An Explanation of North Carolina Commercial Title Insurance

A shot of three commercial buildings.

Commercial real estate is a complex investment choice with a lot of different aspects to consider. Unlike residential real estate, it typically comes at a much higher price tag and a confusing negotiation process. As such, it’s important to protect your investment as much as possible—to the full amount of money its worth—with a thorough and effective commercial title insurance policy.

Commercial title insurance in North Carolina is straightforward: it protects the investment for the investor for the full amount of money paid for the property. As a commercial real estate investor, you need commercial title insurance.

Here’s why.

What Does Commercial Title Insurance Do?

Commercial title insurance protects the investor in the event that any issues arise with the property’s title. When you take on an investment, there’s always an inherent level of risk. For real estate, it is always possible that an issue may come up with the property’s title.

The type of issue generally varies, but it may include negligence, a clerical error, or fraud. When this happens, without a title insurance policy protecting them, the property investor may end up losing the property they paid for without any financial reimbursement. In addition, they would be responsible for covering any court or legal fees necessary to address the issue in a court of law.

That’s why commercial title insurance is so important: it protects you financially as you make a huge property investment.

What Kinds of Property Require Title Insurance?

While title insurance is used in all types of real estate transactions, it is especially valuable for commercial real estate as the purchase price is usually much higher and the purchase agreement more complex.

Commercial real estate agreements are extremely nuanced, so it’s important to ensure that your commercial title insurance policy covers you completely in the event that anything happens.

Who Pays for Title Insurance?

In North Carolina there are two types of commercial title insurance: the lender’s policy and the owner’s policy. A lender’s policy protects the lender from financial repercussions in the event that something happens with the title. An owner’s policy does the same, but for the owner or investor of the property.

If the buyer is using a lender, they are responsible for buying both the lender’s policy and the owner’s policy. The lender’s policy will stay in effect for the amount of time that the loan is being paid back. The owner’s policy lasts for as long as the person owns the property or has a financial stake in it.

It’s important to note that the lender’s policy only protects the lender. We highly recommend the buyer also take out an owner’s policy to protect their own financial situation.

What Does the Title Insurance Process Look Like?

Every title insurance policy varies slightly depending on the type of commercial property being purchased, as well as its title history. The first step to obtaining title insurance is contacting a reputable North Carolina title insurance agency. The agency will then conduct a title search to investigate the history of the property and its different owners.

They will closely examine all of the recorded title transfers for the property and look into any liens, encumbrances, and easements taken out against the property. This search is very thorough, and the agency will take every possible measure to ensure the title is clean.

Once the title search is complete, the agency will provide a report with its findings to the buyer as a preliminary report, who then has the chance to review it with the seller and their lender before purchasing the property.

What Does the Preliminary Report Include?

The preliminary report is one of the most important parts of the title insurance process. This report contains all of the findings from the title search, including any liens or other encumbrances that have been taken out against the property. It clearly defines the state of the property’s current title in relation to the seller.

Once the report has been issued, the seller has the opportunity to review it and make any challenges. For example, if the report reveals that the seller does not have a clear title to the property, the seller may then launch their own investigation to uncover any additional details.

Additionally, the buyer must carefully review the report to ensure there are no outstanding issues with the title. This is very important because the title insurance policy will be based on the findings of this report.

How Do You Obtain Title Insurance in North Carolina?

The first step to taking out a title insurance policy is finding a reputable agency with experience helping real estate investors and buyers in North Carolina. Here at Tryon Title, we have over 30 years of combined experience assisting buyers with their real estate transactions.

Due to the nature of commercial real estate, choosing the right agency to help you is of the utmost importance. Our team is committed to offering the best possible experience, respecting attorney and paralegal deadlines by providing fast and accurate service. Give us a call today to get started.