Buying commercial real estate is very different from buying a home. Whether you are purchasing an office building, retail property, warehouse, apartment property, development site, or investment property, the title and closing process can involve substantially more due diligence, documentation and coordination.
The title company you select can make a significant difference.
At Fidelity Land Title Agency of Cincinnati, Inc., we work with commercial buyers, lenders, attorneys and real estate professionals to identify title issues, coordinate closing requirements and help move commercial transactions from contract to closing.
Here are some of the questions commercial buyers should ask when selecting a title company.
1. Why does the choice of title company matter in a commercial real estate transaction?
A commercial title company does much more than conduct the closing.
The title company examines the public records affecting the property, identifies matters that may affect ownership or the buyer’s intended use of the property, coordinates the satisfaction of title requirements, works with the buyer’s lender and attorneys, handles escrow and closing funds, records the transaction documents and issues the applicable title insurance policies.
Commercial transactions can involve easements, restrictions, leases, access rights, development agreements, utility interests, prior mortgages, judgment liens and other matters that may require careful review before closing.
An experienced commercial title team understands that identifying an issue is only the beginning. The objective is to identify it early enough that the parties and their attorneys have time to determine how it should be addressed.
2. When should a commercial buyer involve the title company?
Ideally, as early as possible after the purchase contract is signed—and sometimes before it is signed.
Commercial purchase agreements commonly contain due-diligence periods and deadlines for reviewing title and survey matters.
Ordering title work promptly gives the buyer and its attorney more time to review exceptions, investigate potential problems and raise objections within the time permitted by the purchase agreement.
Waiting until financing is nearly complete can turn an otherwise manageable title issue into a closing delay.
3. What is a commercial title commitment?
A title commitment describes the conditions under which a title insurer is prepared to issue a title insurance policy.
For the commercial buyer and its attorney, it is also an important due-diligence document.
Among other things, the commitment identifies the proposed insured, the estate or interest being insured, requirements that must be satisfied before the policy can be issued, and exceptions that may remain excluded from coverage.
The exceptions are particularly important. They may disclose easements, restrictions, rights of way, leases, utility interests and other recorded matters affecting the property.
The question is not simply:
“Is the title clear?”
A sophisticated commercial buyer should also ask:
“What affects this property, and could any of those matters interfere with what I intend to do with it?”
4. What title problems commonly arise in Cincinnati commercial transactions?
Every property is different, but commercial title examinations can reveal issues such as:
- Existing mortgages or unreleased liens
- Judgment liens
- Tax liens or delinquent real estate taxes
- Easements and rights of way
- Access limitations
- Utility easements
- Use restrictions and restrictive covenants
- Existing leases or memoranda of lease
- Errors in prior legal descriptions
- Boundary or encroachment issues
- Ownership through corporations, LLCs, partnerships or trusts
- Questions concerning the authority of the person signing for an entity
- Prior documents that were improperly executed or recorded
Many of these issues can be addressed. The key is identifying them early and having an experienced team coordinate the steps necessary for closing.
5. Why are the legal description and survey so important?
In a commercial transaction, understanding exactly what real estate is being purchased is fundamental.
The title commitment describes the land being insured. A survey can provide additional information about the physical property, including boundaries, improvements, easements, encroachments and access.
The title commitment and survey should therefore be reviewed together when a survey is part of the transaction.
A discrepancy between the deed, title commitment, survey and purchase agreement should be investigated before the buyer acquires the property.
6. What is an ALTA/NSPS Land Title Survey?
An ALTA/NSPS Land Title Survey is a detailed survey prepared according to nationally recognized standards and is frequently used in commercial transactions.
Depending upon the scope of the survey, it can provide valuable information concerning boundaries, improvements, easements, access and other matters affecting the property.
Whether an ALTA/NSPS survey is appropriate depends upon the property, the transaction and the requirements of the buyer and lender.
The buyer should discuss survey requirements with its attorney, lender and surveyor early in the due-diligence process.
7. Does a commercial buyer need an owner’s title insurance policy if the lender is getting title insurance?
Yes, if the buyer wants its ownership interest insured.
A lender’s title insurance policy protects the lender’s insured interest. It does not substitute for an owner’s title insurance policy protecting the buyer.
For a buyer making a substantial commercial real estate investment, that distinction is important.
The owner’s policy insures the buyer subject to the policy’s terms, conditions, exclusions and exceptions. Depending upon the transaction, additional endorsements may also be available to address particular risks.
8. What are title insurance endorsements?
Endorsements modify or provide additional coverage under a title insurance policy.
Commercial transactions can present risks that do not arise—or do not arise as frequently—in ordinary residential purchases. Depending upon the property and underwriting requirements, endorsements may be available concerning matters such as access, zoning, contiguity, survey matters and other property-specific risks.
Not every endorsement is available or appropriate for every transaction.
A commercial title company should be able to work with the buyer, its attorney and lender to determine what coverage is being requested and whether the applicable underwriting requirements can be satisfied.
