon a conveyance, devise or mortgage of a unit, we will be provided with a certificate, executed and acknowledged by the Secretary of the Board of Managers of the condominium, stating that compliance has been made by the owner with all of the provisions of the Article of Declaration governing the sale or mortgage of any unit, including the right of first refusal which the board may have or else that said provisions have been duly waived by the board and the rights of the board under such Article have terminated and that all common charges have been paid.

20 COMMENT TO COND12 and COND13 - SURVEY READING CONDO and SURVEY READING CONDO (BUILDING AND LAND) These exceptions are raised in many condominium titles as a supplement to the survey reading covering the entire condominium area. Most declarations contain some provision authorizing such encroachments to remain. COMMENT TO COND14 - SUBORDINATE MORTGAGE / UNPAID COMMON CHARGES In this exception we note that the priority which the statutory lien has over a second mortgage, being insured, is not limited to the amount specified in the verified notice of lien, but rather includes all unpaid common charges which have accrued. (Section 339-a of the RPL.) COMMENT TO COND15 - NEW CONDO WHERE DECLARATION HAS NOT BEEN RECORDED This exception addresses a couple of requirements that must be met under the Condominium Act. The Declaration of Condominium must be recorded, pursuant to 339-n of the Real Property Law, together with the By-Laws, as required by RPL 339-v. Before the first conveyance, a unit floor plan must be filed in the County Clerk's office pursuant to RPL 339-p, which contains the unit designation certified by the appropriate taxing authority as conforming to the official tax lot number. CONTRACTS CN01 CONTRACT MUST BE CONSIDERED BY COMPANY Proposed contract of sale must be submitted for examination and consideration by the Company prior to closing. CN02 CONTRACT APPEARS OF RECORD Record discloses a contract made between [1] and [2] dated [3] recorded [4] in [5]. Said contract must be disposed of by deed or by instrument in writing and duly recorded in the proper recording office. [1] PARTY OF THE FIRST PART [2] PARTY OF THE SECOND PART [3] CONTRACT DATE [4] CONTRACT RECORDING DATE [5] CRFN/LIBER&PAGE

21 CN03 CONTRACT SUBJECT TO MORTGAGE TAX The contract to the insured may be subject to mortgage tax under Section 250 of the Tax Law if the contract vendee has entered into or has the right to enter into possession. CN04 PRIOR CONTRACT EXISTS Proof is required to show that the contract made by and between [1], as grantor, and [2], as grantee, dated [3] has been duly and properly cancelled by the parties or proof shown that the vendee therein has assigned the same to the present purchaser. In lieu of the foregoing a deed must be obtained from said contract vendee. [1] PARTY OF THE FIRST PART [2] PARTY OF THE SECOND PART [3] CONTRACT DATE CN05 CONTRACT/MEMO OF CONTRACT REQUIRED WHEN INSURING CONTRACT Contract of Sale or a Memorandum thereof must be recorded as authorized by Section 294 of the Real Property Law or policy will except any loss, claim or damage in the event of the failure of the insured to so record. CN06 INSTALLMENT CONTRACT Company has been advised that the contract to be insured is an installment contract. WITH REGARD THERETO: The original installment contract of sale or memorandum thereof, and any subsequent assignments or modifications must be recorded. The Company will require the contract vendee pay any and all possible mortgage tax at the time the contract is submitted for recording (Tax Law Section 25). This Company assumes no liability for any loss arising from the inability of the insured to exercise any right in the insured contract except to the extent that such loss is occasioned or caused by any defect or encumbrances otherwise insured against under the terms of this policy affecting the estate of the ultimate grantor. Upon request for issuance of a final fee policy, all intervening liens, mortgages, encumbrances or tenants which might arise after the initial closing must be disposed of or excepted from coverage.

22 COMMENTS TO CONTRACT EXCEPTIONS: COMMENT TO CN02 - CONTRACT APPEARS OF RECORD This exception is raised whenever we find a contract for the sale of our premises duly recorded and/or still effective. COMMENT TO CN04 - PRIOR CONTRACT EXISTS This exception is raised whenever we have any knowledge, from any source whatsoever, that a prior contract is in existence. We are sometimes made aware of a prior contract, by finding a prior title covering the premises, which, however, we never closed. It is usually disposed of by having said prior contract properly cancelled by all of the parties. In some instances, a deed is obtained from the contract vendee. In many other instances, the seller will schedule a time of the essence closing, stating that he is ready, willing and able to perform and demanding that the purchaser, after receiving adequate notice, do likewise. If the purchaser fails to attend, he will be held in default by the seller and the seller will attempt to retain his down payment. All situations of this type must be approved by counsel after we have received detailed documentary proofs of the procedure followed. CORPORATIONS SEE ALSO: IDA TRANSACTIONS CO01 CORPORATE GRANTOR - STOCKHOLDER CONSENT If the present transaction consists in whole or part of a conveyance or lease by a corporate grantor or lessor, there must be compliance with Section 909 of the Business Corporation Law. Company will require the written consent to such conveyance or lease by all the holders of the outstanding shares of the said corporation and the instrument on closing should so recite. In lieu thereof the consent of the holders of two-thirds of all the outstanding shares entitled to vote thereon obtained at a meeting duly noticed and called for the purpose of obtaining such consent in the manner provided for in Section 605 of the Business Corporation Law is required and the instrument on closing should so recite. If neither of the above is obtained, then, the proofs, showing the basis upon which the conveyance or lease is to be made must be submitted to counsel prior to closing.

