Commercial title insurance is perhaps the most common topic we’ve discussed on this blog, and with great reason. We believe that it’s essential for commercial property owners and investors to safeguard their investment with an insurance policy. Working with a title company can help prevent a number of issues that can arise when acquiring new commercial property, but it can’t account for every potential issue. That’s where commercial title insurance comes in.
An owner’s commercial title insurance policy can protect against a multitude of potential issues with a property, but it does not guarantee protection for any and all problems associated with a building or property. However, if you’re smart about how you approach your purchase, you can mitigate the risk associated with some of the aspects that commercial title insurance doesn’t cover. Below, we share some tips for protecting yourself from potential issues that may not be covered by your title insurance policy.
Managing Gaps In Title Insurance Coverage
Let’s take a quick look at some issues that may not be covered by your title insurance policy, and some of the steps you can take to ensure you work to protect yourself from these risks.
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Structural Issues - Title insurance protects you against ownership claims and certain boundary issues, but it doesn’t really provide coverage for structural issues like a leaky roof or a cracked foundation. You’ll want to find out about any of these potential structural issues by hiring a building inspector prior to or during the due diligence phase to ensure you completely understand the physical condition of the property you are interested in acquiring.
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Land Use Or Zoning Violations - If you find out after your purchase that the land isn’t zoned for your intended purpose, you’re not going to be able to seek recourse through your title insurance policy. Fortunately, if you’re considering purchasing commercial title insurance, you’re likely working with a title service company who will investigate the property and ensure you understand the current land use and zoning laws associated with the property. If you’re not working with a title service team like Commercial Partners, now is the time to connect with one.
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Hazardous Land Contamination - If it turns out the property’s ground is contaminated and polluted, you may have to address these issues out of pocket, as it’s unlikely this will be covered by a standard commercial title insurance policy. Similar to land use and zoning codes, you’ll want to have your title insurance company conduct some environmental assessments on the property prior to closing so that any contamination issues can be sorted out before you officially become the new owner.
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Newly Created Issues - Commercial title insurance protects you against issues that first arose prior to your acquisition of the property, but new issues you create are unlikely to be covered by your policy. For example, if it turns out that a previously installed fence was actually placed on a neighbor’s property, you may have recourse through a title insurance claim, but if you mistakenly installed a fence in the wrong location, you’re out of luck. Boundary surveys can ensure any new work you’re completing is done on your property.
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Area-Specific Violations - Finally, a title insurance policy will not protect you in the event you take action on a property that is outlawed by specific laws or policies governing that area. A common example is if you install a fence that is not allowed by the Homeowner’s Association on your property. If you are forced to remove the structure because it violates a previously agreed upon contract, you won’t be able to succeed with a commercial title claim.
To ensure you are protected as best as possible ahead of your next commercial purchase, connect with a team of professionals who have your best interest at heart. Give the team at Commercial Partners a call today at (612) 337-2470.