AOL EXPLAINER

If you have attended an Executive Committee meeting, the NYSLTA annual convention or an ALTA event in the past few years, you will have heard reference to AOLs (Attorney Opinion Letters). In New York State, an AOL is an unregulated insurance product.

AOLs are currently being promoted to provide significant cost saving to consumers, especially low- and middle-income buyers. It appears that a coordinated disinformation campaign is underway as seen by recent articles in the Wall Street Journal, the New York Post, Business Insider and The Daily Mail. 

In addition to marketing activity, federal and multi-state lobbying to promote greater use of AOLs is actively seeking to overturn regulations that have protected consumers for more than 100 years.  In fact, title insurance was introduced to fix the deficiencies of attorney opinion letters.

The New York State Land Title Association is concerned about the spread of AOLs driven by incomplete and misleading information that threatens consumers and distorts the value produced by the title industry. First-time home buyers and people who are financially unsophisticated are especially vulnerable.

This email sets out the following objectives

• What is an AOL?
• Why do you care?
• Does an AOL indemnify the homeowner?
• What are the differences between an AOL and a lenders title insurance policy?
• What can title professionals do?

You will also find attachments that provide details about this unregulated alternative to title insurance.

What is an AOL?

An AOL is a legal opinion prepared by an attorney that provides their professional determination of the status of title to a property and, when delivered to a lender, the priority of the mortgage lien.

Why do you care?

If your business is selling title insurance, AOLs are a low-cost alternative to the lender’s policy. If you are an attorney representing a purchaser, your client will have no protection or indemnification for any issues in the chain of title, such as liens, unpaid taxes, unsatisfied mortgages, as well as issues such as adverse possession, recording errors and challenges to your ownership of title.

Does an AOL indemnify the homeowner?

No, it does not.

These products lack transparency and basic consumer protections provided by state insurance regulation, creating risk to buyers. Providers of attorney opinion letters have no statutory reserving requirements to protect against losses.

What are the differences between an AOL and a lenders title insurance policy?

An AOL does not include defense of challenges.  Sole recourse is legal claim against attorney for negligent misrepresentation or potential breach of contract, which may be time constrained by the three-year statute of limitations [CPLR 214(6)].

You can find a detailed list of the many things not covered by an AOLs in the attachments.  A partial list includes the following elements not covered by AOLs: fraud; forgery; duress; incapacity; impersonation; improper execution of documents; priority over mechanics liens; back-chain creditors’ rights.

What can title professionals do?

1. Familiarize yourself and your colleagues with complete product knowledge about this alternative to the policies that you provide. ALTA has a wealth of good information about AOLs.
2. Help educate the attorneys that you work about the complete details of AOLs
3. Stay attuned to the markets that you serve and contact RGT@NYSLTA.ORG about any marketing or promotional activity that presents AOLs as “better than title insurance” or as a product that will “save consumers money”.
4. Follow NYSLTA and ALTA alerts. Contact NYSLTA about enrolling in the Title Action Network (TAN).