When you’re in the process of buying a commercial property, it’s welcomed news to find out from your title insurance company that their searches haven’t found any issues with the title of the property you’re considering buying. However, you may learn that title insurance is still being offered, and in fact may be required in order to finance your purchase. Why do you need this title insurance if the searches have come back clean?
Title Insurance After A Clear Title Search
If your title search has come back clear, you may think that you’ll forgo purchasing title insurance and take the risk that a long-lost relative isn’t going to come out of the woodwork claiming that they actually have a legitimate claim to your property. That’s a gamble you can take after a careful review of the facts with your title insurance company, but that still doesn’t change the fact that you may be required to purchase commercial title insurance.
As we’ve mentioned in previous blogs, there are two types of commercial title insurance - lender’s title insurance and buyer’s title insurance. Lender’s title insurance protects the interests of the financial institution providing the loan for your purchase, and buyer’s title insurance provides protections for the individual acquiring the land. Buyer’s title insurance is never required, but it’s something we recommend even if a title search comes up clean.
Despite a title search company’s best efforts, it’s possible that something slips past them that comes up later, or there are muddled records or inefficient documentation that can potentially cast doubt over the clarity of a property’s title. There’s also the possibility that a new survey of the land uncovers property line disputes that you may end up being on the hook for if not for title insurance. It is quite rare for an issue to eventually develop after a title search has been conducted, just like it’s rare for a natural disaster like a tornado or fire to affect your property, but the fact of the matter is that circumstances out of our control can cause unforeseen issues down the road, and in these instances it pays to have commercial title insurance.
Remember, a title insurance policy is a one-time fee that provides coverage as long as you own the property, and it stays with the property if the land is passed down to an heir after you’re gone. You’re not going to have to pay annual fees or worry about your spouse having to purchase another policy if you pass away because the property is covered through this one-time purchase.
To get back to a point we were making above, you may be legally required to purchase commercial title insurance for your property, even if a title search comes back clean. If you are getting a loan from a bank or financial institution, they may require that you purchase lender’s title insurance before they will grant you a loan. You don’t need to purchase a buyer’s title insurance policy if you don’t want to, but as part of their loan agreement, a one-time purchase of a lender’s title insurance policy may be required.
To learn more about commercial title insurance and title searches of commercial property, reach out to the team at Commercial Partners today at (612) 337-2470.