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The interest of a purchaser under a contract to purchase is an insurable interest and policies naming contract purchasers as insured may be issued under the conditions outlined herein.
The procedure set forth permits the use of the T-1 Owner Policy, or if the property is residential in nature, you must use T-1R, the Residential Owner Policy.
See also Texas Bulletin TX2015004 – LEGISLATIVE UPDATE 2015 Deals with Executory Contracts
As with any other form of title insurance, a complete examination of the title must be made in order to ascertain the capacity of the owner-vendor, the legal description of the property, the capacity of the proposed insured-vendee, the liens and encumbrances affecting the title, and the total consideration will determine the amount of the policy.
A1(a) or A1(b).
In addition, the following EXCEPTION must be added:
Contract for deed between ____________, seller, and ______________, buyer, dated ______________ and recorded _____________ in Book __________ Page __________.
No. ______: We require that the above contract be filed for record.
Note: Forms, provisions, conditions, and limitations of the document are already executed in the printed language of item 10 of Schedule B.
The contract must be recorded. The contract seller must have furnished the contract buyer with the disclosure notice required under Sec. 5.069 Property Code and (1) survey or evidence of a survey of the real property complying with Procedural Rule P-2; (2) a legible copy of any document that describes an encumbrance or other claim, including a restrictive covenant or easement, that affects title to the real property; and (3) a written notice, which must be attached to the contract, informing the purchaser of the condition of the property. The notice must contain the information in the statutory form.
Schedule A may show the interest insured as "Contract Purchaser under contract for deed between ______, Seller and ____ Buyer."
Schedule B must contain the exception set out above. Schedule B should also except to the refusal or inability of the seller to convey the property upon payment of the purchase price.
The contract must be recorded.
The policy is completed as if a fee simple were to be insured, EXCEPT that the name of the contract purchaser is shown as the insured in Schedule A. The names of the contract seller and the contract purchaser must be shown at Item 3 of Schedule A. The phrase: "as their interests may appear" must be added.
Whichever option is chosen, Schedule B of the policy must contain, in addition to the general or standard and special exceptions, the following exception:
Contract for deed between __________________, seller, and _______________________, purchaser, dated _____________ and recorded _______________ in Book ______ Page _____.
A lender making a loan on the security of a contract interest should not be insured on a loan policy.
In this regard please note that lenders will frequently say they are going to refinance a contract for deed. This cannot be done as the deed is not a lien. Either the contract must be replaced by a traditional deed and deed of trust or the lender must acquire the property for the contract seller and then modify the repayment terms.