Do You Really Need Commercial Title Insurance in North Carolina?

A man signing a piece of paper on a wooden desk.

As with any other investment, purchasing commercial real estate carries a certain number of risks. If you’re a highly experienced investor, you probably already know what to look out for when planning a new commercial property purchase. If you’re a new investor, you might need to do extra research before purchasing a new commercial property. Whether you’re a longtime real estate investor or just getting your feet wet, one surefire way to invest smartly is by ensuring you are properly protected.

Here are some questions you should be asking your real estate agent as you begin planning your next commercial property purchase.

How Would an Issue Arise with My Property’s Title?

A good title will make or break your commercial property. When you purchase a piece of commercial real estate, you’re likely investing a huge sum of money into a worthwhile financial investment. But what if it’s not worthwhile? 

Commercial title insurance will protect you in the event that there’s a problem with your property’s title. Those issues might include negligence, faulty recordings or paperwork, or even fraud.

How Does Title Insurance Work?

Unlike many other types of insurance, where you pay both a premium and a monthly fee, for title insurance you pay one lump sum premium based on the purchase price of your property. This policy protects you in case any issues arise with your title.

Oftentimes, when issues arise with your title, they are often extremely costly—and at times impossible—to resolve. That’s why it’s so important to get title insurance.

Here’s how it works: when you are beginning the transaction to purchase a piece of commercial real estate, you’ll work with your agent to obtain a title insurance policy from a local title insurance company. That company will work with a title agency to perform a title search. They will thoroughly investigate the history of the property’s title to ensure it is clean. If any issues arise with the title, it may signal that this is not a worthwhile investment. You can also work with the seller to resolve these issues before you buy.

How Do Real Estate Titles Differ From Other Types of Property?

A real estate title is much more complex than, say, the title for a car or a boat. The title to a real estate property is not determined by a single piece of paper. Real estate titles depend on an existing chain of different documents related to that title.

Finding out who owns a specific piece of property can be challenging, especially when it’s gone through many different owners. Taking out a title insurance policy includes researching its history, which lets you know if there are any issues you’d rather avoid with a particular property.

What Should I Keep in Mind While Shopping for Title Insurance?

When it comes to title insurance, it pays to do your research. While you certainly don’t need to hire an attorney to purchase title insurance, you should be aware that your agent and the title insurance company are not able to provide you with legal advice as you shop for a title insurance policy.

Typically, there are two kinds of title insurance: an owner’s policy and a lender’s policy. The owner’s policy protects the owner for the entire amount of time they have interest in the property. The lender’s policy protects the lender for the amount of time that the property is being paid off.

When it comes to taking out an owner’s title insurance policy, you should be sure that it includes the following:

  • Extended coverage
  • Taxes
  • Loss determination
  • Survey issues
  • Special/project use
  • Unusual loan documentation issues

For a full list, please contact us at Tryon Title Insurance to discuss your specific title insurance needs.

What Makes a Title Clean?

Generally, a real estate title is considered clean if it is free of fraudulent errors and does not have any existing liens or claims. Additionally, there should not be any confusion over ownership—as this can make purchasing the property very challenging.

Shopping around for commercial title insurance in North Carolina? Contact our team at Tryon Title a call. We have years of experience helping commercial real estate investors in North Carolina and we have everything you need for a successful commercial transaction.