Co-op Buyers Should Consider Purchasing an Eagle 9 Title Policy
Since co-op buyers are not purchasing real estate, but rather shares in a corporation - accompanied by a proprietary lease that gives the buyer the right to live in the co-op, traditional title insurance would not cover the buyer's ownership interest in the shares. Consequently, the Title Rate Service Association (or Tirsa) created an endorsement to the standard title insurance policy that would cover co-ops. The Tirsa endorsement is known in the title industry as "leasehold title insurance." This endorsement insures the buyer's interest created by the proprietary lease.
Just as title insurance provides protection in the event that the title search conducted before closing failed to uncover a valid lien against the real property, the leasehold endorsement provides similar protection in the event the lien search failed to uncover liens against the seller of the co-op. However, the Tirsa endorsement (title insurance for co-ops) never really caught on with co-op buyers.
As an alternative to the Tirsa endorsement, the State Insurance Department, approved the Eagle 9 policy for sale by title companies to co-op buyers. The Eagle 9 policy - unlike the Tirsa policy, is not a real estate policy with an endorsement. Rather, it is a policy specifically designed to insure the buyer's interest in the co-op. The Eagle 9 policy insures the buyer for loss and legal expenses resulting from claims arising against previous owners of the co-op. Additionally, the Eagle 9 policy is significantly less expensive than the Tirsa policy.
Some instances where a co-op buyer should consider purchasing an Eagle 9 policy are as follows:
- Seller is in bankruptcy
- Buying from an estate or heirs of a deceased seller
- Buying a foreclosed co-op (REO)
- Federal tax lien filed against seller in another state (will not be found by a typical search in New
Considering the substantial investment involved in purchasing a co-op, the cost of the Eagle 9 policy, which is far less than the TIRSA endorsement, is a worthwhile outlay in order to protect your investment and give you peace of mind.