THE UNDERWRITING LIBRARY FOR CONNECTICUT

MULTIPLE PARCELS

In large transactions, it may become necessary to issue title insurance policies insuring parcels of land located in different towns, counties, or even states. The format and the structure of the deal will impact directly on the issuance of title insurance. There are typically a number of different ways in which the deal can be structured. The first example involves a situation where the Borrower signs a Note in the amount of $1 million to secure the purchase of three different properties. The Borrower then executes three mortgages, each in the face amount of $1 million (one mortgage for each property). These three mortgages are then recorded in the various Registries of Deeds.

In order to insure this transaction, we would most likely issue one owner's policy in the amount of $1 million (Exhibit A would describe all three parcels). Schedule B of the policy would contain all of the exceptions which apply to the various three parcels of land, including the three mortgages.

We would then issue three separate loan policies. Each loan policy would be in the amount of $1 million (i.e., the face amount of each insured mortgage). We would then issue Tie-In Endorsements for each of the three loan policies. A Tie-In Endorsement (i) notes that the policy at hand has been issued in conjunction with other loan policies and (ii) provides that the cumulative liability of the Company will not exceed the total amount of the Note, not the aggregate face amounts of the various mortgages (in our example, $1 million not $3 million). You may obtain a form Tie-In Endorsement from your local office.

In this instance, the title insurance premium would be based upon a $1 million figure, not $3 million. It is very important to include a Tie-In Endorsement to each of the loan policies. In the event this Endorsement is inadvertently omitted, we may have now incurred $3 million worth of liability, without receiving the premium required for $3 million.

The second common scenario involves a situation where the Borrower signs a note with the Lender in the amount of $1 million. The Borrower then executes a $400,000.00 mortgage for Parcel A, a $350,000.00 mortgage for Parcel B, and a $250,000.00 mortgage for Parcel C. These mortgages are then all properly recorded with the various Registries of Deeds.

In determining the format of the owner's policy, you have two choices. The first is to issue one owner's policy in the amount of $1 million which insures and describes all three parcels of land. The second option is to issue three separate owner's policies in the amount of $400,000.00, $350,000.00 and $250,000.00. Either format is acceptable.

In determining the format of the loan policies, however, you only have one choice. Three separate loan policies must be issued insuring this transaction. We are essentially being asked to insure three separate mortgage liens. The three loan policies would be in the amount of $400,000.00, $350,000.00, and $250,000.00.

In the second example, the title insurance premium is based on the premium due for the three separate policies issued independently of one another. In other words, calculate the premium due on a $400,000.00 policy issuance, the premium due on a $350,000.00 policy issuance, and the premium due on a $250,000.00 issuance. The sum of these premiums represents the amount due for the transaction.

A final example involving multiple parcels concerns a case where a multi-million dollar loan is placed on property which is worth only a fraction of that amount. For instance, a lender may choose to lend $100 million to a Borrower for the acquisition of several properties. In insuring the local transaction, you might only see a deed into the Borrower in the amount of $1 million. You might then see a $100 million mortgage from the borrower to the lender. The Borrower and Lender have indicated that they do not wish to receive a loan policy in the amount of $100 million. Rather, they have determined that this particular parcel is only worth $1 million with respect to their assessment of the values of the parcels involved nationwide. Therefore, they have requested that you issue a loan policy in the amount of only $1 million.

Typically, we require that a loan policy be issued in the face amount of the mortgage. This particular example illustrates an exception to that rule. Assuming that the Lender and Borrower consent to the establishment of a set figure for insurance of the loan involved, the agent can issue a policy. It must be emphasized that we would like to make certain there is documentation in the file as to the consent of the Borrower and Lender to the establishment of the insurance figure. The Borrower and Lender must then acknowledge the highest possible loss payable under the policy is the face amount of the policy (i.e. $1 million), not the amount of the mortgage itself.

Multiple parcel transactions are extremely complex and confusing. Please feel free to contact the local office for assistance.