Underwriting Manual: Zoning Coverage

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Underwriting Manual Subtopic

In General

V 1

All the forms of title policies that we issue exclude from coverage any loss or damage that the insured may sustain by reason of the violation of zoning laws or ordinances.

Underwriting Manual Subtopic

Forms For Zoning Coverage

V 1

In those jurisdictions where it is permitted to give "zoning coverage" it should be offered through the issuance of ALTA Endorsement Form 3-Zoning or ALTA Endorsement Form 3.1 Zoning.

These endorsement forms do not delete the zoning exclusion contained in the policy. They merely modify the terms and provisions of the policy to the extent expressly stated in the endorsements.

Underwriting Manual Subtopic

ALTA Endorsement Form 3

V 1

ALTA Endorsement Form 3 (10/17/98) is designed to insure the insured under an owner's or loan policy of the following matters:

  • The zoning classification(s) under which the land falls.
  • The use or uses that are allowed under said classification(s).

The endorsement contains three limitations:

  • There shall be no liability based on lack of compliance with any conditions, restrictions or requirements contained in the applicable zoning ordinances and amendments thereto, including but not limited to the securing of necessary consents or authorizations as prerequisite to such use or uses.

  • There shall be no liability under this endorsement based on the invalidity of said ordinances and amendments thereto until after a final decree of a court of competent jurisdiction adjudicating such invalidity, the effect of which is to prohibit such use or uses.

  • There shall be no liability based on the refusal of any person to purchase, lease of lend money on the estate or interest covered hereby in the land described in Schedule A.

This form of zoning endorsement may be issued with or subsequent to a policy insuring title to land regardless of whether such land is vacant, under construction or improvements completed.

Underwriting Manual Subtopic

ALTA Endorsement Form 3.1

V 1

ALTA Endorsement Form 3.1 (10/17/98) expands the coverage contained in Form 3 by additionally stating the following:

"The Company hereby further insures against loss or damage arising from a final decree of a court of competent jurisdiction:"

(a) prohibiting the use of the land, with any structure presently located thereon, as specified in paragraph 1(b) above; or, (b) requiring the removal or alteration of the structure on the basis, that as of Date of Policy, said ordinances and amendments thereto have been violated with respect to any of the following matters:

  • Area, width or depth of the land as a building site for said structure.
  • Floor space area of the structure.
  • Setback of the structure from the property lines of the land.
  • Height of the structure.
  • Number of parking spaces.

ALTA Endorsement Form 3.1 may be issued only when:

  • The property is not vacant land.
  • The improvements located on the land are fully completed.

Underwriting Manual Subtopic

Procedure For Extending Zoning Coverage

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Refer to the Guidelines associated with the above endorsements for the general underwriting requirements to issue the Zoning 3.0 or the Zoning 3.1 endorsement.

There is usually an additional premium for a zoning endorsement.

Customers should be advised that the Company may decline to issue a zoning endorsement if we are unable to document compliance.

In some jurisdictions, the ability of the Company to issue a zoning endorsement is based upon an attorney opinion letter. In such cases, the following procedures should apply:

  • Select a local attorney extremely well acquainted with local zoning law.
  • Instruct the customer of its direct obligation to satisfy the fees of the attorney.
  • Notify the attorney that the Company does not assume any obligation for the payment of the attorney's fee and that the customer is obligated to make such payment.
  • Require from this attorney a local zoning law opinion satisfactory to the copy, addressed to both the customer and the Company.

Underwriting Manual Subtopic

Change Of Zoning Classifications Does Not Change The Nature Of Restriction

V 1

Whenever real estate is affected by a valid recorded restriction which limits or restricts the use of the land, any zoning change allowing the use that is prohibited by the restriction will have no effect whatsoever in relation to the existing restriction.