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Basic Manual of Title Insurance, Section IV (continued)

Title Manual Main Index | Section IV Index

Includes Procedural Rules P-49 | P-50 | P-50.1 Effective 01/03/2014 | P-51 | P-52 | P-53 | P-54 | P-55 | P-56 | P-57 Effective 01/03/2014 | P-58 Effective 01/03/2014 | P-59 | P-60 | P-61 | P-62 | P-63


P-49. ANNUAL AUDIT

  1. As provided in Article 9.39, Texas Insurance Code, every title insurance agent and direct operation shall have an annual audit prepared, and before the 91st day after the date of termination of its fiscal year, shall send by certified mail, postage prepaid, to the Texas Department of Insurance one copy of such audit report with a letter of transmittal, and each such agent, shall also send a copy of such letter of transmittal and audit report to every title insurance company which it represents.

  2. If a title insurance company fails to receive an audit report from any of its agents or direct operations before the 91st day after the date of the termination of the fiscal year of the agent or direct operation, the title insurance company shall report that omission to the department not later than the 30th day after the expiration of the 90-day period.


Title Manual Main Index | Section IV Index

P-50. Restrictions, Encroachments, Minerals Endorsement (T-19) and, Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1)

  1. Any insured matter covered in the Restrictions, Encroachments, Minerals Endorsement T-19 or T-19.1 may be insured only by the use of these endorsements, except that coverage regarding minerals may be insured by the use of the T-19.2 or T-19.3 endorsements as provided in P-50.1.

  2. A Company may issue its Restrictions, Encroachments, Minerals Endorsement (T-19) to a Loan Policy ( T-2), if its underwriting requirements are met. The Company shall delete any insuring provision if it does not consider that risk acceptable.

  3. A Company may issue its Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1) to an Owner Policy if its underwriting requirements are met. The Company shall delete any insuring provision if it does not consider that risk acceptable.


Title Manual Main Index | Section IV Index

P-50.1. Minerals and Surface Damage Endorsement ( Form T-19.2), and Minerals and Surface Damage Endorsement (Form T-19.3)

Any insured matter covered in the Minerals and Surface Damage Endorsement Form T-19.2 or Form T-19.3 may be insured only by the use of these endorsements, except that coverage regarding minerals may be insured by the use of the Form T-19 or Form T-19.1 endorsements as provided in P-50. When the policy includes an exclusion or an exception regarding minerals as provided in Procedural Rule P-5.1:

  1. As to real property of one acre or less improved or intended to be improved for one-to-four family residential use, the Company upon request by the insured and if it meets the Company's underwriting standards may issue its Minerals and Surface Damage Endorsement ( Form T-19.2) to an Owner 's or Loan Policy.

  2. As to real property improved or intended to be improved for office, industrial, retail, mixed use retail/residential, or multifamily purposes, the Company upon request by the insured and if it meets the Company's underwriting standards may issue its Minerals and Surface Damage Endorsement ( Form T-19.2) to an Owner 's or Loan Policy.

  3. As to other real property, the Company upon request by the insured and if it meets the Company's underwriting standards may issue its Minerals and Surface Damage Endorsement ( Form T-19.3) to an Owner 's or Loan Policy.

  4. As to an Owner 's or Loan Policy covering multiple parcels of real property that consist of a combination of real property described in paragraphs 1 or 2, and 3, the Company upon request by the insured and if it meets the Company's underwriting standards may issue for each parcel the applicable Minerals and Surface Damage Endorsement (Form T-19.2 or Form T-19.3) to the Owner 's or Loan Policy.

    Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section IV Index

P-51. Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R)

A Company may issue a Texas Short Form Residential Mortgagee Policy of Title Insurance ( T-2R) on property that is Residential Real Property if that policy is requested by the proposed insured and the Company's requirements are met. The Company shall not issue a Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R) unless it receives a survey of the kind described in Sub-Section a. of Procedural Rule P-2, or, if the transaction qualifies under other Sub-Sections of Procedural Rule P-2, a survey and qualifying affidavit described in the other applicable Sub-Section(s) of Procedural Rule P-2.


