Condemnation Insurance

In the U.S., states and the federal government have the right of eminent domain, allowing them to condemn property, transferring the title from private to public ownership. The most straightforward examples of condemnation involve land and buildings that governments may seize to make way for a project they believe will serve the public good. This may be a highway but it may also be a hotel expected to attract business and generate tax revenue.

In every case where eminent domain is exercised, the condemning authority must provide “just compensation” to the owner to offset the value of the property taken. If the property owner considers the amount inadequate, they can pursue the matter in court.

This calculation—and certainly the court process—is often a long and arduous one.

For Credit Tenant Lease lenders, the uncertainty of the amount and the timeline create excessive real estate risk into what is supposed to be a credit-based transaction. To mitigate the lender’s concerns, Condemnation Insurance is available.

Highlights of the policy:

Covers the entire term of the loan up to 30 years
Benefits the lender only (not the tenant)
Provides the lender the entire unamortized balance of the loan within 15 days of a condemnation claim being submitted
The insurer then takes the lender’s position as first mortgagee and all rights of recovery associated with that position
Lender is made whole without the hassle of litigating over the eminent domain process
Premium is paid up-front
Policy is non-cancelable once premium is paid