2022: the NEW ALTA forms are here!

After a long wait following 15 years of discussion and thoughtful debate among industry stakeholders, the American Land Title Association (ALTA) approved new forms of Commitment, Owner’s Policy, and Loan Policy effective July 1, 2021. And now, on February 2, 2022, those forms will be available for use for the FIRST time in most areas of the country on the Fidelity Family of title insurance brands.

If you’re a title nerd this is like Christmas! New Policies – yay! But seriously, these policies don’t just churn themselves out. The ALTA Forms Committee has literally worked for years on the language. If there’s one thing I know as a lawyer it is this: Words have meaning. The words of title insurance policies mean something. Every single word was chosen intentionally and after vigorous discussion as to its effect on coverages. And this effort was not just among title insiders; mortgage bankers, real estate lawyers, industry partners and associations all had a part to play in arriving at the language in the 2021 Forms. So, if you encounter someone in a deal that seems to think they don’t like the new forms, remember that drafting them was not a unilateral decision.

The changes encompass a number of things: aligning the updated language of the 2016 Commitment to the Policy Forms, moving some exceptions that became commonplace to the jacket as Exclusions, punctuation and grammatical refinements, amendments based on how courts have treated the prior policy language, and some fresh coverages and exclusions for both Insured and Insurer. Overwhelmingly, the changes are improvements to coverage for the Insured.

Let’s talk about some of the highlights. This will not cover every single word and change in the new forms, but I hope to pass along the things you will find most essential as you host your next title insurance party and need exciting things to discuss (!).

The ALTA 39 Electronic Policy / Signature endorsement will become obsolete. The coverages of that endorsement are now included in the Policy Jacket. That should be one less page for final policies.

The PACA exception won’t be a fight anymore. The 7/1/2021 ALTA Policies treat this both as a Covered Risk and an Exception. It’s Covered to the extent there is a recorded PACA/PASA lien and the Policy does not except to that recorded lien. It’s Excluded to the extent it is just a regular PACA/PASA lien and not recorded outside the federal statute creating the inchoate lien. In other words, the Insurer has no liability for PACA/PASA Trust liens unless there is actually a recorded document evidencing the lien.

Policies no longer will take specific exception in Schedule B to the "terms and conditions" of Leases or Easements insured under Schedule A. There is a broad disclaimer to that in the preamble of Schedule B to clean up the policy.

A new definition of "State" in incorporated to follow the #SCOTUS decision on McGirt relative to public records of Native American tribes. Notably, the ALTA 47 series of endorsements is available to bridge this gap for the 2006 policy form collection.

A new twist on the defined term “Insured” will allow coverage under the Owner’s Policy to continue when the Land is conveyed to an Affiliate (a term that also saw some pro-Insured tweaking), even when money changes hands. Under the 2006 Owner’s Policy definition, the coverage would only continue if there was no consideration paid. This is a benefit to Insureds and one less technicality to haggle over.

Remote Online Notarization (RON) made it into the new policies just under the wire. This is now part of the Covered Risk 2(a) just as traditional in-person notarization is.

A new defined term is introduced: “Enforcement Notice.” This is a document affecting the Title, recorded in the Public Records at Date of Policy that describes any part of the Land and identifies a violation or enforcement of a law, ordinance, permit, or governmental regulation, exercise of a power, or enforcement of a PACA-PSA Trust. Basically it is a lien but governmental in nature. This terminology appears throughout the new Policies.

The Loan Policy’s Covered Risk 10 adds a lot of language to basically clarify and confirm for lenders that the coverage is for certain enumerated components of the Indebtedness (another defined term that experienced a lot of updates).

Perhaps your favorite and mine - Covered Risk 11 on Mechanics Liens - confirms the coverage relates to services and equipment in addition to labor and materials. This is consistent with the ALTA 32 coverages. No other fun tweaks to mechanics lien coverage this time around.

Because the Uniform Voidable Transactions Act refers to a “voidable transfer” instead of “fraudulent transfer”?those terms are refreshed throughout the 2021 forms.

Have you ever seen an exception to a legal description that recites acreage? Probably so. Not anymore! Exclusion 9 of the Loan Policy and Exclusion 7 of the Owner’s Policy exclude liability for the quantity of area, square footage, or acreage described in the Land (if any). Hopefully this matter is off the table for good. No specific exception is needed and the acreage references can remain in Schedule A if preferred by the Insured.

The Transaction Identification Data that has been a part of ALTA Commitments since 2016 is now formatted into Schedule A of the new Policies as well for consistency. It is made clear this information is not insured.

More space saved: you won’t see standard exceptions to illegal, unconstitutional, Discriminatory Covenants anymore because there is a standard exclusion for that now pre-printed in Schedule B. So, even when a document of record is excepted to, the policy doesn’t then have to disclaim the parts that violate law. (The 2016 Commitment forms already had this feature in case it sounds familiar.)

Several court decisions criticized the Loan Policy following the great recession because the Policy does not specify when a loss should be valued. The result was valuing losses when it best suited an Insured, even if the time for valuing made little sense. The 2021 Policy addresses the problem by adding a new Condition that gives an Insured a choice of valuing a loss at either the date a notice of claim was received by the Company or the date of a foreclosure sale.

There a number of changes to many of the existing endorsements to conform to the policy changes but no wholesale modifications.

You may find a lot of other interesting things as you review the new forms. ALTA will continue rolling out the forms with discussion in print, online, and via video. I’m sure all the underwriters will do the same. For detailed red-line charts showing all the changes from 2006 to 2021, side-by-side with explanatory comments, visit?https://www.alta.org/policy-forms/?.

Take note that while these changes to the forms were effective as of 7/1/2021, they are just now getting close to being implemented for use across the country. Each title insurer or state land title association has to adopt the forms internally and then roll them out per each state’s laws. It's game time!

Our National Commercial Services team based in Atlanta is ready to issue the new ALTA Commitments on February 2, 2022. Be sure to write in the 2021 Commitment and Policy forms to your next Purchase and Sale Agreement. You'll be glad you did.