Title insurance plays a significant role when it comes to any real estate transaction. Every purchaser needs to know that they are dealing with the seller of record and that the title to the property is clear of any defects in the public record.
The only way to have peace of mind through the transaction is by performing due diligence and investing in a title insurance policy for protection.
This article will present you with an overview of title insurance and the role that it plays in commercial transactions.
What is Title Insurance?
Title insurance protects against financial losses that may result from claims jeopardizing your ownership rights to the property. Even after a title search and the transfer of property, it is possible to have someone challenge the transaction.
In the event this happens, title insurance can reimburse against losses that may be incurred, reducing the risks involved in the commercial investment
Title insurance protects the purchaser and the lender against any title defects, such as:
- Deeds by minors or persons of unsound mind
- Mistakes in recording legal documents
- Fraud
- Forged deeds, releases, or wills
- Liens for unpaid taxes
- Deeds executed under invalid or expired power of attorney
- Undisclosed or missing heirs, including spouses
- Incorrect legal descriptions
- Erroneous indexing
- Unsatisfied liens not shown on the title
Having title insurance gives you the confidence in knowing that you will now own the commercial property subject only to easements and other matters disclosed in the land records, as well as those stated in your policy. Your lender will mitigate any risk knowing that the loan provided to you is secured as a valid first deed of trust on the property without any title issues.
How is Title Insurance Used in Commercial Transactions?
Commercial real estate transactions can be rather complicated, often involving multiple parties, large sums of money, conveyancing, and zoning. Taking every step possible to ensure that it is safe without any title defects is always the goal. However, because we know that things can appear seemingly out of nowhere, having title insurance is always a good idea —- especially for your commercial property.
Here’s a look at how title insurance can reduce the complications in commercial transactions.
A Clean Title
A title search is done well before the conclusion of the sale. Any undisclosed interests or title issues can be addressed so that the title is clear before any money changes hands.
This will not only give you confidence throughout the settlement process but can also be beneficial should any legal action arise out of a future claim against the property. The careful due diligence followed as part of the title clearance process can be helpful when a legal defense is needed.
A Seamless Transaction
A seamless transaction often follows a clean title. All of the searching and digging to clear the title of any defects allows all parties to proceed with ease. There is no question that anything is amiss and there should be no delays or hiccups on the way to closing.
Financial Protection
Most commercial real estate investments are quite large which means that the investors and the lender are taking risks when agreeing to move forward with the purchase. Although the initial title search is in-depth, title defects can manifest long after the settlement day.
Title insurance provides financial protection and mitigates risk.
Less Stress
Commercial real estate transactions often follow months or sometimes years of planning, involving many different parties that have been working toward a common goal. Developers, architects, contractors, investors, and more may have plans they are just waiting to fulfill as the right property purchase comes along.
It all comes down to whether or not the transaction makes it successfully through settlement.
Once a title insurance policy has been put in place for the property, everyone can move forward with a greater sense of peace.
Trust Us With Your Commercial Transactions
At Loudoun Commercial Title LLC, we have an unmatched level of knowledge and experience in handling commercial real estate transactions of all sizes.
Contact us today to learn more — or to get started.