Title Manual Main Index | Section IV Index

P-52. Delivery of Pro Forma Policies and Promulgated Forms

  1. For purposes of this rule, a "pro forma policy" is an Owner or Mortgagee Policy prepared prior to payment for, issuance and delivery of the policy, with completed Schedules A and B, showing the proposed insured, the amount of insurance, the exceptions that are proposed to be placed in the final policy to be issued, and the name of the title insurance company and title insurance agent.

  2. A Company may not prepare and deliver to a proposed insured for review a proforma policy unless (a) the land is not residential real property and the proposed amount of insurance is $500,000 or more, and (b) each page of the completed Schedules A and B conspicuously states "This is a Pro Forma Policy furnished to or on behalf of the party proposed to be insured for discussion only. It does not reflect the present status of title and is not a commitment to insure the estate or interest as shown herein, nor does it evidence the willingness of the Company to provide any coverage shown herein. Any such commitment must be an express written undertaking issued on the appropriate forms of the Company."

  3. A Company may provide a proposed insured with a copy of any promulgated title insurance form, or a foreign language translation of such form. Any translation must conform to the following conditions: (a) the translation must not be misleading, (b) an English copy of the promulgated form also must be furnished, and (c) the translation must include the following conspicuous provision at the top of the first page in both English and the language into which the form has been translated: "This translation of (name of promulgated form) is furnished to you in order to assist you in understanding its terms. This translation is not an official form promulgated by the Texas Department of Insurance. It is not a report or opinion of title, an agreement to insure, or a representation of the insurance you may receive. If this translation conflicts with the form promulgated by the Texas Department of Insurance, the promulgated form will control in all respects."


Title Manual Main Index | Section IV Index

P-53. Rebates and Discounts Prohibited

  1. For the purposes of this rule the following terms have the following meanings.

    1. "Authorized Person" means a person doing the business of title insurance under the authority of the Texas Title Insurance Act of the Insurance Code.

    2. "Producer" means a real estate broker, real estate agent, lender, mortgage company, mortgage broker, builder, developer, attorney, or architect who is not an Affiliate of an Authorized Person. A Trade Association is not a Producer; however, Paragraphs 2 and 3 of this rule apply to a Trade Association.

    3. "Affiliate" means:

      1. an officer, director, agent or employee of an Authorized Person or a Producer;

      2. a member of the immediate family of an officer, director, agent, or employee of an Authorized Person or a Producer;

      3. a Person who owns a Producer or Authorized Person;

      4. a Person who is owned by a Producer or Authorized Person; or

      5. a Person who is under common ownership with a Producer or Authorized Person.

    4. "Business Expense" means a cost to operate or promote a business, including but not limited to costs of furnishings, postage, office supplies, advertising, electronic media, computer hardware, computer software, telephones, telephone charges, printing, copiers, fax machines, office equipment, vehicles, staff, employee compensation, and rent. An expense that a Producer is, in accordance with generally acceptable accounting principles, permitted to deduct for tax purposes is presumed to be a Business Expense. Without limiting this definition, the following constitute the payment of Business Expenses of a Producer by an Authorized Person, subject to the provisions of paragraph 3 herein:

      1. jointly, with a Producer, advertising real property not owned by the Authorized Person for sale or lease;

      2. contributing to a Producer or paying any part of the Producer's costs of any of the following:

      1. for sale or for lease signs;

      2. advertisements, in any media or form, that promote any one property not owned by the Authorized Person for sale or lease;
      3. boxes or similar items in which to store advertising media;

      4. hosting an open house;

      5. prizes, food, beverages, gifts, decorations, entertainment or professional services given at open houses; or

      6. parties or receptions which promote a Producer or the Producer's properties or activities of the Producer.

    5. "Trade Association" means a membership organization of persons engaging in similar or related lines of commerce, organized to promote and improve business conditions, and not engaged in a business for profit.

    6. "Market rate" means the price at which a seller, under no obligation or duress to sell, is willing to accept and a buyer, under no obligation or duress to buy, is willing to pay in an Arms-length transaction. The market rate is determined by comparing the rights or items purchased or sold to similar rights or items that have been recently purchased by others or sold to others, including others not in the title insurance business.

