Title insurance is a type of insurance that protects the owner of a property against any financial loss that may result from defects or issues with the property’s title. In the case of a commercial property, this can include issues such as liens, encumbrances, or other legal disputes that may affect the property’s ownership or value. Here are some reasons why a commercial property owner may want to consider purchasing title insurance:
1. To Protect Against Financial Loss
If there are any issues with the property’s title, the owner may face a significant financial loss. For example, if a property lien was not discovered during the purchase process, the owner could be required to pay off the lien before being able to sell or transfer the property. Title insurance through a title insurance agency can help protect against financial loss caused by problematic titles.
2. Avoid Surprises
When purchasing a commercial property, the closing process can be complex and time consuming. While title insurance does add an additional step to the closing process, it’s necessary to ensure there are no surprises. A commercial property requires the same, if not more, due diligence than regular property to ensure, among other things, that the title is free and clear of any defects. Title insurance helps with immediate issues and covers those that can pop up down the line for yourself or the next buyer of the property.
3. Lender Requirements
If you are financing your commercial property purchase, your lender will likely require title insurance as a condition of the loan. The lender wants to ensure that the property’s title is free and clear of any defects that could negatively affect their interest in the property.
A note of caution here is that the lender’s title policy is not the same as a buyer’s title policy. The lender’s policy will only cover the title for the loan amount still owed. Once paid off, the lender’s policy is terminated and no longer provides coverage for your property.
4. Proper Title Coverage
To cover your property for its total value until the day you sell it, you will want your own title insurance policy. Regardless of whether you have a loan or are paying cash for the property, you will want a title policy that protects your full interests in the property for as long as you own it. Additionally, you will still be covered when you decide to sell it if any title issues come up on the land resale down the road.
5. Peace of Mind
As a commercial property owner, you’ve made a significant investment in your property, and it’s important to protect it. Title insurance can provide peace of mind, knowing that your investment is protected against any potential title-related issues. Also, there is something to be said for an insurance policy that you only pay for up front with a single payment. After that, the policy will protect you for as long as you own the property.
Title insurance is an important consideration for anyone purchasing a commercial property. It can protect against financial loss, avoid unexpected surprises, and provide peace of mind. At Cortes & Hay, our professional team has been helping commercial buyers with title insurance across New Jersey for over 50 years. Get in touch with us today to learn more about what title insurance can do for your New Jersey commercial property purchase.