The Top 6 Commercial Loan Policy Endorsements to Protect a Lender

by Maura Snabes, SVP, Corporate Counsel.

March 22, 2022

Want the Commercial Loan Policy Endorsements that provide the maximum protection? The ALTA 2006 Loan Policy provides many protections for a lender that is loaning money to a borrower secured by a lien interest in real estate. However, in many cases, the standard form loan policy may leave the lender with less coverage than expected.

In addition to always getting a survey when dealing with a sale or mortgage of commercial property, endorsements offer a lender additional protection for specific items which may be of concern to a lender or its counsel. If you are a lender or an attorney representing a lender, requesting these endorsements should be on your radar to provide additional assurances. Some endorsements are no charge, while others have a fee associated with them, which fee may vary by title insurance underwriter. The 6 most commonly requested commercial endorsements to a loan policy are:

1. Zoning: ALTA 3 series.

These provide affirmative coverage of the applicable zoning classification and allowed uses under that classification.

• ALTA 3-06 is used for insuring vacant land and insures against loss if the zoning classification at the Date of Policy is not as shown in the endorsement and if the list of uses in the endorsement are not allowed.
• ALTA 3.1-06 is a completed structure endorsement and gives the coverage set forth in the ALTA 3 and also includes insurance against loss if the structures and improvements do not comply with the zoning with respect to certain matters identified in the endorsement.
• ALTA 3.2-06 is for land under development. It again gives the same basic insurance found in the 3.1-06, but applies to land that will be developed with new improvements and insures the zoning for a project if it is built according to the plans identified in the endorsement.

2. Access: ALTA 17 series.

Access is often the most important title issue on commercial property. The standard loan policy insures access to the Land as a Covered Risk and insures against loss or damage caused by a “lack of a right of access to the land.” But, it does not insure specific access from a public street.

• ALTA 17-06 insures that the land abuts a public street, has actual vehicular and pedestrian access and has the right to use existing curb cuts or entries.
• ALTA 17.1-06 insures when access is over an easement to the public street and indemnifies the insured if it cannot use curb cuts and entries along that portion of the street abutting the easement.

3. Same as Survey: ALTA 25 series

These provide assurances to a lender relative to the legal description of the property that is on the loan policy. Lenders may have concerns as to whether the property in the public records is the same land shown on the survey.

• ALTA 25-06 insures that the legal description in Schedule A of the policy is the same land as shown in the survey obtained by the lender.
• ALTA 25.1-06 is used when the survey shows more land that the Land insured in the policy.

4. Comprehensive/Restrictions, Encroachments & Minerals (REM): ALTA 9-06 series

The series 9 endorsements provide various coverage to a lender, depending on which ALTA 9 endorsement is issued. Lenders may request:

• ALTA 9-06 (standard comprehensive endorsement-private rights deleted);
• ALTA 25.1-06 is used when the survey shows more land that the Land insured in the policy.
• ALTA 9.3-06 (CCR only);
• ALTA 9.6-06 (private rights); or
• ALTA 9.7-06 (land under development)

These endorsements have been referred to as the “comprehensive” endorsements. The endorsements were designed to insure against certain covenant, condition and restriction (CC&R) matters and damage to stated improvements because of surface use for mineral development or encroachments. In addition, the ALTA 28.1-06 provides for encroachment coverage and the ALTA 35 series may provide additional assurances as to minerals and other subsurface substances where it is not covered under the ALTA 9 endorsement.

5. Environmental: ALTA 8.2-06.

The 8.2-06 insures against loss or damage sustained by the Insured by reason of an environmental protection lien that, at Date of Policy, is recorded in the public records. This does not, however, insure that the land is clean and has no environmental issues or contamination.

6. Contiguity: ALTA 19 series.

• ALTA 19-06 (multiple parcels). This endorsement insures that two or more insured parcels are contiguous along defined lines or boundaries. The endorsement also insures (to the same effect) that there are not gaps separating the insured contiguous boundary lines.
• ALTA 19.1-06. This endorsement insures that the insured parcel is contiguous to another, uninsured parcel of land along defined lines or boundaries. The endorsement also insures (to the same effect) that there are not gaps separating the insured parcel and the other, uninsured parcel. Typically, both parcels would be owned by the same owner, but would not have been acquired simultaneously.

While an ALTA 2006 loan policy provides coverage to ensure an insured lender as to the loan position and ability to foreclose on the mortgage or Deed of Trust, there are often more issues that must be reviewed in a commercial setting. By doing your due diligence on the front end, you will protect that interest on the back end in the event the loan goes into default and foreclosure.