Do Buyers Need Co-op Title Insurance in New York City?

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
NYC Buyer Closing Cost Calculator: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/

Do Buyers Need Co-op Title Insurance in New York City?

We’ll demystify the following topic in this video. My name is Chris at Hauseit. Hauseit is the largest Assisted FSBO and buyer agent commission rebate company in NYC, established 2014.

New York co-op apartment buyers typically do not pay for co-op title insurance, primarily because it’s not a required closing cost and also because a co-op lien search already affords them $50,000 in coverage against any missed liens.

However, buyers’ attorneys typically do recommend getting co-op title insurance in the case of an estate sale or if an apartment has previously been through foreclosure.

What is co-op title insurance?

Title insurance protects buyers from any undiscovered liens incurred by previous owners as well as any potential claims against their ownership interest, meaning someone who claims that they had rightful ownership in the past and never sold it (i.e. deed fraud) or agreed to sell it (i.e. estate sale where one of the heirs wasn’t consulted on a sale that happened).

Essentially, title insurance protects buyers from events that happened in the past, before they purchased the apartment, whereas a home insurance policy protects the buyer from events that happen in the future.

Technically, co-op title insurance is called co-op leasehold insurance because buyers won’t have title to real property like they would with a condo or house.

Instead of a deed for real property for a condo, co-op apartment buyers receive a proprietary lease and a stock certificate.

The stock certificate states the number of co-op shares they own in the cooperative corporation that typically owns the entire building, and the proprietary lease lets them occupy their specific apartment.

As a result, co-op apartment owners are technically tenants, but also shareholders, of the co-op corporation that is the landlord of the entire apartment building.

What does co-op title insurance cover?

Co-op title insurance protects buyers from any liens on the property that were missed by the co-op lien search, and also provides protection against loss and legal expenses from any claims on the buyer’s ownership interest (i.e. it guarantees that the title is transferred “free and clear”).

Furthermore, co-op leasehold insurance insures that the cooperative corporation was duly formed and actually holds title to the building and/or land.

Co-op title insurance also protects against any missed liens imposed by the co-op corporation itself, such as delinquent monthly maintenance fees or co-op special assessment charges.

Perhaps most importantly, co-op title insurance covers the cost of legal defense, for which there is no limit to the amount spent.

This means that while a standard title insurance policy will only cover the purchase price of a property in the event of a claim against rightful ownership, there is no corresponding limit on how much a title insurance company may spend to defend the policy holder.

As a result, title insurance companies on average spend about as much money on legal defense costs as they do on actual payments on claims.

How much is coop title insurance?

A co-op leasehold insurance policy typically costs around 0.30% of the purchase price, which consists of a sliding as well as a fixed fee component.

This compares favorably to title insurance for a condo or house which we estimate to be between 0.40% to 0.50% of the purchase price per our buyer closing cost calculator for NYC.

There are lower cost options for buyers who are more concerned about undiscovered liens than claims against their ownership interest.
For example, co-op buyers can instead opt for a UCC insurance policy which includes the co-op lien search fee and provides coverage up to the purchase price for under 0.10% of the purchase price.

The co-op lien search provides some protection

A buyer’s attorney typically orders a co-op lien search to look for any open liens against the seller, the seller’s stock and lease and the cooperative corporation itself, regardless of whether the buyer intends to purchase co-op title insurance or not.

The title company that does the coop lien search will usually do a good job of discovering all open liens, however, if there is an open lien that is missed, the co-op lien search fee includes coverage up to $50,000.

However, anything above that amount wouldn’t be covered, which is one reason why co-op title insurance can come in handy.

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
NYC Buyer Closing Cost Calculator: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
.
.
Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
_
#hauseit #hauseitnyc