Bulletin: NJ000109

We are pleased to advise that an agreement now exists among title underwriters in New Jersey eliminating the need for indemnification letters under specific circumstances.  Stewart Title Guaranty Company participated in the finalization of this agreement and is a signatory together with all other major New Jersey Underwriters.

Here is how it works:  You need to have, in your file, a complete copy of the owner's title insurance policy, insuring the current record owner who is either refinancing or selling to your proposed insured.  You need the complete signed owner's policy in your file.  The face amount of the present owner's policy must be less than $500,000.  You may not rely upon representation that an owner's policy exists and will be given to you at some future date.  You may not rely upon a "pro forma" policy.  You may not rely upon a "marked- up" commitment.  You may not rely upon a loan policy.  You need to carefully examine the complete owner's policy.  If the owner's policy does not take exception for a covered lien as discussed below and the amount of the lien will not exceed the amount of the present owner's policy; you are authorized to omit the covered matter without the requirement of obtaining a formal indemnification letter from the present title insurer.  In short, for any of the liens listed below, for which you would have formerly sought a letter of indemnification, that letter is no longer required pursuant to the terms of the Treaty.

It is important to note that the treaty only applies where an owner's policy is presented.  There is no provision for indemnification based upon a prior loan policy unless the insured mortgage is foreclosed and the lender insured was the successful bidder at sheriff's sale and is now conveying title. 

Here is what is covered by the Treaty: 

• Prior closed end mortgages where there is no lis pendens filed;
• Prior judgments;
• Prior Federal or state tax liens;
• Prior Franchise taxes;
• Prior Construction lien claims;
• Prior Reimbursement agreements;
• Prior Institutional liens;
• Prior State taxes, and ·Prior Marital interests (dower, curtsey, or right of possession)

However, these matters are covered by the Treaty only so long as none of these are subject to an enforcement action.  If you have any knowledge that any action has been taken; is presently being taken or will be taken to enforce any of the liens or rights, you need to call the Stewart State office for further direction. 

Further you may rely on the Treaty to omit:

• tax sale certificates and
• home equity or revolving credit mortgages

However, notice must be given to the prior title underwriter as to these matters.  For tax sale certificates and open ended mortgages, you must call the Stewart's State Office to obtain the address and instructions for giving the proper notice. 

The Treaty does not apply to any other liens or encumbrances, including but not limited to:

• Where prior owner's policy was in excess of $500,000;
• Where the open lien may exceed the prior policy limit;
• Any lien of record against the current owner;
• Riparian claims;
• Missing interests;
• Description errors;
• Survey matters;
• Lack of access;
• Missed easements or restrictions
• Violations of restrictions;
• Defects in Master Deeds;
• Adverse possession;
• Defective bankruptcy or foreclosure proceedings;
• Violations of the Automatic Stay Order in Bankruptcy or any other court order;
• Association dues;
• Recorded contracts of sale;
• Pending judicial proceedings;
• Competency/Capacity;
• Defectively formed corporation or other legal entities;
• Open property taxes and assessments;
• Farmland roll back taxes;
• Insufficiencies of Powers of Attorney;
• "Self dealings" (conveyances by fiduciaries to themselves);
• Escrow compliance issues; and
• Any and all other title defects and encumbrances

As to all matters not covered, the prior procedures are to be followed.  When in doubt, call the Stewart State Office. 

So long as the item to be indemnified is covered under the Treaty, no further documentation is required in your file other than a complete copy of current owner's title policy. 

The Indemnification Treaty will be available for review on our web site [www.stgnewjersey.com].  If you have any questions regarding the new procedure or what is covered, please do not hesitate to contact the State Office.