Understanding Title Insurance for Renewable Projects: The 36 Series
One of the most important documents in getting a renewable energy project financed is your title pro forma. It is essentially the real estate guide for financing parties. A significant part of that guide are the ALTA endorsements, which grant title insurance coverage for specified risks not otherwise covered under the main policy. Recently, one of the biggest title companies in the industry hinted they would standardize the “patent” endorsement to include the protections granted in the ALTA Series 36 endorsements, which previously had to be specifically requested and therefore could be denied. The “patent” endorsement insures against reservations found in U.S. patents (original grants of land from the U.S. government, though some states also have state patents), which are commonplace in the Western United States. To understand the benefits of this potential change it is important to understand the ALTA Series 36 endorsements and why are they the bread and butter of any renewable energy title policy endorsements package.
The ALTA Series 36 were created in response to the exponentially increasing demand for title coverage for “energy” projects. Prior to the adoption of the Series 36, developers would have to ask for standard commercial endorsements to be modified to account for the specific risks of a utility-scale renewable energy project.
Of particular importance in the Series 36 is the inclusion of the defined terms “Electricity Facility”, “Severable Improvement”, and “Constituent Parcel”.
- “Electricity Facility” is broadly defined to include current and/or future development of an electrical generating facility, based on provided “Plans”. When submitting those Plans to the title company it is important to have them as close to “final” as possible, 30-50% design is a good starting point though a higher percentage is preferable.
- “Severable Improvement” allows for damages to the “Electricity Facility” due to a title claim to include diminution in value to the entire project, not just the portion of the project being affected, integrated rather than piecemealed. This is important given the amount of land utility-scale renewable projects cover.
- “Constituent Parcel” essentially grants the same type of protections as “Severable Improvements” but covers the real property, including the same ability to integrate the entirety of the Electricity Facility when it comes to damages. The Series 36 contains endorsements coverage for fee, leasehold, and easement rights, so it is crucial that you are asking for the correct coverage for the underlying real property rights.
These defined terms are by no means the only positives in obtaining the proper Series 36 endorsements, which also include potential costs for decommissioning as part of damages, easements coverage (ALTA 36.6), and CC&R coverage (ALTA 36.4).
The discussed “patent” endorsement included the definitions above, which, given the ubiquity of patents (even a medium-sized solar project could have dozens of separate patents), is a positive move forward by the title companies in making the complicated task of completing the title pro forma that much easier.
If you have questions regarding the ALTA Series 36, the “patent” endorsement, or any of the other myriad of issues that arise when completing your project’s title pro forma, please contact us and we would be happy to assist.