Legal Analysts

Showing posts with label Title Insurance. Show all posts
Showing posts with label Title Insurance. Show all posts

Wednesday, December 16, 2020

New York is Really Tired of Banks and Title Companies Not Accepting Powers of Attorney

Governor Cuomo has signed into a law Assembly Bill A5630A which aims to simplify the statutory short form power of attorney and increase its acceptance by third parties (looking at you title insurers and banks). 

Previously, a power of attorney could be void because it did not contain the "the exact wording of the form set forth in Section 5-1513". This strict language caused many third parties relying on the form to refuse to honor powers of attorney not prepared using their own templates out of fear that the form they were unfamiliar with had a small technical error rendering it invalid. 

Now, a power of attorney is valid so long as it "substantially conforms to the form required pursuant to Section 5-1513" even if it contains insignificant mistakes in "wording, spelling, punctuation, or formatting, or the use of bold or italic type... or uses language that is essentially the same as, but not identical to, the statutory form." Even more, "failing to include clauses that are not relevant to a given power of attorney shall not in itself cause such power of attorney to be found to not substantially conform with the requirements of such form." Long story short, the statute now gives much more leeway in the preparation of the form, hopefully avoiding the voiding of powers which in all fairness should have been valid for the purpose intended. 

To promote acceptance of more powers of attorney, the new bill bakes in protections for third parties relying upon powers, as well as penalties for third parties that unreasonably reject powers. 

Section 5-1504 of the General Obligations Law is amended to contain a presumption that a duly acknowledged (notarized) power of attorney is genuine and valid. It also is amended to provide for a mechanism to release a third party relying upon a power of attorney from liability after reasonable acceptance. The third party may "request, and rely upon, without further investigation" (1) an agent's certification under penalty of perjury any factual matters relating to the power and (2) an opinion of counsel (from the principal is fine) as to any matter of law concerning the power. There are strict time limits (10 business days) in which the third party must reject a power of attorney together with a written explanation given to the principal and agent, and then either reject or honor the power after receipt of written explanation received from the agent/principal (7 business days). Most importantly, if the agent receives an acknowledged affidavit from the agent stating that the power is in full force and effect, the third party must accept the power of attorney except for reasonable cause, which is enumerated in the statute. If the third party and agent/principal follow all the steps in this dance, the "third party shall be held harmless from liability for the transaction." 

But what if your bank or title insurer still won't accept your power of attorney? A special proceeding may be commenced against the third party refusing to honor the power, awarding damages (including reasonable attorney's fees and costs) if the third party acted unreasonably in refusing to honor the power of attorney. 

Time will tell if these changes, coupled with the elimination of the statutory gift rider, will result in more widespread use and acceptance of powers of attorney. Banks and title insurers are notorious for avoiding risk when it comes to the use of powers of attorney and the State's attempts to promote their acceptance has bordered on Sisyphean. 

Thursday, August 06, 2020

Title Litigation - Resolving a Boundary Line Dispute

The Appellate Division recently reminded us how the courts make a boundary line dispute determination in the case of Old Timers Rod & Gun Club, Inc. v. Wa-A-We Rod and gun Club, Inc. with the following quote:
Where such discrepancies exist in property descriptions, ‘the rules of construction require that resort be had first to natural objects, second to artificial objects, third to adjacent boundaries, fourth to courses and distances and last to quantity’
We are therefore reminded of the importance of locating monuments referenced in a deed rather than simply relying on compass bearings and distances when resolving boundary line disputes. 

Title Insurance - Read Your Policy Before You Sue Your Insurer to Take Action

I want it; I want it; I want it is not a good enough argument said the Appellate Division in Irma Straus Realty Corp. v. Old Republic National Title Insurance Company

Underlying the demand for action was a dispute between neighbors over use of a common stairwell. Plaintiff sued their insurer demanding that the title company pay attorneys' fees and costs to prosecute an ownership action against the neighbor. 

Plaintiff's suit was pursuant to section 5 (b) of its policy, which provides that the title insurer “shall have the right ... to institute and prosecute any action or proceeding or to do any other act that in its opinion may be necessary or desirable to establish the Title, as insured, or to prevent or reduce loss or damage to the Insured."

Clearly, as the court points out, Plaintiff didn't understand the difference between the terms "right," which the policy stated, and "obligation," which the policy didn't state.

That is to say, the Plaintiff lost the case. 

Clearly, words matter. 

