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The Importance of Title Insurance Underwriting

Silvestri Law, P.A. April 20, 2023

Commercial and residential real estate transactions often involve huge amounts of money and commitment. When buying or selling a commercial or residential real estate property, it is important that you protect yourself and your investment from possible risks and losses. Title insurance remains a vital tool that can be used to validate the property’s title, deed, and ownership. This will help detect any issue or inconsistency in the property’s title that might cause problems in the future. 

At Silvestri Law, P.A., I’m dedicated to offering outstanding legal services and guiding clients through the complexities involved in commercial real estate transactions. As a Florida commercial and residential real estate attorney and title closing agent, I can help you understand the functions and importance of title insurance underwriting and how to use it in your commercial and residential real estate deals. My firm proudly serves clients in St. Petersburg and throughout the Greater Tampa Bay area of Florida. 

What Is Title Insurance?

Title insurance can be described as an insurance policy that is designed to protect a buyer from possible issues with the title of a real estate property after the closing. Title insurance is used in both commercial and residential real estate deals in Florida. Depending on the custom in the area in which the property is located, and subject to negotiation, the seller or the buyer may pay the title search and premium charges.

What Is Title Insurance Underwriting?

Title insurance underwriting can be described as the process of validating the title, deed, and ownership of a real estate property before the transaction. The title insurance underwriter will conduct a thorough investigation to ensure that there are no issues or defects in the public records of the title – which might lead to a title dispute or potential claim - or point out any issues that may run with the land. 

How Underwriting Functions in Commercial Real Estate 

As mentioned earlier, buying a commercial real estate property often involves huge investments. As the buyer, the last thing you want is a dispute or claim about the ownership or title of the commercial property you just purchased. Hence, to protect your interests and investment in a commercial real estate deal, the title insurance underwriter and closing agent will do the following: 

  • Research public records and documents such as deeds, marriage certificates, wills, and birth certificates. 

  • Carry out a title search to validate the property’s deed and ownership. 

  • Investigate whether the seller is the legitimate owner and has the right to sell the property. 

  • Find out any existing liens and encumbrances on the property. 

  • Provide a Commitment to issue a Title Policy to the Buyer upon the closing.

  • Hold the seller's escrow deposits on the buyer’s behalf to ensure a successful transaction. 

  • Act as Closing Agent and receive and disperse the funds and documents necessary to close the deal.

Essentially, the title insurance covers the due diligence phase all the way through the commercial or residential real estate closing. In the event of a legal issue after closing, the title insurance underwriter will, subject to policy exclusions and limitations, cover the legal fees or reimburse the property buyer if they lose the case. 

What Types of Title Problems Can Occur?

Unfortunately, an issue with the property’s title can delay or prevent a property sale. Here are some common types of title problems that may occur in a real estate deal: 

  • Errors in Public Records: Errors in public records, such as inaccurate square footage, mistakes in recording property information, improperly filed papers, unreleased mortgages, and misspelling the name or address of the property, can result in title issues. 

  • Unknown Liens: If a previous owner of the commercial property has past-due payments, this may result in a lien on the property. The debt will stay with the property even after it is sold. 

  • Illegal Deeds: Fraudulent deeds and deeds signed by an incapacitated person or a minor are considered illegal or invalid, thereby affecting the ownership rights of the new buyer. 

  • Undiscovered Encumbrances: If there is a previous mortgage, covenant, or lien on a commercial real estate property, a third party can make a claim on the property in the future. 

  • Unknown Easements: Also, if there are easement issues on the commercial property, there may be restrictions on how the new buyer may use the building. Unknown easements that are not discovered and resolved before closing may cause title problems down the line. 

  • Boundary/Survey Disputes: Boundary or survey disputes may occur when there is a disagreement between two neighbors or adjacent property owners regarding where a property line starts or ends. 

  • Unknown Heirs: Also, a title problem may occur if a previously unknown heir with a Will granting them the property shows up many years after the death of the previous owner. 

A skilled Florida real estate lawyer can help investigate the property’s title to discover possible disputes and issues that may affect the commercial or residential real estate deal or your rights to own the property. 

The Role of a Real Estate Attorney

When involved in a commercial or residential real estate deal, having the right title insurance policy is crucial to protect your investment and property rights. At Silvestri Law, P.A., I have the skill and resources to assist clients in navigating the complexities of commercial and residential real estate transactions and title insurance underwriting. 

As your legal counsel, I can work to understand your unique situation, assess the financial risks involved in the deal, and help you make informed purchase decisions. In addition, at your direction, I will conduct due diligence to detect and correct potential defects in the property’s title, identify any red flags, and other title issues.  

Contact me at Silvestri Law, P.A. today to schedule an initial consultation with an experienced real estate attorney. My firm proudly serves clients throughout the State of Florida.