Commercial real estate transactions require some unique and specific endorsements that are not usually required in the residential arena. One such endorsement is the "Fairway Endorsement." The Fairway Endorsement got its name from a specific court case. "Fairway Development Co. v Title Insurance Co. of Minn. 621 F. Supp. 120 (N.D. Ohio 1985). In this case two of the existing partners sold their interest in the partnership to a remaining partner and a new partner. The remaining partner and the new partner then entered into a new partnership agreement and retained the old partnership name. In this case the court held that a new partnership was created when the partnership interests were transferred. Therefore, the new partnership did not have an insurable interest under the existing policy and was not covered for the defect in title in the partnership's real property. This became known as the "Fairway Rule." Whether the Fairway Rule exists in N.Y. is a subject of debate among lawyers. However, to be absolutely safe, when a new person is acquiring, or "buying into" a partnership, and replacing a departing partner, you should consider purchasing a Fairway Endorsement. That way, the title company will not be able to deny coverage if the title owned by the prior partnership comes under attack. The company will not be able to say that coverage ended because the new entity does not have the same internal composition as the old partnership. This has particular application also to a Limited Liability Corp. (LLC). Under most state statutes, an LLC dissolves statutorily when only one member remains or if any member dies, withdraws, becomes insolvent, bankrupt or incompetent. In most states, however, the LLC may continue if the operating agreement specifically speaks to the continuation of the LLC upon the occurrence of any one of the foregoing events. Therefore, when purchasing title insurance, an LLC or partnership should consider the Fairway Endorsement to protect itself against any lapse of title insurance coverage resulting from a change in internal ownership which might result in the statutory dissolution of the original entity. In NYS, the cost of this coverage is now 10% of the cost of the fee policy. Title companies must review the partnership agreement in cases where the fee title is being taken in a partnership and the operating agreement in cases where title will be taken in an LLC. All entities do not qualify for this endorsement and the language of the endorsement is at times very specific to the transaction. However, when an LLC, LLP or partnership as an entire entity is converting to a different legal entity, then the 2006 new form title policy provides continuation of coverage for the new entity. This is true for successors by operation of law, dissolution, merger, consolidation, distribution or reorganization. Another endorsement which has considerable importance in the commercial market is the "Non-Imputation Endorsement." This endorsement insures that the title insurance company will not deny liability to the insured by reason of knowledge imputed to it through a new, incoming partner, shareholder, or member by operation of law. Liability can be denied due to "knowledge of the insured," or "an act of the insured." In other words, if you know about a title defect prior to purchasing a piece of real property, even if your title policy does not accept that defect, you still are not covered for that defect. This goes back to full disclosure. This is particularly important protection for a new person coming into a partnership or LLC and replacing a departing member. Any knowledge of the departing member could be imputed to the new, incoming member. When the new entity purchases title insurance covering its property, it should be certain to purchase the non-imputation endorsement so that the knowledge of the departing member is not imputed to the new member. Obtaining this endorsement would avoid any subsequent denial of coverage by the title company based on policy defenses for matters "created, suffered, assumed or agreed to" by the outgoing member and for matters known only to the outgoing member and not of public record. The title company will require a "Non-Imputation Affidavit" to be executed by the members of the current entity certifying to the company that to the best of their knowledge no matters exist that would affect title to the property. The cost of this endorsement currently in NYS is 20% of the cost of the fee policy. Nan Gill is the president of Gill Abstract, Goshen, N.Y. and New York, N.Y.