Title defects can derail promising commercial real estate deals in Texas. It is vital for buyers, sellers and lenders to understand common title issues and how title insurance can help them address these defects. Knowing what to watch out for and what the available legal remedies are is key to saving time and money.
Common commercial title defects in Texas
When reviewing a title to commercial property, it is important to identify defects that may affect ownership, use or transferability. Some frequent title issues include the following:
- Hidden property rights
- Lien priority issues
- Boundary line disputes and encroachments
Careful review of the title, survey and any liens on the property is important before closing. These checks help uncover problems early to help avoid costly surprises and legal problems later.
Legal duties of title insurance providers
In commercial real estate deals, title insurers have a duty to defend, meaning they must provide legal counsel if a third party makes a covered claim against the title. Insurers also have a duty to indemnify, meaning they must compensate the insured for actual losses caused by a covered title defect, up to the policy limit.
In Texas, certain policy endorsements are especially important in commercial transactions. For example, the T-3 endorsement covers the assignment of rents. Lenders often use it to make sure that rental income protection is part of the collateral. These duties and endorsements help explain what title insurance covers in Texas commercial transactions.
Enforcing rights and resolving disputes
When there is a title problem or ownership dispute, the first step is reviewing the contract. In Texas real estate deals, the parties should check the Title Objection deadline to see whether the issue was raised on time and what remedies are available.
Depending on the agreement, the buyer may be able to ask the seller to fix the problem or, in some cases, require the seller to complete the deal. If the issue stays unresolved, a lawsuit may be necessary. Common options include:
- Suit to quiet title
- Trespass to try title
- Declaratory judgment actions
Together, these remedies provide multiple avenues for protecting title and resolving ownership disputes under Texas law.
Protecting your investment
Title defects in commercial real estate transactions require careful review and early planning. If problems come up, Texas law offers several ways to resolve ownership disputes and confirm property rights. Working with an attorney can help ensure your deal is secure from closing through long-term ownership.