Underwriting Q&A: What are the requirements of issuing the Texas Residential Owner Policy (Form T-1R)?

Q: What are the requirements of issuing the Texas Residential Owner Policy (Form T-1R)?

A:  Requirements to issue the

• The property must be residential (defined in Procedural Rule P-1.u);
• The residence must be for 1-to-4 families; and
• the proposed insured MUST be a “natural person” (required in Procedural Rule P-38)

the Texas Residential Owner Policy (Form T-1R) may NOT be issued to an entity (ex: corporation, partnership, LLC, joint venture)

Applicable rules found in the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas  are Procedural Rules P-38 and P-1.u, (respectively from above), which appear here for ease in reference:

P-38. Residential Owner Policy of Title Insurance – One-to-Four Family Residences

A Company shall only issue a Residential Owner Policy of Title Insurance-One-to-Four Family Residences (Form T-1R) on property that is Residential Real Property, and the insured is a natural person(s) at the date the policy is issued. In the application of this rule it is permissible to issue a Residential Owner Policy of Title Insurance (Form T-1R) prior to the construction of improvements provided that the Residential Owner Policy of Title Insurance (Form T-1R) is issued to a natural person, in accordance with P-8.a. In all other cases, the Company shall issue the Owner Policy (Form T-1) when issuing a policy to an owner.          (See definition in Rule P-1.u)

P-1. Definitions.

1. Residential real property –
   1. Any real property which has improvements thereon designed principally for the occupancy of from one to four families (including individual units of condominiums and cooperatives) and either (a) situated in a platted subdivision of record, or (b) consisting of five acres or less, or
   2. Any real property which has improvements thereon designed principally for the occupancy of from one to four families and consisting of more than five acres but not more than 200 acres used for agricultural production by individual insureds (according to the information known by the Company at the time of issuance of the policy of title insurance).

Memory Tip: A “natural person” is a human being.  A corporation, partnership, LLC, or other entity is not a “natural person” thus the Form T-1R Residential Owner Policy may not be issued to an entity even if the property has residential improvements designed for 1-to-4 families.

The Owner’s Policy of Title Insurance (Form T-1) is the only OTP that can be issued to an entity.