Tuesday, March 24, 2020

Title Examination, GAP Insurance, and Recorded Deeds - Closing Title in a Quarantined World

As of March 24, 2020, both the Nassau County and Suffolk County Clerks have suspended in-person access to their offices. As previously reported on our blog, the Chief Administrative Judge of the Courts has ordered that county clerks shall no longer accept any filings, electronic or otherwise. It's still an open question whether this precludes the electronic recording of documents, but there is no doubt that title insurance is a whole lot more complicated right now.

How will your title insurer examine title and issue a policy if they cannot pull non-electronic records? While some clerks have a more robust electronic system than others, can title insurers be confident that the records are up to date given limited staffing and restrictions on filing?

What about the period between closing of title and the recording of your deed? It has always been theoretically (and unfortunately in some instances, actually possible) for a grantor to encumber title to the property you just bought after your title insurer had already performed its search, cleared for closing, and locked in its policy. If there is an even further extended period between closing and recording due to coronavirus closures, it is more vital than ever to ensure that you are protected against these unseen encumbrances.

Traditionally this "GAP Period" requires a special endorsement that protects the purchaser against encumbrances that occur after closing but before the deed is recorded, but will title insurers be willing to insure such an unknown and potentially length time period?

If you are closing in the next few weeks, make sure your attorney has all these questions answered.

Monday, December 30, 2019

Case Alert: Title Regulation 208 is Back - No More Wining and Dining Permitted - DFS Enforcement is Coming

On December 26, 2019, the Appellate Division, First Department, reversed the Supreme Court and dismissed the New York State Land Title Association's challenge to Regulation 208.

Now, title insurance underwriters and their agents may not offer free meals and beverages, tickets to entertainment events, gifts, golf outings, parties, office supplies and the like as we had previously discussed in the November 2019 article, No More Title Insurance Bribes: Compliance Protocol needed at Every Title Insurance Agency

The only aspects of Regulation 208 which remain annulled after this decision are the ancillary fees at 228.5 and the closer payment restrictions.

To understand the current title landscape, read our blog from January 19, 2019, Title Insurance Regulation 208 is Back - Soliciting Title Business is Seriously Restricted Yet Again.

Now, after the December 26 decision, the only possibilities that can change the new reality of the title insurance industry in New York are:

  • An application for leave to appeal to the Court of Appeals is made and granted, then, the matter is heard and reversed;
  • New regulations are issued by DFS; or
  • New legislation is enacted. 
Title insurance companies should immediately issue policy notices to their staff, conduct trainings and prepare for DFS enforcement. 

Saturday, January 19, 2019

Title Insurance Regulation 208 is Back - Soliciting Title Business is Seriously Restricted Yet Again

On January 15, 2019, the Appellate Division, First Department, reversed the Supreme Court in New York State Land Title Associations, Inc. v. The New York State Department of Financial Services (page 69).

To remind the reader, the New York County Supreme Court had previously annulled the Insurance Regulation which regulated title closer fees, ancillary charges, premiums and most importantly, soliciting business.

Now, the annulment is reversed (as if it never happened), except with respect to section 228.5(a)(1)-(3) [ancillary search fees] and (d)(1)-(2) [closer fees].

So, no more sports tickets, golf outings, holiday parties, open houses, and wining and dining to solicit title insurance business.

Now, to the entertaining part. What about all of the ancillary fees that were being charged by title insurance companies, above the regulatory caps, in between the annulment date and the reversal date? If a decision is reversed was it ever annulled? If it was never annulled were the caps on ancillary fees always applicable and were consumers overcharged. These are tough questions that Department of Financial Services should answer soon. Stay tuned and perhaps we will be hearing from the Court of Appeals to put finality to the legality of Insurance Regulation 208.

Friday, September 07, 2018

Sports Tickets for Real Estate Attorneys - Title Regulation Annulled - Game On

Insurance Regulation 208 has been annulled in the Article 78 case of New York State Land Title Association, Inc.; The Great American Title Agency, Inc.; and Venture Title Agency, Inc. v. The New York State Department of Financial Services; and Maria Vullo, in her official capacity as Superintendent of the New York State Department of Financial Services.

As a result, and unless the decision is reversed, sports tickets for real estate attorneys are available anew from title companies. However, can an attorney ethically accept such tickets without running afoul of Rule 1.8(f) of the Rules of Professional Conduct? 

Tuesday, July 10, 2018

Judge Strikes Down Title Insurance Regulation 208

Regulation 208 (11 NYCRR 228) is now annulled pursuant to New York County Supreme Court Justice Rakower’s decision and order on New York State Land Title Association (NYSLTA) et. al. v. New York State Department of Financial Services (DFS).

The Court annulled Regulation 208 in its entirety and reasoned, among others, that Regulation 208 is “irrational” and “internally inconsistent.”

