Summary of the 2021 Changes to the ALTA Policy Forms
Chris Burti, Vice President and Senior Legal Counsel

The American Land Title Association (ALTA) promulgates title industry standardized policy and endorsement forms. A general overhaul of the forms occurred in 2006 and the most recent in 2021. The need for updated forms stems from changes to the legal and regulatory environment including new and updated laws and regulations as well as appellate court decisions. Both the new Owner Policy ("OP") and the new Loan Policy ("LP") as well as numerous endorsement forms have been subject to substantial revision. Every section of the standard policy forms has been affected including new clarified limitations and enhanced coverage along with new and revised definitions. Examples of a few of such changes follows:

Policy Authentication
Both the new Owner and new Loan Policy begin by effectively incorporating coverage provided by the Policy Authentication Endorsement (ALTA 39) eliminating any need for its issuance with the new policies. It states: "As long as the Insurer issues the policy with a Policy Number and Date of Policy, the policy is valid even if issued electronically or without any signatures:

Covered Risk 2 (OP)
The new policies update Covered Risk 2 by adding new examples of title defects that can cause a covered loss:

• a document affecting the Title not being properly authorized, created, executed, witnessed, sealed, acknowledged, notarized, (including by remote online notarization), or delivered; and
• the repudiation of an electronic signature by a person who signed the document because the electronic signature was not valid under applicable electronic transactions law.

The survey coverage provided by Covered Risk 2(c.) is also enhanced to add a boundary line overlap as one of the matters covered if it would have shown up on a survey.

Covered Risk 9 (LP)
Similarly, Covered Risk 9 is updated by adding these examples of matters that can impair the Insured Mortgage and cause a covered loss:

• the Insured Mortgage not being properly authorized, created, executed, witnessed, sealed, acknowledged, notarized (including by remote online notarization), or delivered; as well as
• the invalidity or unenforceability of Insured Mortgage resulting from the repudiation of an electronic signature by a person who signed the mortgage because the signature was not valid under applicable electronic transactions law.

Covered Risks 5, 6 and 7
Both the Owner and Loan Policies revise Covered Risks 5, 6 and 7 for loss resulting from a violation or enforcement of governmental regulations, enforcement of other governmental powers, or the exercise of the power of eminent domain. The updated language covers loss to the extent of the violation, enforcement or exercise described in an Enforcement Notice. "Enforcement Notice" is a new defined term, and with a clarification of the definition of Public Records (discussed below), represents a significant refinement what type of notice triggers coverage and where that notice must be recorded.

New Covered Risk 8
"PACA-PSA Trust" is also a new defined term. The Perishable Agricultural Commodities Act (7 U.S.C. §§ 499a, et seq.) imposes a trust in favor of unpaid suppliers and sellers of fresh fruits and fresh vegetables against assets of buyers or dealers. The Packers and Stockyards Act (7 U.S.C. §§ 181, et seq.) establishes a similar trust to protect livestock producers. Both trusts can exist and encumber the subject property in without a requirement for recordation. Both policies forms add a new Covered Risk 8 insuring against an enforcement of a PACA-PSA Trust to the extent of the enforcement described in an Enforcement Notice.

Covered Risk 10 (LP)
Covered Risk 10 explicitly insures the priority of the Insured Mortgage for specific elements of the debt, including:

• the amount of the principal disbursed as of the Date of Policy;
• the interest on the obligation secured by the Insured Mortgage;
• reasonable expenses of foreclosure;
• the following amounts advanced by the Insured before the acquisition of the Title
• i. ad valorem taxes and assessments imposed by a governmental taxing authority paid to protect the priority of the lien of the Insured Mortgage; and
• ii. regular, periodic assessments by a property owners' association paid to protect the priority of the lien of the Insured Mortgage; and
• iii. amounts advanced for insurance premiums by the Insured;

Covered Risk 9 (OP) and Covered Risk 13 (LP)
The new policies afford new creditors' rights coverage.

• The protection against loss resulting from a court order providing an alternative remedy now applies to both subsections of the Covered Risk. Section 550(a) of the Bankruptcy Code authorizes an alternative remedy in allowing the bankruptcy trustee to "...recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property"
• In addition, the provision also updates coverage by insuring against loss resulting from the prior transfer being voidable under the Uniform Voidable Transactions Act. (adopted in North Carolina as Article 3A, N.C.G.S. Chapter 39 Uniform Voidable Transactions Act)

EXCLUSIONS
Both the Owner and Loan Policies have added two new Exclusions and made changes to this section that updates them and makes them consistent with the revised language in the corresponding provisions of Covered Risks and of Conditions.