23 CO02 CORPORATE MORTGAGOR - BOARD OF DIRECTORS RESOLUTION If the present transaction consists in whole or in part of the making of a new Mortgage there must be compliance with Section 911 of the Business Corporation Law. Company will require a certified copy of the resolution of the board of directors of any corporate mortgagor authorizing the making of said Mortgage. Proof must also be shown that the consent of stockholders of the mortgagor corporation is not required by its certificate of incorporation or amendments thereto for the making of said Mortgage. The Mortgage should contain a recital showing that it is made and executed pursuant to the resolution of the board of directors of the mortgagor. CO03 PROOF OF GOOD STANDING (NYS & FOREIGN) Proof is required that the entity in title is in good standing in its jurisdiction of formation. CO04 CERTIFICATE OF INCORPORATION REQUIRED Certificate of Incorporation of [1] with proof of its due incorporation must be obtained and considered in connection with this title. [1] CORPORATION NAME CO05 CORPORATION NOT TIMELY ORGANIZED Deed made by [1], as grantor, to [2], as grantee, dated [3] and recorded [4] in [5], prior to the incorporation of the grantee. A Confirmatory Deed is required from said grantor to the present owner of the premises herein. [1] GRANTOR S NAME [2] GRANTEE S NAME [3] DEED DATE [4] DEED RECORDING DATE [5] CRFN/REEL/LIBER&PAGE CO06 PAYMENT OF FRANCHISE TAX Proof of payment of Franchise Tax on [1] from incorporation to date of closing is required. Report requested from State Tax Commission. [1] CORPORATION NAME

24 CO07 FRANCHISE TAX - PARTY IN CHAIN OF TITLE [1] was in title from [2] to [3]. Proof is required that it has paid its franchise tax to date of transfer of title. Report requested from State Tax Commission. [1] CORPORATION NAME [2] FROM DATE ACQUIRED TITLE [3] TO DATE CONVEYED OUT CO08 PAYMENT OF NYC GENERAL CORP. TAX Proof of payment of the New York City General Corporation Tax on [1] from date of incorporation to [2], is required. NOTE: Proof of payment of these taxes may be established by requesting a Tax Status Report from the Department of Finance, City of New York. We have inserted a copy of the form that will assist you in obtaining this information from the City of New York. Failure to supply this information may result in an exception in our policy. [1] CORPORATION NAME [2] DATE TITLE CONVEYED OUT CO09 NO RECITAL IN DEED AS TO REGULAR COURSE OF BUSINESS In light of the fact that the Deed into the certified owner does not contain a recital to the effect that This conveyance is made in the regular course of business actually conducted by the party of the first part and upon the consent of all of its stockholders; Company will require proof, i.e., corporate consent, resolution of the Board of Directors, authorizing said conveyance. CO10 CONVEYANCE TO CORPORATE OFFICER The certified owner is a corporate officer and the person who executed the Deed on behalf of the grantor corporation. The following is required: A) Confirmatory Deed by an officer other than said grantee, executed on behalf of said corporation. B) Proof that said conveyance did not render said grantor insolvent. C) Proof that the certified owner was the sole stockholder of said grantor or consents and confirmation of said Deed must be obtained from all stockholders. This objection can be disregarded if title is to pass to a purchaser for value.

