Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
New York co-op apartment purchasers generally do not pay for co-op title insurance. Usually, it’s not a required closing cost. Besides, a co-op lien search already grants buyers $50,000 in coverage against any liens missed during the due diligence. So why do sometimes buyers ask their attorneys if title insurance is required for Coops in New york? Attorneys only recommend buyers to get title insurance for a coop purchase in the case of an estate sale or foreclosure.
Title insurance is required by lenders when buying a condo or a house with financing. It is extremely common even for all-cash deals. However, we do not see too often in co-op apartment transactions. Banks don’t require borrowers to utilize a mortgage to get a co-op leasehold insurance policy. However, real estate attorneys generally don’t push buyers to get them either. However, there are a few unique, risky cases where we recommend buyers to pay for co-op title insurance.
An estate sale can be messy. Having a clear title may not be as simple as a regular deal. For example, the trustee may not have identified all beneficiaries.
Another example: a brother has taken over the sale process but did not get written consent from his sister. The sale may go through without the permission of the sister, which is a significant risk.
For Coops, the seller must physically give the original stock certificate and proprietary lease to the managing agent. The latter will cancels them at closing and then re-issues a new stock and lease to the buyer. However, this can be an issue if a seller lost their stock and lease.
The managing agent sometimes asks the seller to cover the cost of co-op title insurance to protect the management company in case of any potential future disputes.
In this specific case, the seller will pay for the insurance covering the managing agent’s risk. In parallel, if the purchasers want to cover themselves, they will have to pay for the insurance.
This situation entails higher and more specific risks. This is because previous owners could complain that the co-op foreclosure process was improper. This increases the risk since the co-op foreclosure process is non-judicial. Co-ops do not need to go through a court process to foreclose.
The third situation where we recommend buyers to get co-op title insurance is if the buyer has an attorney from out of town. We saw closings where a seller’s attorney has no idea what a co-op is. This situation is not entirely surprising considering that co-ops are indeed a very NYC concept. In these situations, we recommend buyers to get a title insurance policy. This instance is the last example where we tell our clients: title insurance required for Coops!