    7. "Arms-length transaction" means a business transaction between two unrelated and unaffiliated parties or a business transaction conducted between affiliated parties as if the parties were unrelated or unaffiliated.

  2. Except as provided by this rule, an Authorized Person, directly or through an Affiliate, may not:

    1. pay, contribute, share in the cost of or finance any part of the Business Expenses of a Producer;

    2. pay, contribute, share in the cost of or finance any part of the expenses of an event or activity of a Trade Association that exists for the primary benefit of Producers and in which a majority of members are Producers; or

    3. solicit or engage in a title insurance transaction(s) involving land located in more than one state which includes land located in Texas if:

      1. the policy premium charged or solicited to be charged by the Authorized Person or Affiliate for any title insurance policy issued in the transaction(s) covering the land described in the policy outside the state of Texas violates the law of that other jurisdiction where the land is located; or

      2. the policy premium for the land in the other jurisdiction is so discounted or reduced from the normal and customary charge as to constitute a thing of value in this state.

  3. Notwithstanding Paragraph 2, an Authorized Person or its Affiliates may:

    1. join a Trade Association and voluntarily participate in a Trade Association's activities provided that the level of such participation does not exceed normal participation (not more than two hours per business week) of a volunteer member of a Trade Association and is not activity that would ordinarily be performed by paid staff of a Trade Association;

    2. purchase advertising promoting the title insurance company or the title insurance agent at market rates from any person in any publication, event, or media;

    3. deliver to a party in the transaction or the party's representative legal documents or funds which are directly or indirectly related to a real estate transaction closed by the Authorized Person; and

    4. engage in legal promotional and educational activities that are not conditioned on the referral of title insurance business.

  4. Authorized Persons shall maintain auditable records documenting compliance with this rule.

  5. In addition to any other sanction or penalty which the Commissioner may impose by law, after notice and opportunity for hearing, any person (including a Producer or Authorized Person) found to have violated this Rule is subject to a civil penalty of not more than $10,000 for each act of violation and for each day of violation, unless a greater penalty is specified by the Insurance Code or another insurance law of Texas. The Escrow Officer, Title Insurance Agent or Direct Operation license or the certificate of authority of any person found in violation of this Rule may be suspended or revoked, after notice and opportunity for hearing.


Title Manual Main Index | Section IV Index

P-54. ACCESS ENDORSEMENT (T-23)

A Company may issue its Access Endorsement ( T-23) on or after the date Rate Rule R-30 is effective to a Loan Policy ( T-2) or Owner's Policy ( T-1) on land which contains improvements and which is not residential real property, if its underwriting requirements are met and if it is paid the premium, if any, prescribed in Rate Rule R-30. The Company may add any exception to the endorsement that it considers, in its sole discretion, to be appropriate. The Company shall delete any insuring provision or portion thereof if it does not consider that risk acceptable. Any insured matter covered in the Access Endorsement (T-23) may be insured only by the use of this endorsement.


Title Manual Main Index | Section IV Index

P-55. NON-IMPUTATION ENDORSEMENT (T-24, T-24.1)

A Company may issue its Non-Imputation Endorsement ( T-24) or its Non-Imputation Endorsement (Mezzanine Financing) ( T-24.1) to a concurrently issued Owner's Policy ( T-1) on land which is not residential real property, if its underwriting requirements are met and if it is paid the premium, if any, prescribed in Rate Rule R-31. The Company may add any exception to the endorsement that it considers, in its sole discretion, to be appropriate. Any matter covered in the Non-Imputation Endorsement (T-24) or the Non-Imputation Endorsement (Mezzanine Financing) (T-24.1) may be insured only by the use of the applicable Non-Imputation Endorsement. A Company may not issue its Non-Imputation Endorsement (T-24) or its Non-Imputation Endorsement (Mezzanine Financing) (T-24.1) on residential real property.


