Title insurance is insurance against the chance that recognition of the title of property being bought is challenged by another party at some later stage. Title insurance can be obtained when acquiring either commercial or residential property. Generally, because of the much higher financial transactions involved in acquiring commercial property, title insurance is always recommended when purchasing this type of property. Nevada is an attractive state to acquire property because of its generous tax provisions, so commercial title insurance is a sensible precaution against the possibility of fraudulent transactions, however rare these may be.
What can go wrong when acquiring commercial property?
Even when a title search is made, which is what usually happens before a property changes hands, there may be legal challenges made against the title. These may be because the seller was less than honest about their ownership of the property or that there were liens or other “encumbrances” that put limits on the ownership and right to transfer title which didn’t become obvious when a title search was first conducted. The challenges may be made at the time the property is being purchased or later on after the property has been acquired.
Types of commercial title insurance
Title insurance is of two main types: loan title insurance and owner’s title insurance. Loan title insurance protects the lender, if there is one, from losses if the title is challenged. Owner’s title insurance protects the new owner from potential losses.
Who is responsible for paying the cost of insurance?
It is generally the buyer who is financially liable for paying title insurance premiums. This is certainly the case with loan title insurance, and the cost of insurance may be absorbed into loan repayments. For all practical purposes, it is true even if owner’s title insurance is taken into consideration when negotiating a price. That is because even if the seller agrees to pay part or all of the policy cost, it is most likely that this will be added on to the purchase price anyway.
What title insurance covers
When protected by title insurance, if the worst comes to the worst and legal title is challenged, the insurance will pay for the legal costs of a fight over title. If the property is eventually awarded to the challenger, insurance will reimburse the buyer the cost of purchasing the property and the lender the cost of outstanding loans and interest incurred. Commercial title insurance may be designed to include other endorsements. In addition to title challenges it may also cover boundary mistakes, environmental issues and zoning errors which might only surface after purchase has taken place.
What happens before insurance is obtained
Before a commercial property is purchased, a suitable insurance company is approached to arrange title insurance. The company will institute a title search which is designed to test the claims of the seller with regard to title. If there are any liens, encumbrances or discrepancies detected then these will have to be sorted out before an insurance policy is finalized and purchase is completed. The insurance company will provide a “preliminary title report” which is given to both the buyer and seller to examine before purchase is finalized. The seller has the right to disagree or challenge the findings if there are discrepancies with what has been stated beforehand.
The role of a commercial real estate attorney
If there is a legal challenge made to the title or part of the title of a commercial property that you have bought, you will need to make a claim with the insurance company that provided your commercial title insurance. Generally, the insurance company will then appoint an attorney to examine the validity of the claim. The main aim will be to resolve the challenge as swiftly as possible.
At this stage, if you still have any problems with the challenger(s), or the insurer, you may wish to contact a commercial real estate attorney like Pintar Albiston in Las Vegas, Nevada. Your attorney will fight for your interests in any court case associated with the title challenge or negotiations with the insurance company. You can contact the Law Offices of Pintar Albiston at 702-685-5255.
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