• Exclusion 1 excludes loss resulting from municipal regulations and revises its subsection b. to exclude loss or damage resulting from "any governmental forfeiture, police, regulatory, or national security power"
• Exclusion 3 updates language to exclude loss or damage that would not have been sustained if the insured had paid consideration sufficient to qualify as a bona fide purchaser or borrower under applicable recording laws, but further clarifies coverage by not excluding loss based on the insured's failure to pay fair market value
• Exclusion 4 (OP) and Exclusion 6 (LP) The new creditors' rights exclusion in each policy contains a clarification that a loss resulting from a voidable preference is excluded if not given as a contemporaneous exchange for new value. There is also an express exclusion for loss resulting from the transaction vesting the Title or creating the Insured Mortgage being a voidable transfer under the Uniform Voidable Transactions Act (adopted in North Carolina as Article 3A, N.C.G.S. Chapter 39 Uniform Voidable Transactions Act)
• Exclusion 5 (OP) and Exclusion 7 (LP)
  Both policies include a new exclusion for loss arising from any claim of a PACA-PSA Trust, while stating that the exclusion does not modify or limit the coverage provided by the new Covered Risk 8 discussed above
• Exclusion 7 (OP) and Exclusion 9 (LP)
  Both policies will now exclude loss caused by "any discrepancy in the quantity of the area, square footage, or acreage of the Land or of any improvement to the Land." This will eliminate the need for this language as an exception in Schedule B.

SCHEDULES
Schedule A
An optional Transaction Identification Data header has been added to Schedule A to provide clarity and this information is intentionally set apart from the insured information in Schedule A so it's not an insured matter but serves as reference information to improve communication.
Another optional provision enables the Schedule A to incorporate specific ALTA endorsements by reference.

Schedule B
Schedule B will now begin with language that makes it clear that when a policy includes an exception for restrictions, it does not republish any unenforceable discriminatory provisions contained within those restrictions nor does it except any Discriminatory Covenant from coverage and will eliminate the need for similar language in covenant exceptions.

Some historical land records contain Discriminatory Covenants that are illegal and unenforceable by law. This policy treats any Discriminatory Covenant in a document referenced in Schedule B as if each Discriminatory Covenant is redacted, repudiated, removed, and not republished or recirculated. Only the remaining provisions of the document are excepted from coverage.

Exception Language
The new Policies modify the language immediately preceding the list of the exceptions in Schedule B. This addition eliminates the need to include a specific exception in Schedule B for the terms and conditions of any leases or easements that comprise any part of the insured property.

The policy does not insure against loss or damage, and the Company will not pay costs, attorneys' fees, or expenses resulting from the terms and conditions of any lease or easement identified in Schedule A, and the following matters:"

CONDITIONS
New Definitions in Condition 1
Affiliate, Discriminatory Covenant, Enforcement Notice, and PACA-PSA Trust are new defined terms in both policy forms. Discriminatory Covenant, Enforcement Notice, and PACA-PSA Trust have been discussed above.
Affiliate
In both policies an "Affiliate" is an Entity:

• that is wholly owned by the Insured;
• that wholly-owns the Insured; or
• if that Entity and the Insured are both wholly owned by the same person or entity.
• An Affiliate will be considered an Insured when the named Insured conveys the Title to the Affiliate by deed or other instrument of transfer

Insured (OP)
In the new Owner Policy, a deed from the named Insured to one of the following can also result in the grantee being an Insured under the policy. The last two categories are new, and this provision also differs from the language in the 2006 policy because there is no requirement that the deed or conveyance be without consideration.

• an Affiliate;
• a trustee or beneficiary of a trust created by a written instrument established for estate planning purposes by an Insured;
• a spouse who receives the Title because of a dissolution of marriage
• a transferee by a transfer effective on the death of an Insured as authorized by law; or
• another Insured named in Item 1 of Schedule A.

Insured (LP)
The new form also makes changes to the definition of Insured. The new language doesn't alter coverage but clarifies that the Insured is a person that holds the Title after acquiring the Indebtedness, regardless of the means. A transfer from the named Insured to one of the following should result in the grantee being an Insured under the policy:

• the grantee of an Insured under a deed or other instrument transferring the Title, if the grantee is an Affiliate (Note that this is no longer conditioned on the transfer being for no consideration);
• an Affiliate that acquires the Title through foreclosure or deed-in-lieu of foreclosure of the Insured Mortgage (regardless of whether the Affiliate owned or held the Indebtedness); or
• any Government Mortgage Agency or Instrumentality.

Public Records
The new policies modify the definition of Public Records to distinguish between records that are Public Records as used in a title policy and other governmental records that may be public, but are not intended to be, and are generally not construed as, within the scope of Public Records for purposes of triggering policy coverage. "Public Records" means the recording or filing system established under State statutes in effect at the Date of Policy under which a document must be recorded or filed to impart constructive notice of matters relating to the Title to a purchaser for value without Knowledge. The term "Public Records" does not include any other recording or filing system, including any pertaining to environmental remediation or protection, planning, permitting, zoning, licensing, building, health, public safety, or national security matters.

Condition 8: Contract of Indemnity; Determination and Extent of Liability
This Condition has been revised in both policies and clarifies the fact that the policies are contracts of indemnity, and are not abstracts of title, reports of the condition of title, legal opinions, opinions of title, or other representations of title. Another enhancement to policy coverage are the provisions establishing a process that allows the Insured to select the date for determining value for calculating loss. The ability to choose an alternate date for the determination of loss was previously conditioned on the Insurer's unsuccessful attempt to cure the defect.

There are numerous other changes and a line by line comparison chart for owner and lenders policies and endorsement forms has been prepared by ALTA and they may be accessed using the following links:

Owners Policy Comparison

OP Comparison

Loan Policy Comparison

LP Comparison

Endorsement Comparison

Endorsement Chart