Transactions ORT Does NOT Insure (AYU June 2024)

Presented by: T. Stewart Rauch

As much as we work to make every transaction insurable, unfortunately, there are a limited number of types of transactions that Old Republic will not insure.  The purpose of this Title Byte is to raise awareness of these transactions; not to provide all relevant information, requirements and/or exceptions.  If you need our guidelines, copies of the authorities cited, or have questions, please contact vaunderwriting@oldrepublictitle.com.  

Transactions that Old Republic Title does NOT insure:

Co-Ops: Old Republic is not currently insuring leasehold interests in, or DOTs secured by, units in real estate owned by a Cooperative Association as set forth in the Virginia Real Estate Cooperative Act, VA Code § 55-424, et. seq. (the “Act”). Unlike many localities, including New York City and Washington, D.C., comparatively, Virginia has very few properties organized under the Act. The antiquated statutory scheme is very complex, and the matters that have to be reviewed and analyzed are very numerous, requiring specialized knowledge and, very often, a significant amount of time to properly underwrite a co-op transaction. A business decision has been made to decline to insure interests in co-ops since the potential for loss outweighs any potential benefit from earned title premium.  

Foreign Adversaries: Va. Code § 55.1-507 et. seq. prohibits ownership of “agricultural land” by any “foreign adversary.” This has significant impact on title insurance underwriting, as any agricultural real estate owned by a foreign adversary will immediately be vested in the Commonwealth of Virginia according to the statute. As of March 29, 2024, countries identified by the U.S. Secretary of Commerce as Foreign Adversaries are:

(1) The People's Republic of China, including the Hong Kong Special Administrative Region (China);

(2) Republic of Cuba (Cuba);

(3) Islamic Republic of Iran (Iran);

(4) Democratic People's Republic of Korea (North Korea);

(5) Russian Federation (Russia); and

(6) Venezuelan politician Nicolás Maduro (Maduro Regime).

If the seller or purchaser is a Foreign Adversary or the organizational documents show an entity may be a Foreign Adversary prohibited from acquiring or transferring an interest in agricultural land under Va. Code § 55.1-508, Old Republic must decline to insure.

Federal or State Forfeiture: Old Republic does not insure real property that has been seized under federal or state forfeiture laws (i.e. where property has been seized in connection with drug related crimes, terrorist activities, mail and wire fraud, financial institution crimes, counterfeiting, money laundering, etc.). The U.S. Supreme Court, in three different cases, Alexander v. United States, 113 S. Ct. 2766 (1993), Austin v. United States, 113 S. Ct. 2801 (1993), Timbs v. Indiana, 2019 WL 691578 (2019), has held that civil and criminal forfeitures brought under federal and state law are subject to the Excessive Fines Clause of the Eighth Amendment and the Due Process Clause of the Fourteenth Amendment. Accordingly, there are number of state and federal court challenges to property seizures where the seizure has been deemed invalid. 

Marijuana: Although Virginia has legalized certain marijuana use and possession, marijuana and THC, the principal psychoactive constituent of marijuana, are still classified as Schedule I controlled substances under the federal Controlled Substances Act (“CSA”). The CSA also makes it unlawful to manage or control any place, whether permanently or temporarily, either as an owner, lessee, agent, employee, occupant, or mortgagee, and knowingly and intentionally rent, lease, profit from, or make available for the purpose of unlawfully manufacturing, storing, distributing, or using controlled substances. Real property owners who are linked to these unlawful activities with controlled substances are also subject to civil forfeiture. Until the federal law(s) concerning marijuana are changed, Old Republic is not insuring real estate that is connected to marijuana related businesses (e.g. grow farms, distribution facilities, retail stores).

In addition, we now require the following general exception to appear in commitments and policies: 

Due to the conflict between federal and state laws concerning the cultivation, distribution, manufacture or sale of marijuana, this policy does not insure Property that is directly or indirectly associated with, or related to, these activities.

If you need our guidelines on any of the above, copies of the authorities cited, or have questions, please contact vaunderwriting@oldrepublictitle.com.