Commercial real estate can be a wise and high-value investment, but it comes with numerous potential risks. Title insurance can help cover these risks by protecting property owners and lenders from financial losses due to title issues.
If you are considering getting a title insurance policy for your commercial real estate, it’s important to understand what it covers. This includes the following.
1. Encroachment issues
Title insurance can protect against encroachment issues, which occur when a neighbor’s structure, such as a fence or building, extends onto your property. These types of disputes can lead to costly legal battles and potential financial loss, but a title insurance policy can provide coverage to help resolve such conflicts.
2. Unrecorded liens
If your commercial real estate has an unrecorded lien, such as a mechanic’s lien or unpaid contractor fees, title insurance can offer protection. These liens may not appear in public records but could still affect your ownership rights or result in financial obligations. Title insurance can help cover expenses associated with settling or removing these liens, helping ensure that your property is free from hidden claims that could jeopardize your investment.
3. Inaccurate legal descriptions
Title insurance can also protect against errors in the legal descriptions of the property. Mistakes in public records or incomplete property descriptions can create confusion about boundaries or ownership rights. These inaccuracies may lead to disputes with neighboring property owners or issues with the transfer of ownership.
4. Unknown title defects
Title defects can adversely affect your ownership rights, such as claims from previous owners or unresolved legal issues. These defects may include undisclosed heirs, forged signatures or fraudulent claims on the property. Since some title issues may not be discovered through a standard title search, title insurance provides protection against these unknown defects, covering the costs of resolving disputes or clearing the title to better ensure your property ownership is secure.
Getting legal guidance can help you better understand your title insurance coverage and protect your commercial real estate investment.