DFS has filed its Notice of Appeal. Stay tuned as it is yet to be determined whether Regulation 208 would be reinstituted with a stay or otherwise.

Thursday, January 18, 2018

New York State Senate Says Aye to Bill Allowing Title Insurance Marketing Expenses

With 61 ayes and 0 nays, the New York State Senate passed S6704 which provides a definition for “an inducement for, or as compensation for, any title insurance business” in Insurance Law 6409. The new definition allows title companies and agents to continue usual and customary marketing activities such as taking clients out for coffee or lunch. The only requirement is that these marketing expenses must not be offered as a quid pro quo for a particular piece of title insurance business.

Nonetheless, title insurance companies and agents are still holding their breath as it is still in the Assembly’s hands to approve A8467 and effectively ease Regulation 208’s prohibitions on inducements for title insurance business.

You can track the Assembly’s actions on A8647 through this link

Thursday, December 21, 2017

Title Bribes continue until February 1, 2018

DFS Statement Regarding 11 NYCRR 228

Given the important consumer protections and impact of the necessary reforms of the title insurance industry that DFS has implemented pursuant to Regulation 208, DFS recognizes that a longer implementation period may be necessary to ensure full compliance.  Accordingly, DFS will commence enforcement of Section 228.2, Prohibition on Inducements for Future Title Insurance Business on February 1, 2018.

Thursday, November 09, 2017

No More Title Insurance Bribes: Compliance Protocol Needed at Every Title Insurance Agency

The Department of Financial Services has closed the door to the good old boys’club of title insurance kickbacks. Say goodbye to free meals and beverages, tickets to entertainment events, gifts, golf outings, parties, office supplies and the like. Two new regulations, Regulations 206 and 208, respectively at 11NYCRR35 and 228, have ended the party.

Read the full article by Andrew Lieb, Esq. published in The Suffolk Lawyer here. 

Wednesday, March 08, 2017

FinCEN Renews Order Requiring Full Disclosure of Persons Behind All Cash Purchases of High-End Real-Estate

The Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury renewed a Geographic Targeting Order (GTO), on February 23, 2017, requiring “U.S. title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ for high-end real estate in six major metropolitan areas.” The counties covered in this renewal are: all New York City Burroughs, Miami-Dade County, Broward County (FL), Palm Beach County (FL), Los Angeles County, San Francisco County, San Mateo County (CA), Santa Clara County (CA), San Diego County, and Bexar County (TX).

Each county will have a different monetary threshold for transactions covered by this GTO to become applicable. In New York, covered transactions shall be all cash payments for real property at or above a total purchase price of $1,500,000 in Brooklyn, Queens, Bronx, Queens, and Staten Island. In Manhattan, covered transactions are set at or above a purchase price of $3,000,000.

A title insurance company involved in a covered transaction will be required to file a FinCEN Form 8300 detailing, inter alia, the identities of any persons representing the purchaser and any “Beneficial Owners” (an individual who owns 25% or more in equity of the purchaser) “within 30 days of the closing.” For New York, this GTO will continue to prevent anonymous high-end purchasers in the five boroughs.

Wednesday, April 02, 2014

Title Insurance Reform in NYS Budget

Accordingly to a Press Release entitled, Governor Cuomo and Legislative Leaders Announce Passage of 2014-15 Budget, NYS now has significant changes to our title insurance industry.

Title insurance insures against defects in title to real property and is required if a purchaser obtains an institutional mortgage as part of their purchase of the real property. Some private lenders do not require title insurance. However, its always a good idea to not only get title insurance in the form of a lender's policy, but also to obtain a fee or homeowner's policy as well because purchasing property is quite expensive in this State and insuring that you own what you thought you bought is a great idea.

According to the Press Release, the Title Insurance Reform coming to NYS is as follows:

The Budget includes measures to provide stronger oversight for the title insurance industry, which will help better protect consumers and lower costs for New York homeowners. The Budget provides the Department of Financial Services (DFS) with authority to issue licenses to title insurance agents for the first time, just as it licenses all other insurance agents and brokers. Licensing will require agents to meet qualification standards and undergo regular training. DFS will also have the authority to monitor abuse by agents and to revoke licenses accordingly, as well as help root out conflicts of interest that drive up costs for homeowners. Together with other measures including regulations DFS will soon issue on title insurance, these reforms are expected to result in a 20 percent reduction in title insurance premiums and closing costs for new home purchases and a more than 60 percent reduction in costs on refinancing transactions.

The 2 keys in this reform is:

  1. Licensing requirements for title closers
  2. Reduced costs of title insurance
As the Department of Financial Services issues the applicable Regulations we will update this blog with more information. 

Stay tuned.