25 CO11 SALE/LEASE BY RELIGIOUS CORP. The proposed [1] is a corporation formed under the Religious Corporation Law of the State of New York. The following is required: A) The [2] to the proposed insured must be approved by an appropriate Order of the Supreme Court; and B) Closing [3] must be made in conformity with and recite the Order of Court authorizing same. Such instrument must recite the full consideration received; and C) Execution of the [4] must be authorized by a vote of two-thirds of the entire Board of Trustees or Directors of the religious corporation, or, if there are twenty-one (21) or more Trustees or Directors, by a vote of a majority of the entire Board. However, if the Certificate of Incorporation or By-Laws requires a greater number of the Board to consent, then compliance therewith is required. [1] SELLER/LESSOR [2] SALE/LEASE [3] DEED/LEASE [4] DEED/LEASE CO12 MORTGAGE BY RELIGIOUS CORP. The mortgagor is a corporation formed under the Religious Corporation Law of the State of New York. The following is required: A) The Mortgage to the proposed insured must be approved by an appropriate Order of the Supreme Court; and B) Execution of the Mortgage must be authorized by a vote of two-thirds of the entire Board of Trustees or Directors of the religious corporation, or, if there are twenty-one (21) or more Trustees or Directors, by a vote of a majority of the entire Board. However, if the Certificate of Incorporation or By-Laws requires a greater number of the Board to consent, then compliance therewith is required. CO13 CONFIRMATORY ORDER REQUIRED The [1] from [2], as [3], to [4], as [5], dated [6], recorded [7] in [8], made by the Religious Corporation named, was not made pursuant to an Order of Court as required by Section 12 of the Religious Corporation Law (or Section 511 of Not-for-Profit Corporation Law). A Confirmatory Order, duly obtained, will be required. [1] INSTRUMENT (DEED/LEASE/MTG) [2] NAME OF GRANTOR/LESSOR/MTG OR [3] ENTER AS GRANTOR/LESSOR/MTG OR [4] NAME OF GRANTEE/LESSEE/MTG EE [5] ENTER AS GRANTEE/LESSEE/MTG EE [6] DATE OF INSTRUMENT [7] INSTRUMENT RECORDING DATE [8] CRFN/REEL/LIBER&PAGE

26 CO14-SALE, MORTGAGE, LEASE OR OTHER DISPOSITION BY A NOT-FOR-PROFIT CORPORATION If the proposed sale, mortgage, lease, exchange or other disposition to be insured is by a corporation governed by the Not-For-Profit Corporation Law, proof of compliance with Sections 509 and 510 (a) (1) or (2) of said Law will be required. Said transaction must be authorized by the vote of a majority of directors of the board of said corporation or a majority of a committee authorized by said board, provided however, that if the proposed sale, lease, exchange or other disposition constitutes all or substantially all of the assets of said corporation, then the vote of two-thirds of the entire board shall be required, or, if there are twenty-one or more directors, the vote of a majority of the entire board shall be sufficient. In addition, if the corporation is classified as a charitable corporation under Section 201 of the Not- For-Profit Corporation Law, a sale, lease, exchange or other disposition constituting all or substantially of the assets of said charitable corporation must be approved by a Court Order or by the Office of the Attorney General of the State of New York pursuant to Section 510 (a) (3) of said Law. The requirements for a Petition: a. to obtain a Court order can be found in NFP Law Sec. 511; b. to obtain Attorney General approval can be found in NFP Law Sec a Such approval must be obtained and delivered to the Company prior to closing. NOTE: Proof is required that said corporation is organized for not-for-profit purposes and is exempt under the laws of the United States and the State (and City) of New York for tax purposes. CO15-INTENTIONALLY DELETED CO16 STATE HIGHWAYS - DEED/GRANT BY COMMISSIONER OF TRANSPORTATION Proof must be furnished that the Attorney General of the State of New York has approved the form and manner of the execution of the instrument to be insured pursuant to Section 30 (18) of the Highway Law. CO17 STATE HIGHWAYS - PROOF SALE IS BENEFICIAL TO NYS Proof must be furnished that the sale to be insured hereunder is on terms beneficial to the State of New York in accordance with Section 30 (18) of the Highway Law. CO18 PROOF MORTGAGOR IS AN EDUCATIONAL INSTITUTION UNDER DORMITORY AUTHORITY ACT (TITLE 4)

27 Proof must be furnished that the mortgagor of the proposed Mortgage is an Educational Institution as defined in Section 1680 (1) Public Authorities Law. CO19 FURNISH BY-LAWS OF DORMITORY AUTHORITY The By-Laws of the Dormitory Authority should be furnished to this Company for consideration of the following: 1. Power or limitation, if any, for entering into the proposed transaction. 2. Determining the proper parties to sign the instruments used at closing. CO20 FURNISH AGREEMENT WITH DORMITORY AUTHORITY The agreement or agreements between [1] and the Dormitory Authority should be furnished to this Company for consideration; specifically, Company to review the power or limitation, if any, for entering into the proposed Mortgage, pledge, or assignment. See, Section 1678 (15) of the Public Authorities Law. [1] NAME OF PARTY TO AGREEMENT CO21 TERMS/CONDITIONS OF AGREEMENT WITH DORMITORY AUTHORITY Terms and Conditions of the agreement from the Dormitory Authority to [1] including the right of reversion upon payment or discharge of the obligation pursuant to Section 1680(2)(d) of the Public Authorities Law. [1] NAME OF PARTY TO AGREEMENT CO22 TERMS/CONDITIONS OF DORMITORY AUTHORITY RESOLUTION Terms and Conditions of the resolution of the Dormitory Authority approving the sale of bonds to finance the improvement to the premises and the agreement, if any, between the Dormitory Authority and the purchaser of said bonds. CO23 FURNISH CERTIFICATE OF COMPLETION A Certificate of Completion pursuant to the terms of paragraph [1] of the Land Disposition Agreement (Contract of Sale) dated [2] and recorded [3] in [4], must be supplied to the Company. [1] PARAGRAPH NUMBER [2] AGRMT/CONTRACT DATE [3] AGRMT/CONTRACT RECORDING DATE [4] CRFN/REEL/LIBER&PAGE

