Closing deals in the current environment — or even getting them to progress — has been challenging for the past few weeks. Municipalities are struggling to keep up with volume, and online notarization is present in some states but not others. Western Real Estate Business recently spoke with John Lotardo, senior vice president and director of operations for Commonwealth National Title Insurance Co. based in Arizona.
Lotardo, also known as the Titleman, spoke to WREB about how commercial real estate transactions are closing and moving forward during the COVID-19 pandemic.
WREB: What is your “new normal”? How are you managing business day-to-day?
Lotardo: My company has mandated that the majority of our teams work remotely. The majority of my time is remote as well. Being the operations director, I have to manage my employees, including our title and settlement employees, wherever they may be. As a national commercial office based in Arizona, we have always been forward-thinking with technology. Our transition to a mix of folks in the office together with a remote workforce, while it has been challenging at times as for many other businesses, it wasn’t as difficult as it could have been. We had the proper hardware, software and IT support in place to make the transition efficiently and relatively quickly.
WREB: How has COVID-19 affected your business?
Lotardo: There was typical business activity toward the end of March, right as the pandemic began to take hold. As we entered April, the stay-at-home orders began to have an increasing impact on our industry, as other areas of the business are also seeing. With title insurance, there is a logistics factor with getting documents executed, funding loans and recording documents. And all of these are being worked out in differing ways throughout the country right now.
WREB: Some states have not made property tax deferrals. California’s deadline, for instance, was, April 10. Does this issue of taxes and tax deferrals have an impact on title?
Lotardo: We are there to handle the closings and coordinate settlement. Part of the settlement process is paying taxes when they are typically due. If the parties are not going to pay taxes when they are due, the issues needs to be addressed in some fashion, typically shown in the form as an exception on the title. The real issue is that property taxes are being handled differently on a state-by-state basis. Presently, in Maricopa County, Arizona, the assessor had made a request for the governor to make an extension for property taxes due to the circumstances, but there has been no word yet on that. From a title and escrow perspective, if the taxes are due and there has been no extension, you have to pay for them when it comes to closing; or the parties need to agree how those are being handled.
WREB: Generally speaking, why should a commercial property owner be concerned about title insurance?
Lotardo: Title insurance is one of the greatest value products available. It is what protects the insured — the property owner or lender — against a host of potential defects of a property. As a contract for indemnity, a title insurance policy covers a host of items, such as ownership, liens on the property and the description of the property, among other things. There is a lot of upfront legwork that is done to provide a policy of title insurance.
WREB: Is there any reason to pay attention to title insurance in this time?
Lotardo: One of the issues we are working through right now is the ability to record in jurisdictions around the country. Some counties are still not electronically recording; as in they do not accept documents electronically for recording. If those counties are closed to the public or are not receiving mail, then you cannot record documents immediately. Fortunately, many counties have the ability to electronically record. The inability to record in some places does bring up the question of delaying the transaction. That brings into play gap coverage. Each of the underwriters who are issuing title insurance are handling that on a case-by-case basis in each jurisdiction. They are figuring out quickly where there are issues with recording documents. The American Land Title Insurance Association has a great website where they are keeping tabs on which county recorders are open and which are closed, and which ones can record documents electronically. That changes every week. Having that conversation now with your title partner helps those in the midst of a transaction plan for a closing.
WREB: What are the most common claims with title insurance?
Lotardo: For many years, I worked as claims counsel for a title insurer. During the Great Recession, the largest amount of claims came from the errors in the legal description of the property. A lender would be attempting to foreclose and the legal description of the property would be considered erroneous or have missing information. Fortunately for us, the number of claims to the number of policies is kept to a minimum because of the pre-issuance work that is done by the title examiner.
WREB: We are hearing that online notarization is an issue that is holding up transactions in certain places. What is the status of that?
Lotardo: It is evolving almost daily from a local perspective as well as nationally. Right now, there is a pending national bill called the Secure Notarization Act that was introduced a few weeks back. This is attempting to create a national implementation of remote online notarization of documents. As of yet, it has not advanced. It is there to seek a national solution to establish minimum standards for the online notarization of documents to occur. I’ve seen more activity at the local level by governors who have implemented immediate legislation for their states establishing remote online notarization.
— Interview conducted by Randy Shearin