Between 2017 and 2022, the Title Insurance industry has grown by 6.6 percent every year. This is because more people are investing in commercial real estate. Yet, older properties tend to have several owners and may have more issues.

Given all this activity, determining who truly owns a property may be difficult. This is why commercial title insurance plays a significant role in real estate. With that in mind, keep reading for more on title insurance for commercial property.

WHAT IS COMMERCIAL TITLE INSURANCE?

This type of insurance protects a buyer from problems with the chain of title to a real estate. It is necessary to reassure a buyer that the title to a property is free of flaws.

The title confers the right to have a real estate asset. While a deed is the instrument that transfers the title of a property between a buyer and a seller. Not all deeds provide a title free of liens or encumbrances that might impair a claim to ownership.

WHY IS TITLE INSURANCE CRITICAL FOR COMMERCIAL INVESTORS?

Assume an investor buys a commercial property. Everything seems alright, but one year later, another person has paper claiming to be the owner. In this case, the buyer's title insurance covers the legal fees in defending this claim.

If the third party prevails, the title insurance policy may also cover the buying price. Without title insurance, the buyer risks losing the property and receiving no compensation. Additionally, the buyer may need to pay tens of thousands of dollars in legal expenses.

PROCESS OF GETTING A TITLE INSURANCE

A firm will conduct a title search before granting an insurance policy. This is a comprehensive examination of public records and legal paperwork relating to:

• All title transfers of the property
• Liens
• Encumbrances

This is not a simple process if the property is ancient or has had several transactions. After completing the title search, the insurance company will produce a title report. This outlines any possible chain of ownership and legal claim to the property.

For instance, it may show that a contractor filed a lien on the property many years ago. This happened when the vendor's account went unpaid. These title concerns may be resolved before closing or can be known as a defect.

WHAT IS COVERED BY A TITLE INSURANCE POLICY?

It’s best to research the commercial title insurance cost to ensure it fits in your budget. Once you have that sorted out, here is what your policy covers:

• Defects in the title, which include fraud, forgery, or improper deeds
• Unrecorded liens for unpaid property taxes, utility bills, and contractor invoices
• Concerns about encroachments
• Incorrect legalese

If the property owner runs into any of these problems, they can submit a claim on the insurance. This will help cover the legal fees connected with addressing the issue.

COMMERCIAL REAL ESTATE TITLE: WANT TO LEARN MORE?

Investing in a commercial property can be very lucrative. Yet, you want to ensure you have the proper title to prove you are the owner. The last thing you want is to lose your investments.

If you are looking for more information, we can help. Contact us today to get started on getting commercial title insurance.