Title insurance is the closing product that protects commercial real estate buyers and lenders against defects in the chain of title that existed before the transaction but were not discovered during the title search. Unlike most insurance, it is a one-time premium paid at closing and covers the insured party for as long as they have an interest in the property. The American Land Title Association publishes the standard policy forms used across the United States, with the 2021 revisions being the current version in most jurisdictions. Two distinct policies are issued on a typical CRE transaction: an owner's policy insuring the buyer, and a lender's policy insuring the mortgagee up to the loan amount.
The transaction begins with a title commitment — a preliminary report showing what the title company is prepared to insure, subject to specified conditions and exceptions. Schedule A identifies the insured, the amount of insurance, the estate or interest being insured, and the vesting of title. Schedule B-I lists the requirements that must be satisfied before closing, such as payoffs, recordings, and signatures. Schedule B-II lists the exceptions from coverage that will appear on the final policy — these are the defects, liens, encumbrances, or other matters the policy will not insure over. A careful review of Schedule B-II is one of the most important legal tasks of the closing attorney.
Standard exceptions cover matters that would be disclosed by a current survey (boundary disputes, encroachments), rights of parties in possession not of record, unrecorded mechanics' liens, and water rights. Endorsements are the mechanism by which specific standard exceptions can be removed or additional coverage added. Common CRE endorsements include the survey endorsement (removing survey exceptions if an acceptable survey is provided), the comprehensive endorsement (covering a cluster of common concerns), zoning endorsements, access endorsements, and contiguity endorsements for properties spanning multiple parcels. Endorsements are priced separately and can meaningfully expand coverage beyond the base policy.
For lenders, the lender's policy is non-negotiable on almost any mortgage loan. It insures the validity and priority of the mortgage lien and typically includes extended coverage for matters like zoning, access, and survey — often through endorsements that the owner's policy may not carry. The policy amount decreases as the loan principal is paid down, eventually terminating at payoff. Gap coverage is a critical detail: it protects the insured against any intervening liens or defects recorded between the title examination date and the actual recording of the insured's interest, a window that can be several days in some jurisdictions. Commercial closings routinely require gap indemnities from the seller to backstop the title company's gap risk.
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