The biggest difference between residential and commercial title insurance is that commercial title insurance needs to be extra certain that the land purchased is able to be used for commercial purposes. Even if you buy a piece of property in the perfect location, it may not be zoned for that specific use. And because zoning laws change over time, just because land was used for farming, manufacturing or retail 50 years ago does not mean it is currently zoned for this use, and that is where commercial title insurance comes in.
Just like residential policies, commercial title insurance is a one time fee you can opt-in to pay at the time of your closing. And similar to residential title insurance, there are two types of commercial title insurance policies:
- Lender’s commercial title insurance policies are requested by your lender if you take a loan to buy the property for commercial purposes. If your lender wants the policy, you likely don’t have a say and they’ll add the cost into the fees.
- Owner’s commercial title insurance is a policy you can purchase as the land owner, and it helps protect you once you rightfully own the land if you took a loan, or immediately if you paid for the property in full.
Some title insurance companies will allow you to purchase after closing, but that is situational. When you buy a commercial title insurance policy, the title company will perform a title search where they look at all of the details regarding the land to make sure it is clear to close and in many cases they’ll determine what the property is zoned for.
The title search will not protect you from unforeseen issues like environmental hazards, but it will be your best chance at making sure the property is being sold legally from the seller to you as the buyer. If for some reason there was a clerical error or an heir to the land was not found, your commercial title policy may cover you, and the same goes for a zoning law that was missed during the research and discovery process.
But each policy is different so it is important to read your policy and ask the insurance company the right questions.
Examples of questions to ask a commercial title insurance company can include:
- Will your policy cover me if the property is not zoned for my intended usage?
- How am I protected if an unknown heir says they own the property and the seller didn’t have the right to sell it to me?
- Where and how do I file a claim if something happens?
- May I do it online, or do I have to call someone?
- Do you look for environmental protections like wetlands or historic buildings and will you let me know if that will impact the way I want to use the land?
- Am I required to buy a commercial title insurance policy?
- Why should I buy one if it isn’t required?
- Can you give me a recent example of when a commercial title insurance policy helped someone like me?
- Does the policy I’m buying protect me from encroachment whether it is new construction or the previous owner’s structures?
If the Title Agent is able to answer these questions, and without hesitation, then you likely have someone knowledgeable. A good commercial title insurance agent will walk you through coverage including talking points about property surveys, mineral rights, liens that are discovered and zoning laws for the area. Most of this happens after they have done a title search, none of it is meant to scare you. Instead it is to keep you informed about your risks with buying the land, and then you can make the choice if you want to protect your purchase or not.
Commercial title insurance is similar to residential policies. The big thing to keep in mind are the zoning and usage rights as these change more frequently than if land can be used to live on, or if the property is cleared for mix use. If you have questions or are interested in a commercial title insurance policy, email us at info@atgtitle.com or call us at (703) 934-2100 and one of our title agents will be ready to answer your questions and see how we can assist you with your purchase.