9. What if the commercial property is being purchased by an LLC?
Purchasing commercial property through a limited liability company is common.
The title company will need to confirm the exact legal name of the purchasing entity and may require organizational or authority documentation before closing.
Those details matter.
A difference between the purchaser identified in the contract, the borrower identified in the lender’s documents and the entity that will actually take title can create unnecessary complications immediately before closing.
If a new entity is being formed for the acquisition, tell the title company and lender early in the transaction.
10. How does the title company work with the buyer’s attorney?
In a sophisticated commercial transaction, the title company and buyer’s attorney have complementary roles.
The buyer’s attorney provides legal advice and represents the buyer’s interests. The title company performs the title, escrow and settlement functions associated with the transaction and issues title insurance in accordance with applicable underwriting requirements.
Good communication among the buyer, attorney, lender, broker, surveyor and title company is one of the most effective ways to prevent last-minute surprises.
Fidelity regularly works with law firms representing commercial buyers and lenders.
11. Can Fidelity coordinate with a commercial lender?
Yes.
Financed commercial acquisitions require coordination between the title company and lender concerning the lender’s title requirements, loan documents, closing instructions, funding and the issuance of the lender’s title insurance policy.
Commercial loans may also involve entity documentation and transaction-specific title requirements.
The earlier the title company receives the lender’s requirements, the more time there is to address them before the scheduled closing.
12. Can Fidelity handle escrow and closing funds?
Yes. Fidelity provides commercial title, escrow and closing services.
The title company coordinates the receipt and disbursement of funds in accordance with the transaction documents and closing instructions.
Because commercial transactions can involve substantial wire transfers, buyers should also pay particular attention to wire-security procedures. Wire fraud remains a serious risk in real estate transactions.
Never rely upon unexpected or changed wiring instructions without independently verifying them through a trusted and previously established method.
13. What happens between signing the purchase contract and closing?
Although every transaction is different, a commercial title and closing process commonly includes:
- Receipt and review of the purchase contract.
- Opening the title and escrow file.
- Examination of the public title records.
- Preparation and delivery of the title commitment.
- Review of title and survey matters by the appropriate parties.
- Resolution of title requirements and objections.
- Coordination with the buyer, seller, attorneys, lender, brokers and other professionals.
- Preparation and collection of closing documents.
- Preparation of the settlement statement or closing figures.
- Receipt and verification of closing funds.
- Execution of the closing documents.
- Funding and disbursement.
- Recording of the deed, mortgage and other applicable documents.Content optimization
- Issuance of the applicable title insurance policies after closing requirements have been satisfied.
A strong commercial title team manages these pieces as one coordinated transaction, rather than treating each task in isolation.
14. Can Fidelity handle a commercial transaction outside Hamilton County?
Yes.
Commercial real estate does not stop at county lines, and neither does Fidelity’s experience.
Fidelity Land Title Agency of Cincinnati provides title and closing services throughout the region and is familiar with the local procedures that can vary among counties and jurisdictions.
For Greater Cincinnati buyers, that can include transactions throughout Hamilton, Butler, Warren and Clermont Counties and the surrounding Tri-State region.
15. What should I look for when choosing a Cincinnati commercial title company?
Price is a consideration, but it should not be the only consideration.
For a commercial acquisition, buyers should consider:
Commercial experience. Does the company regularly handle commercial transactions?
Title expertise. Can the team recognize issues that warrant additional attention?
Responsiveness. Can you reach someone who understands your file?
Local knowledge. Does the company understand local recording, tax and closing practices?
Lender coordination. Can it efficiently work through a commercial lender’s title and closing requirements?
Attorney coordination. Is the company accustomed to working with outside counsel?
Problem solving. When a title issue appears, does the company simply report it, or does it help move the process toward a solution?
Security. Does the company use appropriate procedures for transmitting sensitive information and handling closing funds?
And perhaps most importantly:
Who is actually responsible for getting your transaction to the closing table?
Commercial real estate transactions rarely become easier as closing approaches. Experience, communication and early attention to detail matter.
Choosing a Commercial Title Company in Cincinnati
A commercial property acquisition represents a significant investment. Your title company should be more than the place where documents are signed.
It should be an experienced member of your transaction team.
Fidelity Land Title Agency of Cincinnati, Inc. provides commercial title, escrow and closing services to buyers, lenders and law firms throughout Greater Cincinnati and the surrounding region. Our team understands that every commercial transaction is different, and we work with the professionals involved in the transaction to identify title requirements, coordinate closing details and help get the deal to the finish line.
Purchasing commercial property? Talk with Fidelity early in the process.
Contact Fidelity Land Title Agency of Cincinnati, Inc. at (513) 489-2900 or visit our Commercial Services page to learn more about our commercial title and closing services.
This article is intended to provide general information regarding commercial title and closing services and is not legal, tax or investment advice. Buyers should consult their own legal, tax and other professional advisors regarding their particular transaction.