Keep these title issues in mind when searching for a commercial property
So you’ve been searching for months to find the perfect space for your business, and you think you’ve found it. Time for a celebration, right? Well, not necessarily. If you’re not careful, you could end up with a defective title, which can cause significant problems down the road.
What is a defective title?
A defective, or unmarketable title occurs when there is a serious omission, error, or other complication related to the ownership of a piece of property. A title defect can significantly impede your ability to purchase or resell your property, and banks will often refuse to provide financing for commercial real estate that has a defective title.
Title defects to keep in mind
The following are just a few of the types of title defects that you can run into when purchasing property. Be sure to work with a reputable and experienced commercial real estate agent throughout the entire buying process to ensure that your best interests are protected.
Unreleased Liens
A land record search can unearth information about any existing liens that may be present on a property. A title search should be able to identify any loans that should be paid, satisfied, and released prior to purchase. Examples of liens that a title search should disclose include:
- Tax liens – If a property owner owes the IRS, or has not paid necessary property taxes, state and federal authorities can actually place a lien on a property that must be settled prior to it being sold to another party.
- Judgement liens – If a creditor wins a lawsuit against a property owner for monetary damages, a lien is often placed on a debtor’s property, which must be settled prior to the property being sold.
- Mortgages – A mortgage is the most common lien found during a title search. While this mortgage may not be binding on you personally as the buyer, it likely would be binding on the property you are purchasing, and can therefore be foreclosed if not settled before you take ownership.
The seller doesn’t actually own the property
In certain scenarios, the person whom you’re buying from may not actually own the title to that particular property. So-called property owners should not be considered owners without a thorough examination of estate and will records, which should also be part of a title search. Tracking down heirs can be time consuming, but it’s necessary in certain scenarios to ensure that a commercial property is free and clear of any title defects at closing.
Missing or incorrect property information
Incorrect property records can further complicate a real estate transaction, because a title search may not discover these items. Title insurance should be purchased to protect buyers against these types of defects.
Be extremely careful when purchasing real estate
It can be very easy to get caught up in the emotion of a seemingly-perfect property when looking for commercial real estate. But you should never forget to do your due diligence on important aspects of the transaction, including a thorough title search.
If you’re interested in purchasing commercial property in Miami-Dade, Palm Beach, Broward, or surrounding counties, partnering with Morris Southeast Group can help make the entire process go smoothly. With decades of experience matching business owners with the right commercial property, we are ready to help you find your next location today. Give our team a call at 954.474.4776, reach Ken Morris on his cell at 954.240.4400, or email kenmorris@morrissegroup.com to get started.
Tags: commercial real estate, Title defects
