What Protections Does Title Insurance Give Commercial Real Estate Investors?

 Posted on December 00, 0000 in Commercial Lease Agreements

Title insurance is part of virtually every commercial and residential real estate transaction. Usually, it is the lender that insists on the formalities of title insurance. However, title insurance can give commercial real estate investors a great of protection, even if nothing ever goes wrong.

What Title Insurance Does 

Before a title insurance policy is issued, the title company does a thorough examination of the title history of a property. This will include not just any sales, but also any liens on the property. Title insurance protects policyholders from any defects that are not discovered during the title search. If a defect later arises, title insurance covers the cost of defending claims from rival titleholders and pays out damages should those rivals prevail in court.

The issuance of title insurance is a key part of the due diligence process. Commercial real estate investors are able to make sure the property is as the seller claims. Any problems with zoning, title, or liens are usually discovered during the title search. If any issues arise, investors can either pull out of a deal without risking further resources or work with the seller to find satisfactory solutions.

Different Types of Title Insurance Policies 

There are two primary types of title insurance policies. The first is the loan policy or lender's policy. The bank, or lender for the sale of the property is issued a title insurance policy as part of the closing process. This ensures that the lender will be paid back the loan, even if a defect in the title should later come up. Owners of the property only benefit from the lender's policy to the extent that claims against the property are defended.

The second type of title insurance policy is called an owner's policy. It works much the same way as the lender's policy, except the beneficiary of the policy, is an owner of the property. If issued at the time of sale, an owner's policy is usually an inexpensive addition to the transaction. Real estate investors would be wise to make sure an owner's policy is held on a commercial property. If something does go wrong with the title, the investor can know that the policy will compensate them directly or that they have a way to get their money back from the holder of the owner's policy.

If you have questions about title insurance, due diligence, or any other commercial real estate issues, you need to contact an experienced and knowledgeable Naperville commercial real estate attorney right away. Call Lindell & Tessitore, P.C. at 630-778-3818 today to schedule an appointment.

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