Insurance is something that you hope you never need, but you’ll be so happy you have in the event that you need to cash in on the policy. Without the right insurance, a surprise surgery or an undiscovered lien can have massive financial implications for you or your business, and could jeopardize decades of hard work.
In our line of work, we specialize in commercial title insurance that protects the policyholder against financial loss resulting from issues related to the property’s title. You may think that you’re purchasing a clean title from a trusted seller, but don’t take that chance without doing your homework. Connect with a team like Commercial Partners to get the title clearance and title insurance you need to know your financial interests are protected during a commercial acquisition.
In commercial real estate transactions, there are two main types of insurance - lender’s insurance and owner’s insurance. We’re going to explain both of these policies and explain if you need both for your commercial purchase.
Lender’s And Owner’s Insurance
Title insurance helps protect you against major issues that could arise if you don’t work with a reputable title search company during the process of purchasing your commercial property. Let’s explore a couple of examples to explain situations that could potentially come up if you’re not careful during your commercial acquisition:
-
Scenario 1 - You find what you believe to be a hidden gem of a commercial property in an area you forecast for substantial growth and opportunity in the coming years. You complete the purchase and maintain the property for six months only to get a letter in the mail saying there is a lien against the property. It was never discovered during closing, and now a financial institution is demanding that you settle the lien before they take you to court. Title insurance can protect your financial interests, regardless of whether or not the financial institution has a valid claim to the property or a remaining balance.
-
Scenario 2 - You purchase land that you plan to develop, and you begin construction when someone shows up asking why you’re building on their property. If unnamed heirs were not discovered during a title search, or another person knowingly or unknowingly sold you property that they actually had no legal right to sell, you may be out your purchase price and then some. Title insurance can reimburse you if the person or entity you bought the property from had no legal right to do so.
Now let’s dive into the two types of title insurance you’ll want to acquire if you’re looking to make a commercial purchase. The team at Commercial Partners can get you set up with both Lender’s and Owner’s insurance:
-
Lender’s Insurance - As the name implies, lender’s insurance protects an institution that is providing capital in the form of a loan in order to facilitate the purchase of the commercial property. Although it protects the bank’s interest, it is typically the responsibility of the borrower to secure this policy. In the event that an enforceable lien is later found on the property, their financial interests in the transaction are protected.
-
Owner’s Insurance - The second policy you’ll want to have is owner’s insurance, and it protects your financial interests as the new owner of the commercial property. Similar to the above, if a lien or similar title issue is discovered weeks, months or even years after your property acquisition, you can take solace in knowing your financial interests are protected. Owner’s title insurance is not required, but with so much money at stake, it is highly recommended.
At Commercial Partners, we’re here to assist with all aspects of your commercial real estate purchase, and would be more than happy to help insure your interests. For more information, or for help with your commercial purchase, reach out to our team today at (612) 337-2470.