Podcast
Questions and Answers
An owner-occupied residential property may be affected by unrecorded lease agreements.
An owner-occupied residential property may be affected by unrecorded lease agreements.
True
A recorded memorandum of lease needs to be listed as an exception on Schedule B-2 of the commitment.
A recorded memorandum of lease needs to be listed as an exception on Schedule B-2 of the commitment.
True
What is a potential risk when issuing a policy for a property without including a tenant in possession exception?
What is a potential risk when issuing a policy for a property without including a tenant in possession exception?
Why is it important to consider leases when dealing with vacation homes or rental properties?
Why is it important to consider leases when dealing with vacation homes or rental properties?
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What can happen if a property has a recorded memorandum of lease?
What can happen if a property has a recorded memorandum of lease?
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In what scenario should a tenants in possession exception be included in a commitment?
In what scenario should a tenants in possession exception be included in a commitment?
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What is a leasehold deed primarily used for?
What is a leasehold deed primarily used for?
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Study Notes
Leases and Leaseholds in Title Insurance
- Leases affect both commercial and residential properties, including vacation homes and rental properties. Tenant in possession exceptions are crucial.
- A lease on a property without a current tenant in possession still requires an exception on the policy. This is vital for commercial buildings.
- Insuring co-ops, like those in South Florida and Tampa, requires understanding proprietary leases. Leasehold deeds are a specific conveyance type.
- Exceptions for leases are necessary when a recorded memorandum of lease exists. Evidence like subordination agreements also requires exceptions.
- Unrecorded leased properties demand an exception for parties in possession listed in Schedule B-2 of the commitment. An owner's affidavit allows removal if no tenants are in possession.
- Commercial properties often require limiting the exception to tenants on an attached, affidavit-certified rent roll. Review leases with purchase or first refusal rights.
- Removing a lease exception needs a mutual release from both lessor and lessee, not just the lessor.
- Lease termination and tenant vacating must be proven for affidavit removal. Contact underwriting for significant commercial tenants.
- An owner can't guarantee tenant actions; tenant lease claims may impact the owner's policy.
- Foreclosure on a mortgage recorded after a lease does not extinguish the lease; the recorded lease has priority.
- Lease expiration alone isn't enough for removal; off-record modifications can extend leases. An affidavit stating no modification and tenant vacate proof is needed.
- Be hypervigilant when dealing with large, well-known tenants. Direct tenant confirmation of lease termination is necessary.
- A lease, validly created and recorded, takes precedence over subsequently recorded mortgages or judgments.
- The lessor only mortgages their interest, not the lessee's; judgments affect the lessor, not the lessee.
Insuring Leases
- A valid lease is a conveyance of an interest in land, insurable.
- Validate the authority of both lessors (and their entities) and lessees.
- The lease/memorandum of lease must include granting language and a clear legal description; no ambiguity.
- All parties (lessor and lessee) must execute the lease; witnesses are no longer required (after 7/1/20). Record and show all necessary information.
- Existing lease assignments require the lessor's approval (estoppel) confirming the assignee's rights.
- Leasehold policies have endorsements for lease valuations, costs, and related issues.
- Leasehold policies contain leasehold endorsements for lease valuations, costs, and related matters; these endorsements are without cost.
- Lenders and buyers often ask for lease exception modifications on commercial policies; limiting exceptions to a rent roll, attached as Exhibit A, is a common request.
- The rent roll attached to the policy must align with the affidavit.
- Lease removal requires a mutual release from both lessor and lessee.
- Affidavits stating lease termination and tenant vacate are insufficient without further diligence. Contact underwriting for lease deletion questions.
- Requests to exclude clauses regarding purchase or right of first refusal require an owner-executed affidavit. Review all leases to confirm absence of such rights if the affidavit is not executed.
- Leases with purchase or first refusal rights should be reviewed.
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Description
Explore the critical aspects of leases and leaseholds in title insurance, focusing on both commercial and residential properties. Understand exceptions necessary for tenant possession and co-op insurance, as well as the importance of recorded and unrecorded leases. This quiz will help you navigate complex leasehold considerations and their impact on title policies.