Title Manual Main Index | Section IV Index

P-56. Contiguity Endorsement (T-25, T-25.1)

  1. A Company may issue its Contiguity Endorsement ( T-25 or T-25.1) to a concurrently issued Loan Policy ( T-2) or Owner's Policy ( T-1) on land which is not residential real property:

    1. If title to each tract described in the Contiguity Endorsement (T-25) is insured by the policy; and

    2. if the Company receives a survey acceptable to it; and

    3. if its underwriting requirements are met and it is paid the premium prescribed in Rate Rule R-32.

  2. The Company may add any exception to the endorsement that it considers, in its sole discretion, to be appropriate.

  3. Any matter covered in the Contiguity Endorsement (T-25) may be insured only by the use of this endorsement.

  4. If the insured non-residential land is composed of four or more parcels, or if the insured non-residential land is composed of irregularly shaped parcels, a Company may, in its discretion, issue the Contiguity Endorsement (T-25.1).


Title Manual Main Index | Section IV Index

P-57. ADDITIONAL INSURED ENDORSEMENT (Form T-26)

  1. Living Trust, Acquisition of Interest under Existing Agreement, Family Partnership or Family Corporation

    A Company may issue its Additional Insured Endorsement (Form T-26) to an Owner 's Policy of Title Insurance (Form T-1 or Form T-1R) by naming a person as an additional insured in the endorsement, if :

    1. its underwriting requirements are met,
    2. it is paid the premium, if any, prescribed in Rate Rule R-33, and
    3. the additional insured is :

      (a) the trustee or successor trustee of a Living Trust to whom the insured transfers the title after Policy Date, and/or the beneficiaries of the Living Trust, or

      (b) any partner, member or stockholder that acquires the interests of the other owners of the insured in accordance with the terms and provisions of a written agreement in effect at Date of Policy, or

      (c) a family partnership or family corporation solely composed of or owned by members of the insured's family and the insured.

    Any matter covered in the Additional Insured Endorsement (Form T-26) may be insured only by the use of this endorsement.
  2. Limited Liability Company

    A Company may add to the Additional Insured Endorsement (Form T-26) to an Owner's Policy of Title Insurance (Form T-1), when:

    1. its underwriting requirements are met, and
    2. it is paid the premium, if any, prescribed in Rate Rule R-33,

      the following language when requested by a Limited Liability Company that is the insured in the policy to which the endorsement is to be added, when:

      (i) there will be a transfer(s) of all or any part of the Limited Liability Company members' interests in the insured to any transferee(s), or

      (ii) the withdrawal(s) of one or more of the members from the Limited Liability Company, or

      (iii) the addition(s) of one or more persons or entities as members of the Limited Liability Company.

    The Company may acknowledge that the Company will not deny liability under the policy or raise a defense to any claims because such actions may cause a dissolution or termination of the Limited Liability Company.

    Language that may be added:

    [ ] Optional Coverage for Limited Liability Companies: [if box is checked]

    The Company hereby agrees that, notwithstanding anything to the contrary contained in this policy, in the event of loss or damage insured under this policy, the Company shall not deny liability under this policy or raise a defense to any claim made under this policy solely on the ground that, after the Date of Policy, a dissolution or termination of the Limited Liability Company has occurred or a new Limited Liability Company or other entity has been created by reason of any one or more:

    1. transfer(s) of all or any part of the Limited Liability Company members' interests in the insured to any transferee(s),

    2. withdrawal(s) of one or more of the members from the Limited Liability Company, or

    3. addition(s) of one or more persons or entities as members of the Limited Liability Company;
provided that the insured Limited Liability Company remains the record title holder and no new Limited Liability Company is explicitly formed.

The Company reserves all of its rights and defenses under this policy which the Company would have had against the named insured or its constituent members before or after any withdrawal, transfer or substitution.

Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section IV Index

P-58. Report on Directly Issued Policy

Each Title Insurance Company shall compile and submit to the Department annually, as part of the Texas Title Insurance Statistical Plan, a report of all directly issued [sometimes commonly referred to as Home Office Issued] policies of title insurance which shall include at least the following information:

  1. Location of insured land identified by standard three (3) digit county code as set forth in Table 7 of the Texas Title Insurance Statistical Plan;

  2. Gross Premium (for policy and all endorsements) and limits of liability on each policy issued;

  3. Date of Policy;

  4. Transaction identification number (guaranty file number or other identifier);

  5. Requesting Agent's TDI Agency/Direct Operation Company ID Number as shown on the Agent/Direct Operation license;

  6. Cooperating Agent's TDI Agency/Direct Operation Company ID Number as shown on the Agent/Direct Operation license; and,

  7. Directly Issued Policy "DIP" Status Code (Best Evidence = 0; Multicounty = 1 ; Out of County=2).

The report shall be sorted by county (primary sort) and by the requesting agent's TDI Agency/Direct Operation Company ID Number as shown on the Agent/Direct Operation license (secondary sort) within each county. The report may contain additional information, totals, or subtotals as deemed necessary by the Title Insurance Company or as required by the Department.

Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section IV Index

P-59. RECONCILIATION OF REFERENCES TO PROVISIONS OF THE INSURANCE CODE OF 1951 TO PROVISIONS OF THE TEXAS INSURANCE CODE AS RECODIFIED

A reference in any provision of this Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas ("Basic Manual"), including an amendment, revision or readoption of a provision of this Basic Manual, to an Article, Chapter or Title, or part of an Article, Chapter or Title, of the Insurance Code of 1951, or any amendment, revision or readoption of a part of that Code, is considered to include a reference to the part of the Texas Insurance Code, as recodified, which revises that Article, Chapter or Title or part of the Article, Chapter or Title of the Insurance Code of 1951 pursuant to Section 323.007, Texas Government Code as part of the State's continuing statutory revision program.


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P-60. ASSIGNMENT OF RENTS/LEASES ENDORSEMENT (T-27)

A Company may issue its Assignment of Rents/Leases Endorsement ( T-27) on or after the date Rate Rule R-34 is effective to a contemporaneously issued Mortgagee Policy ( T-2), if its underwriting requirements are met and it is paid the premium, if any, prescribed in Rate Rule R-34. The Company shall delete any insuring provision if it does not consider that risk acceptable. Any insured matter covered in the Assignment of Rents/Leases Endorsement (T-27) may be insured only by the use of this Assignment of Rents/Leases Endorsement (T-27). The Assignment of Rents/Leases Endorsement (T-27) may not be issued on residential real property.


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P-61. TIMELY PROVISION OF TITLE POLICIES

Title policies shall be provided and furnished to the insured within ninety (90) days after receipt by the title company of proof of compliance with the company's Schedule C requirements.


Title Manual Main Index | Section IV Index

P-62. LICENSING AND LOCATION OF TITLE AGENTS AND DIRECT OPERATIONS

In accordance with Procedural Rule P-1, title agents and direct operations may not maintain an office in a county in which they are not licensed.


Title Manual Main Index | Section IV Index

P-63. Policy Issued to Qualified Intermediary under IRS Code 1031

When a qualified intermediary under Internal Revenue Code §1031 takes title on behalf of the ultimate owner (the person making the exchange and receiving the tax benefit), Schedule A of the policy should be prepared as follows:

Owner Policy of Title Insurance

  1. Name of Insured:
    (Alternative 1) John Doe
    (Alternative 2) Jane Smith, (insert "trustee", "on behalf of", "qualified intermediary" or other designation of capacity as approved by the underwriter, based on the wording of the applicable deed), and John Doe, as their interests may appear.

  2. Title to the estate or interest in the land is insured as vested in: Jane Smith, (insert exact designation of capacity as shown in deed).

Texas Residential Owner Policy of Title Insurance

Name of Insured: Jane Smith, (insert "trustee", "on behalf of", "qualified intermediary" or other designation of capacity as approved by the underwriter, based on the wording of the applicable deed), and John Doe, as their interests may appear.

An issued policy should not be altered or endorsed after the deed from the intermediary to the ultimate owner, to change the insured to reflect the name of the ultimate owner.


Continue to P-64. Subordinate Liens and Leases - Pursuant to Rule P-11.b.(8)

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Last updated: 11/03/2015

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