ALTA Endorsements 32-06, 32.1-06 and 32.2-06 are designed for loan policies during construction in situations where the mortgage or deed of trust can never have priority over mechanic’s liens or where the mortgage or deed of trust has lost priority to mechanic’s liens (e.g., due to commencement of work prior to the recording of the mortgage or deed of trust). Some insurers also use these endorsements for situations where the mortgage or deed of trust has priority over mechanic’s liens. If these endorsements are issued, the Title Agent must be reviewing and approving payment requests or disbursing the funds. The coverage is limited, but is designed to prevent the Title Insurance Policy from being treated as a payment bond.
ALTA Endorsements 32-06, 32.1-06 and 32.2-06 are similar in that all three endorsements insure against loss or damage by reason of: (a) the invalidity or unenforceability of the lien of the Insured Mortgage as security for each Construction Loan Advance made on or before the Date of Coverage; (b) the lack of priority of the lien of the Insured Mortgage as security for each Construction Loan Advance made on or before the Date of Coverage, over any lien or encumbrance on the Title recorded in the Public Records and not shown in Schedule B; and (c) the lack of priority of the lien of the Insured Mortgage, as security for each Construction Loan Advance made on or before the Date of Coverage over certain Mechanic's Liens, if notice of the Mechanic's Lien is not filed or recorded in the Public Records.
The ALTA 32-06 endorsement provides coverage only to the extent that the charges for the services and/or materials rendered were designated for payment in the documents supporting a Construction Loan Advance disbursed by or on behalf of the Insured on or before the Date of Coverage.
The ALTA 32.1-06 endorsement provides coverage only to the extent that direct payments to the labor and material suppliers have been made by the Company or by the Insured with the Company’s written approval.
The ALTA 32.2-06 endorsement provides coverage only to the extent that direct payments to the labor and material suppliers has been made by the Insured or on the Insured’s behalf on or before the Date of Coverage. When the Pending Disbursement Endorsement is included as a part of the Title Policy, the date of coverage for mechanic’s liens is extended through the use of the Disbursement Endorsement (ALTA 33-06). While the coverage for mechanic’s liens is extended, it does not change the Date of Policy or any other endorsements that have been issued in conjunction with the policy. The endorsement also inserts any additional exceptions resulting from the title search done in connection with the issuance of the endorsement.
Commercial Title Services You Can Rely On
When you’re embarking on a commercial real estate transaction, it’s important to work with a commercial title company you can rely on. At Commercial Partners Title Company, our focus is on ensuring that your commercial transaction is a success. You can rely on us to guide you through your transaction, prepare your required documents for closing, and provide you with a title insurance policy that matches your unique needs. Contact us today to set up a time to chat with one of our team members and get started with your next commercial transaction.