We can’t talk about title insurance without talking about its importance in real estate commercial transactions. In my opinion, getting title insurance for commercial real estate is more important than buying title insurance for your own home. Why? One reason is that commercial real estate transactions often involve large amounts of money and more complicated titles.
Recently, title insurance for commercial real estate has received renewed attention, as more property buyers want to safeguard their investments. While a proper title search may bring up many title problems, an owner could face serious financial loss and even lose ownership of a piece of property due to undiscovered defects.
If you buy title insurance, you can rest assured knowing that the title insurance company will compensate you for any losses resulting from covered title defects, up to the amount of the policy. Considering the powerful benefits of title insurance, it’s no wonder that it has become one of the most essential steps in the process of legally acquiring a piece of commercial property.
Types of Commercial Title Insurance Coverage
For a one-time premium paid at the closing, title insurance for commercial real estate provides protection against loss potentially arising from:
- Unknown title defects, including title fraud, forged, unauthorized or improperly indexed deeds, lack of mental competence and any other defect that prevents you from having clear ownership of the property;
- Undisclosed by unrecorded liens like unpaid taxes, utilities, mortgages and work orders that were due and payable before the date of the policy;
- Encroachment issues such as boundary descriptions inconsistent with the area being used (e.g. part of your building is on a neighboring property);
- Erroneous or inadequate legal descriptions along with errors in public records and in official responses relating to title searches and inquiries;
- Other defects that make the title unmarketable and affect your ability to sell, get a mortgage or rent out the property.
As the owner of commercial real estate, it’s essential to know that property-specific exceptions may apply, according to the maters discovered in the title search process. Some exceptions included in standard title policies are, without being limited to:
- unfiled mechanic’s liens;
- rights of parties in possession of the property;
- easements and rights of way;
- previous violations of zoning, building and environmental regulations.
One way to address these exceptions is to extend your coverage. This can be done by adding the aforementioned exceptions along with certain defects ascertainable but undiscovered, such as adverse possession, incorrect surveys and off-record liens.
Another point worth mentioning is that title insurance for commercial real estate doesn’t provide compensation for issues unrelated to the property title (e.g. damages resulting from events like flooding or fire, normal wear and tear, theft, etc.). To get protection against such risks, you need commercial property insurance.
Just as with residential title insurance, there are two types of commercial title policies: lender’s policy and owner’s policy. Also, commercial title insurance provides protection for as long as you remain the owner of or hold interest in the property.
Since 2007, Guardian Title & Trust, Inc. has been proud to serve residential and commercial property owners and lenders against inherent title risks. As a leading title insurance provider in the United States, not only do we have dedicated resources to implement policies and procedures that ensure compliance with industry rules and regulations but we’re also committed to exceeding the guidelines for compliance and business practices set by the American Land Title Association. To find out more about what we can do for you, give us a call at (904) 992-1162 or fill out our online form.