The Role of Title Companies in Commerical Real Estate Transactions
As you would expect, commercial real estate transactions are complex and involve more risk than residential real estate. They involve numerous parties (usually entities), large sums of money, and legal and regulatory requirements.
Title companies play an important role in a smooth and successful transaction, on behalf of all parties involved.
The main role of the title company is to ensure the authenticity of a property’s title. This breaks down into 1) does the seller have the legal right to sell the property 2) is the title cleared of any liens, judgments, outstanding mortgages, or other encumbrances?
Example(s):
Utility Easement: PECO
Mechanic’s Lien: Unpaid contractor
Title companies will perform a thorough title search and property survey to ensure that the property’s title is free of defects that could impact the buyer. It’s a win-win for both the buyers and sellers.
Title companies also perform other tasks in the transaction process such as providing title insurance, escrow services, and settlement services. As a third-party source, they will help manage the sale, ensuring all necessary documents are in order and funds are disbursed at milestones, and holding others accountable.
Example(s):
Loan Payoff: They will call for the exact loan amount to be paid off
Escrow Service: They will hold the deposit(s) as a 3rd party
Deposits are made out to the Title Company not the seller
Deed: They often will prepare the Deed and have it recorded
Choosing the wrong title company or not choosing one can be an expensive mistake to make. Here’s what I’ve had to learn the hard way:
Always get the Rent Roll to the Tiltle Company ahead of settlement
Always have any and all Security Deposits ahead of the settlement
Typically, you will not realize you have had GOOD Title Service until you have a negative experience.
