Understanding the process of getting commercial title insurance is critical to ensuring your deal goes smoothly and securely.
Let’s break down the steps involved and highlight the roles of the key players:
1. Application and Information Gathering:
- You (the buyer): You’ll initiate the process by contacting a commercial title company. Be prepared to provide comprehensive details about the property (including legal descriptions, surveys, and environmental reports), the purchase agreement, and any relevant loan information.
- Commercial Title Company: They understand the complexities of commercial transactions. They’ll conduct a meticulous title search, examining public records to verify ownership history, identify potential liens, easements, or zoning violations, and ensure the seller has the legal right to transfer the title.
2. Enhanced Due Diligence and Underwriting:
- Commercial Title Company: Their team will delve deeper than residential searches, often requiring additional documentation and collaborating with experts like surveyors and environmental consultants. This comprehensive due diligence helps uncover potential issues that could cloud the title.
- Legal Counsel (Highly Recommended): Given the higher stakes in commercial deals, consulting a real estate attorney specializing in commercial transactions is highly recommended. They can analyze the title report, identify potential risks, and advise on necessary curative actions.
3. Issuing the Commitment and Premium Calculation:
- Commercial Title Company: Based on the extensive search, they’ll issue a “title commitment,” a preliminary report outlining their findings. It details the type of ownership being conveyed, any exceptions (coverage limitations due to identified issues), and the estimated cost of the insurance policy due to the potentially broader coverage needed for commercial properties.
- You (the buyer) and Legal Counsel: You’ll carefully review the commitment with your legal counsel to understand any exceptions and determine if additional steps are needed to address them before proceeding.
4. Policy Issuance and Closing:
- Commercial Title Company: They’ll work with a title insurance company (which may or may not be the same entity) to finalize the policy. Once any exceptions are addressed and the premium is paid, the title insurance company will formally issue the commercial title insurance policy. This policy outlines the specific coverage terms and the insurer’s commitment to defend your ownership rights in case of future title challenges, which can be particularly complex in commercial settings.
- Closing Agent (usually affiliated with the commercial title company): They’ll manage the closing process, ensuring all parties fulfil their obligations. This includes the disbursement of funds, the signing of complex closing documents specific to commercial transactions, and the official transfer of ownership.
Wrapping Up
In short, obtaining commercial title insurance is a collaborative effort. The commercial title company plays a crucial role by conducting a comprehensive due diligence process and facilitating policy issuance.
Remember, commercial title insurance provides a safety net and is about understanding the process that empowers you to navigate a secure and prosperous commercial real estate deal. Pippin Title offers a wide range of commercial search services to help you.
