Deleting the Standard Exceptions

What does it mean to delete the Standard Exceptions???   And what do I do with the NM 35 Form?

As a buyer, you will receive a New Mexico Form 35, which is a regulatory form produced by the State Department of Insurance. It can be a fairly confusing to complete, and its not unusual for a buyer to call their real estate broker and title company to ask for assistance in completing the form. Let’s see if we can break down the form a little, and make the whole process easier.

Generally speaking, the form asks you if you want the “upgrades” to your title insurance policy, covering matters not insured in a standard title policy.

First of all, title insurance relies on the public record for most of its information (predominantly, County Clerk records). But some risks to title are not a part of the public record. The four top areas are: (a) parties in possession – most times, tenants’ leases are not recorded; (b) easements not shown in the public records – easements can be created by use and other circumstances, (c) survey matters – an encroachment of the neighbor’s shed or boundary disputes are not typically shown on the plats recorded with the County; and (d) mechanics’ lien issues – a lien resulting from unpaid work done on the property.

So the State allows title insurers to “except” to these matters – that is, not cover them. Yet these coverage’s are often desired by buyers and their lenders. Thus the State allows title insurers to establish additional underwriting requirements, and charge an additional fee, for these coverage’s.

Where the NM Form 35 form gets tricky is in the manner in which they ask the questions… do you want the exceptions deleted?” In other words, do you want the affirmative coverage? It’s a double-negative to delete an exception, but that’s the way the form is written by the State. So if you want the affirmative coverage, you have to delete the exception. Crazy, but simple, right?

What is a buyer to do? First, check your purchase agreement. In many cases here in Santa Fe, the market demands these coverages, and they have become part of typical contract writing. And customarily (although everything is negotiable), the seller pays for these additional coverages. So buyers should first check to see if the purchase agreement obligates the seller to pay for these exceptions to be removed, in which case the buyer has an easier time of completing the form. If the Purchase Agreement does not call for the seller to pay to delete the exceptions, the buyer needs to make his or her own analysis as to the need for these coverages. Ask your title representative how you can secure the best available protection, and complete this form to maximize your protection.

The author is not an attorney and this writing should NOT be construed as legal advice