Title insurance has been protecting purchasers from a loss in the event of a claim against real property for over a century. It protects property buyers against defects or problems with ownership of real estate when there is a transfer of real property. If a title dispute arises during or after a sale, the title insurance company may be responsible for paying specified damages including legal fees, depending on the policy.
While title insurance is typically secured and purchased by the purchaser on all real estate transactions, cooperative ownership is very different: In a co-op purchase, a purchaser buys shares of stock in a corporation and is allowed to reside in the apartment pursuant to a proprietary lease. In a condominium or house, ownership consist of a deed. Co-op title insurance has only been available for co-op’s for the last 15 years. In 2005, title insurance companies began to offer title insurance to co-op shareholders. The co-op title policy, known by many as an Eagle 9 or a Co-op Plus policy, is not a real estate policy but a policy specifically designed to protect a purchaser’s interest in a co-op.
Normally when a purchaser buys a co-op, his or her counsel will obtain a document called a “lien search.” A lien search is a very limited search which primarily discloses if there are liens filed against the seller. A lien is a debt or amount owed to someone. In most cases the lien search will disclose all open liens against the seller. However, sometimes, the lien search may miss an open lien. In this case co-op title insurance is worthy of the extra protection and cost to a purchaser. If a lien is overlooked, the lien may follow the ownership of the property and the purchaser may be obligated to satisfy the lien when it is time for him or her to sell costing the purchaser thousands of dollars.
The co-op policy is particularly helpful if the seller is in bankruptcy or if the purchaser is buying the co-op from an estate or heirs of a deceased seller. These policies are also very helpful if the purchaser is buying the apartment as part of a foreclosure action or if there are federal tax liens filed against the seller. The co-op policy will also protect against fraud, unpaid maintenance charges, and forgery.
Every co-op purchaser should consider purchasing a co-op title policy.