When you are investing in any type of real estate, you always want to ensure you are buying just the property — and not acquiring a bunch of unwanted title issues.
Because commercial real estate transactions can be a bit complex, having commercial title insurance is an extra precaution to protect your investment going forward.
Risks of Investing in Business Real Estate
You take a few risks when buying commercial property, increasing the chances that something can go wrong. As you go through the title process, a title search can disclose title issues that need to be addressed, including:
- Involuntary Liens such as judgments and tax liens
- Outstanding Deeds of Trust
- Incomplete legal descriptions
- Unknown owners or heirs
- Pending litigation
Unlike residential investments, commercial real estate often involves many transactions between companies or multiple parties. And this in itself can make things more complicated.
Anything that is not caught prior to closing can potentially appear down the road and put your property rights in jeopardy. For instance, any judgments or liens that may have belonged to a previous owner now become your responsibility. So, should any of these issues arise once you have taken ownership, they are your problem to deal with.
As a business owner or investor, the last thing you want is for your finances to take a major hit.
Commercial Title Insurance is Essential
Since these risks exist in business real estate, having a thorough title search performed by a trusted title company is crucial. Note that if you are financing through a lender, there is almost always a guarantee that they will require a title insurance policy – further emphasizing the need for this search.
What is the importance of commercial title insurance in business real estate? This one-time purchase at closing can save you from having to defend yourself in title actions, especially when they turn into long, drawn-out legal battles.
There are two types of commercial title insurance, including a lender’s policy and an owner’s policy.
An owner’s policy protects the owner or owners of the property from any title issues that may have been missed during the title search. In the event that a claim to title is filed, the title insurance will protect the owners from financial loss. This policy will remain in effect for as long as you own the property.
Keep in mind that title insurance does have limitations and will not protect against everything. To make sure the property is free from encroachments, for example, it is always a good idea to get a survey done as part of your title due diligence. Also, confirming that your land use is zoned properly is not protected under the title insurance, but is something you will want to work with your legal team on regarding your business.
A lender’s title policy offers protection for the lender. After all, the lender is taking a risk in providing the loan to make the purchase and they want a guarantee that they will get their investment back.
There are many necessary steps that investors take when purchasing real estate and buying commercial title insurance is one of them.
Learn More About Commercial Title Insurance
While commercial title insurance is very important, working closely with the title experts at Loudoun Commercial Title. LLC will help you to get the most protection possible for your new piece of real estate.
Contact us today at (703) 737-3800.