So you’re buying your first apartment building or commercial property and you receive a copy of title commitment. Now what? A title commitment shows the current state of title as identified by the title examiner. It consists of three parts:
- Schedule A: This part of the commitment represents the basic facts of the transaction, including the effective date, the proposed insureds (purchaser and lender), the types and liability amounts of the policies to be issued, the estate being insured, how the title to the state is currently vested, and the legal description and address of the subject property.
- Schedule B-1: This section lists the requirements that must be met before a title policy will be issued, including any or all of the following items: releases of mortgages, releases of tax liens, entity or estate documentation, releases of judgments, correction deeds, and warranty deeds.
- Schedule B-2: This section lists the title insurance exceptions. The items not being insured by the title company will initially include standard exceptions, taxes not yet due and payable, and further burdens such as covenants, conditions, and restrictions, easements, and/or mineral reservations
- Obtain complete copies of each exception document identified in Schedule B-2.
An experienced real estate attorney will perform a thorough analysis of the Title Commitment. With respect to Schedule A, the attorney will ensure the Owner’s name and Lender’s name are spelled correctly and the policy is the correct amount (which may vary depending on cross-collateralization). With respect to Schedule B-1, the attorney—if representing the owner—will ensure that all documents requested in Schedule B-1 are supplied to the title company and if representing the lender will request that such items identified in the schedule are satisfied or waived prior to closing. Finally, with respect to Schedule B-2, the attorney will request the standard exceptions be waived. This request will require the parties to obtain an ALTA/NSPS Land Title Survey. The attorney will also request the deletion of non-applicable exception, ensure all depictable exceptions have Survey references, and obtain relevant endorsements. Endorsement are supplemental insurance that protect against risks enumerated therein. These endorsements include the Comprehensive endorsement (so named because, prior to the creation of the endorsement, lenders would typically request a multitude of endorsements that are now comprehensively contained therein), a Zoning endorsement, Environmental Lien Endorsement, Survey Endorsement, Access Endorsement, Utilities Endorsement, Enforced Removal Endorsement, Mineral Endorsement, and Deletion of the Arbitration Clause. In Indiana, there exists several additional endorsements that may be applicable depending on the specific nature of the property being acquired.
It’s critical that an experienced real estate attorney prepare and review the real estate purchase agreement, the Survey, the Title Commitment, and the closing documents to assure that the client is well-protected against risks that are common to real estate ownership. For all your real estate legal needs, please contact Justin Leverton at email@example.com