10% of the sum of Owner’s Policy and Loan Policy Premiums [690-186.005(9) F.A.C.]. All endorsements require a minimum of 30% remittance to the underwriter [69O-186.003(9)(a)].
The ALTA 9-06 is sometimes referred to as the “Florida Form 9” and/or the “Comprehensive” Endorsement. The endorsement is seen as being comprehensive in nature due to it addressing restriction violations, mineral rights, encroachments into easements and other various matters that a standard loan policy fails to insure against.
In terms of assessing the risk of issuing the Form 9 Endorsement, most underwriters see the ALTA 9-06 (loan policy) as less risky than the ALTA 9.1 or 9.2-06 (owner’s policy) because the liability under the Form 9 Endorsement will decrease as the loan is paid down, whereas the liability for an owner’s policy remains fixed. Being that this endorsement fills in any gaps in coverage of the standard loan policy by providing coverage against violated restrictions, outstanding assessments, and other matters that may affect the priority of the insured lender, most lenders require the Form 9 Endorsement to be issued with each of their policies.
The ALTA 9-06 is identical to the previous ALTA 9 and may be issued with both 1992 and 2006 ALTA Policies.
As more comprehensively detailed in the endorsement, the ALTA 9-06 Endorsement provides coverage against:
- Covenants, conditions or restrictions that would extinguish or affect the priority of the insured Mortgage;
- Present violations of any covenants, conditions or restrictions, nor do any existing improvements violate platted setback lines;
- Restriction instruments which establish an easement, provide a lien for liquidated damages, provide for private assessments or option to purchase, right of first refusal, reverter or approval;
- Encroachments of existing improvements onto adjoining land or of adjoining improvements onto Land;
- Encroachment of existing improvements into easements;
- Notices of violation of covenants, conditions and restrictions related to environmental protection of record;
- Damage to improvements which encroach into easements or from future exercise of any right existing at Date of Policy to use surface of Land for extraction of minerals, and;
- Denial of the right to maintain because of a violation of restrictions or platted building setback lines.
Requirements to Issue
Any covenants, conditions and restrictions as well as a survey map of the property must be reviewed prior to issuance of the ALTA 9-06 Endorsement. Verify or obtain proof of the following:
- Obtain an affidavit from the association, if any exists, certifying that the property is not in violation of any covenants, conditions or restrictions. In lieu thereof, an affidavit from the owner certifying the same may be relied upon. Any violations must be shown on Schedule B of the policy.
- Verify the survey map depicts all easements stated on Schedule B. Any easements that cannot be located must be identified on Schedule B of the commitment/policy in the form of the following added exception: “Encroachment or possible encroachment of improvements into the matter shown as item __ of Schedule B”.
- Review survey to confirm improvements (including buildings) do not (1) violate any platted setback lines, (2) encroach into easements, (3) encroach onto adjoining land, or (4) encroach onto Land from adjoining land.
- Review covenants, conditions and restrictions to confirm the absence of any created easements, liens, private assessments or right of first refusal, reverter or approval to sell/encumber. Any such right should be released or specifically taken added to the exception on Schedule B of the policy.
- Verify the right of entry has been released for any mineral rights shown on Schedule B or in legal description. If the right of entry is not released, Item 3(b) of the endorsement may not be provided.
- Any recorded notice of violation regarding environmental protection must be shown on Schedule B of the policy.
If a violation of a restriction or an encroachment into an easement or setback exists, the following must be complied with:
- Exception must be specifically stated on Schedule B as to the violation or encroachment.
- A special exception must be taken if (1) The violation of the setback is greater than 10% (2) There is pending enforcement or objection to the setback (3) the building is not completed or (4) there is a reverter provision in the instrument which imposed the setback. Special exception does not need to be taken as to removable/minor improvements such as fences, pavers, sheds, A/C Pads or screen enclosures. The special exception would read: “Coverage under the ALTA 9-06 Endorsement shall not apply to said described violation”.
Frequently Asked Questions
Why would a lender want to purchase this endorsement?
The ALTA 9-06 Endorsement is Florida’s version of a comprehensive endorsement providing coverage against loss arising from matters ranging from easement encroachments to outstanding assessments to rights of first refusal. A lender will typically require this endorsement as additional protection for their lien of mortgage.
How do I calculate the price the Form 9 Endorsement on a second or third loan policy?
The formula remains the same. 10 percent of the sum of the Owner’s Policy Premium + Premium charged for Loan Policy (in this case the amount charged for the second or third policy). Specifically, say the Owner’s Policy premium was $2500 and the agent charged $25 for the simultaneous first loan policy and $25 for the second loan policy. Form 9 premium on the second mortgage would be $252.50 (10% of $2,525.00).
What’s the difference between the ALTA 9-06 and the ALTA 9.3-06?
The ALTA 9.3-06 Endorsement provides the same coverage as the ALTA 9-06 with one exception, the ALTA 9.3-06 limits the definition of “covenants, conditions or restrictions” not to include any covenants, conditions, or restrictions relating to obligations of any type to perform maintenance, repair, or remediation on the Land. Therefore, the ALTA 9.3-06 appears to offer less coverage than the ALTA 9-06. The 9.3-06 also appears to clean up some ambiguous, inconsequential, language contained in the 9-06.
Can this endorsement be issued without obtaining a survey?
Yes. If a survey is not provided, Items 1(b)1, 1(b)3, 1(b)4, 3(a), 4 and 5 of the endorsement may not be provided.
Still have questions? View answers to our frequently asked questions.