Title insurance may seem like a trivial additional expense, especially if you’ve done your own due diligence on a property’s past ownership. However, the research conducted by a title insurance company covers more than just who has previously held title to a property; it can also reveal problems with liens, property boundaries, zoning, easements, right-of-ways, or environmental regulations that could make a property unsaleable (as well as unmortgageable).

It can be easy to miss some of these minor details if you’re relying on yourself for your due diligence. For example, what if you are buying a property that is accessed by a single road that crosses other properties? Or what if your property doesn’t have the easement for a curb cut on the road that it is next to? A title insurance company will investigate to make sure that your property has the appropriate easements so that access is assured and the value of your property is maintained.

After conducting a title search and providing a report to the borrower, a title insurance company will offer policies that insure the property (though some policies may have property-specific exclusions depending on what was turned up in the title search, so make sure you read over your policy carefully). There are two types of title insurance:

• Lender’s policy (covers the lender’s investment whether that lender is private or institutional)
• Owner’s policy (covers the property owner, typically the borrower or a company owned by the borrower)

As a borrower, you will need both. Typically, the cost of the lender’s policy is included in the borrower’s closing costs while the seller pays for the owner’s policy (and likely includes this cost in the purchase price). These policies only require a one-time payment and last as long as you are the owner of the property (or hold a controlling interest in it). Title insurance will typically pay out in the event of the following: title fraud; forged or unauthorized deeds; unrecorded liens from taxes, utilities, previous mortgages or work orders due before the policy starts; encroachment issues such as a building that crosses over the property line; and public record errors.

Titles for commercial properties can be more complicated than those for residential properties and involve significantly more money so it’s worth taking the time and money to obtain a title report and line up title insurance before you bite the bullet and buy the property. If you have any questions about securing title insurance for your commercial real estate deal, you can contact Montegra at 303-377-4181 for referrals and suggestions.