Since the 2006, two ALTA commitments have been used: ALTA Commitment (NJRB 3-07) and ALTA Plain Language Commitment (NJRB 3-08). Effective May 23, 2017 both of these forms will be replaced with a single form: ALTA Commitment for Title Insurance (NJRB 3-09).
The main change we would like to make our clients aware of, is that we are no longer allowed to use “TBD” or “TBA” in the Schedule A of proposed policies. Please be aware that in the future, if we do not have the name of the entity or person, or the amount being insured we can not and will not be inserting “TBD” or “TBA” as a placeholder, but must use new verbiage. Please see below for two examples of what you can expect with the new verbiage.
Insured is TBD
The name of the proposed insured for each policy to be issued must be inserted in Schedule A. The use of terms such as TBD or TBA is unacceptable. If the proposed insured is to be an entity yet to be created, the name of an existing related entity may be inserted, followed by “or its designee” or “assignee” or “nominee”. In other cases, where the applicant does not know (or chooses not to disclose) the name of the proposed insured, the applicant’s name will be inserted in lieu thereof.
Example:
Scenario: ABC Developers LLC intends to acquire WhiteTire for the purpose of constructing a warehouse building. Its custom is to form a separate subsidiary LLC for each project it undertakes, but this does not typically occur until shortly before the closing date.
Verbiage on the commitment: “ABC Developer LLC or its designee”
When the named of an insured is unknown at the time the commitment is issued Schedule B Section 1 will contain the following wording:
The identity of the proposed Insured or Insureds must be disclosed to the Company prior to closing. The Company reserves the right to undertake such additional searches as it may deem appropriate in light thereof, and to amend this Commitment to add such additional requirements and exemptions in connection therewith as it may, in its sole discretion, deem necessary or advisable.
Amount is TBD
The amount of insurance for each policy to be issued must be inserted in Schedule A. The use of terms such as TBD or TBA or an amount of “$0.00” is unacceptable. If the amount is unknown, the underwriters have deemed that $10,000 be inserted for residential properties and $100,000 be inserted for commercial properties.
Example:
Scenario: Purchase price amount is unknown on a commercial property:
Verbiage on the commitment: $100,000
When the actual amount of insurance is unknown at the time the commitment is issued Schedule B Section 1 will contain the following wording:
The proposed Amount(s) of Insurance must be increased to the full value of the estate or interest being insured in accordance with NJLTIRB Manual of Rates and Charges, Article 3. When the final Amount(s) of Insurance are approved by the Company, the proposed Amount(s) of Insurance will be revised accordingly, and the underwriting rate for the policy or policies and endorsement charges will be calculated consistent therewith.
Please feel free to contact our office if you have any additional questions about the new NJ ALTA Commitment.