28 CO24 TERMS & CONDITIONS OF LAND DISPOSITION AGRMT Terms, covenants, restrictions, reservations, easements and agreements contained in the Land Disposition Agreement (Contract of Sale) dated [1] by and between [2] and [3] and recorded [4] in [5]. [1] AGRMT/CONTRACT DATE [2] PARTY OF THE FIRST PART [3] PARTY OF THE SECOND PART [4] AGRMT/CONTRACT RECDG DATE [5] CRFN/REEL/LIBER&PAGE CO25 URBAN RENEWAL - DISPOSITION OF REAL PROPERTY Proof must be supplied to the Company that the sale is being made pursuant to Section 507 of the General Municipal Law. CO26 URBAN RENEWAL - ACQUISITION OF REAL PROPERTY Proof must be supplied to the Company that the sale is being made pursuant to Section 555 of the General Municipal Law. CO27 CORPORATE AUTHORITY FOR CONVEYANCE - FOREIGN CORP. The authority of [1], a [2] corporation, to convey or mortgage the premises described in Schedule A, must be submitted to the Company in advance of closing. A properly authenticated certificate of incorporation, a resolution of its Board of Directors or Managing Directors authorizing a named officer or Managing Director to execute the Deed or Mortgage to be insured, and a certificate of good standing will be required. [1] NAME OF CORPORATION [2] STATE OF INCORPORATION CO28 PROOFS FOR CONVEYANCE BY ALIEN CORPORATION With respect to the sale of the premises described in Schedule A by [1], (an alien corporation). The following is required: A) Proof of due incorporation; B) A copy of the certificate of incorporation, or equivalent, with a certified English translation, if necessary; C) Resolution of the Board of Directors (or comparable body) authorizing the sale; D) Proof that said corporation is in good standing in the jurisdiction where incorporated; E) If said corporation is to act through a power of attorney, a resolution of the Board of Directors (or comparable body) of the corporation authorizing the corporation to act by a power of attorney;

29 F) Opinion of Counsel of the jurisdiction where corporation was formed to the effect that the transaction as structured complies with the laws of the jurisdiction of incorporation. [1] NAME OF CORPORATION COMMENTS TO CORPORATION EXCEPTIONS: DEFINITION "Corporation" means a corporation for profit formed under the Business Corporation Law, or existing on its effective date and theretofore formed under any other general statute or by any special act of this state for a purpose or purposes for which a corporation may be formed under this chapter, other than a corporation which may be formed under the cooperative corporations law. A Not-for-Profit Corporation means a corporation: (1) formed under the Not-for-Profit Corporation Law, or existing on its effective date and theretofore formed under any other general statute or by any special act of this state, exclusively for a purpose or purposes, not for pecuniary profit or financial gain, for which a corporation may be formed under this chapter, and (2) no part of the assets, income or profit of which is distributable to, or enures to the benefit of, its members, directors or officers except to the extent permitted under this statute. SUMMARY A corporation is formed by the creation and execution of a Certificate of Incorporation and then filing the Certificate with the Department of State. The necessary elements to the Certificate of Incorporation are set forth in Section 402 of the Business Corporation Law. The corporation will also have a set of By-Laws which will govern the operation of the corporation s business. In the absence of a provision in the By-Laws, the operation of the corporation will be governed by the Business Corporation Law. DETAILED EXPLANATION As an underwriter it is important to review two important elements in a transaction involving a Corporate Grantor or Mortgagor: (1) that the corporation is validly formed and in good standing and (2) that the parties affecting the transfer on behalf of the corporation have the capacity and authority to do so. To make a determination that the corporation has been validly formed, the underwriter will need to review the filed Certificate of Incorporation together with any amendments. You will also need to confirm that the corporation is current with its NYS franchise tax payments and, if relevant, its NYC General Corporation Tax. The title company may require a certificate of good standing, or if the party requests, order a certificate of good standing from the State. This would evidence that the corporation was validly formed and remains in good standing. Although it is a straightforward way of addressing the concerns, a certificate of good standing is not a requirement.