Bulletin: NY000071

Dear Associates:

We have received a letter from Mineola attorney, Michael A. Rich, addressed to all title underwriters in the New York metropolitan area, containing a schedule of H.D.A. assessments which he claims are a "lien on title insurance policies". Aside from Mr. Rich's mistaken understanding of the nature of the lien of unpaid homeowner's association assessments (no, the unpaid assessments he refers to are not a "lien" on title policies), it is incumbent upon us to be aware that Bayside Gables, Inc. is an active homeowner's association. In addition, his letter makes us aware that, at least at the present time, Mr. Rich is probably the party to contact in order to obtain proof that the homeowners' association assessments have been paid.

As a general rule, upon conducting a proper search on one of the Bayside Gables properties, the Declaration in L.30l8 Cp 27l would be turned out, if it is properly indexed. A reader's review of the instrument would disclose the language in the declaration regarding the potential for a lien for unpaid assessments, and an exception calling for proof of payment of homeowners' association assessments should be raised. Such an exception could be cleared by a letter from the homeowners' association or its attorney, in a manner similar to clearance of outstanding condominium common charges.

An example of appropriate exception language:

H-1Declaration in (Liber)_____________(CP)________, establishing _____________, as a homeowners' association. Policy excepts the terms, provisions, and conditions contained in said declaration. Said declaration contains a clause providing that unpaid association assessments shall be a lien on the real estate; proof is required from the association that there are no assessments due and that all outstanding assessments have been fully paid.

If the search turns out a Notice of Lien, that should be turned out as an exception, and a satisfaction called for. Such a satisfaction should be arranged so that delivery is made at closing in exchange for payment, or the satisfaction is provided in advance, in escrow, with a letter of instructions allowing release of the instrument upon payment of the amount due.