As we’ve talked about many times on this blog, title insurance is incredibly important if you are considering acquiring new commercial property. Commercial title insurance protects your financial interests if a long lost heir claims that your original purchase wasn’t valid, or issues like an easement or boundary dispute comes to light while you own the property. Nobody wants an unexpected issue to draw their property purchase into question, which is why a small one-time insurance policy can give you the peace of mind you need knowing your financial interests are protected.
And while commercial title insurance provides you with plenty of assurances during your commercial acquisition and while you own the property, there are some things that it doesn’t cover, and you need to be aware of those as well. Below, we outline some of the things that are not covered by a standard commercial title insurance policy.
What’s Not Covered By Commercial Title Insurance?
You’ll want to be aware of some of the things that are not covered by your commercial title insurance policy, but at the same time, if you trust an experienced team like Commercial Partners to clear a prospective title and get you set up with the right policy, it’s unlikely that you’ll run into coverage issues. Here’s a look at some things that are unlikely to be covered by your commercial title insurance policy.
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Title Defects That Occur After Signing The Policy - You’re not protected against any new title defects that are created after you sign the policy. For example, if a lien is created by the new property owner, you would not be protected in the event that you fail to fulfill your obligations to that lien since it was created after signing your title policy.
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Building Code Violations Created After Signing The Policy - You are absolutely protected from being financially responsible for business code violations that are discovered during the acquisition phase or even after you’ve acquired the property so long as the violation was something that was present at the site at the time of your purchase. If you decide to build or expand on your property, and during this process code violations occur, your policy will not address those errors since you were responsible for their creation after the policy had been signed.
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Legal Non-Compliance - If you do something with your newly acquired property that goes against existing or agreed upon rules/laws/regulations, your policy won’t cover these costs. For example, if you buy some condominiums in an homeowner’s association and make improvements to your property that are in violation of the bylaws of your HOA agreement, your title insurance policy isn’t on the hook for the money you’ve spent on these upgrades. As always, make sure you and your title company clearly understand the specific laws and regulations associated with any potential commercial purchase that you are considering.
In other words, you’re protected for issues that were the result of someone else’s actions or oversight, but if you start making changes to your property that cause issues, you may be the one who has to manage the financial fallout. We work to ensure nothing like this ever happens to our clients, so if you want to make sure that your next commercial acquisition runs smoothly and your financial interests are protected, reach out to the team at Commercial Partners today at (612) 337-2470.