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Ensuring Clear Title in Commercial Real Estate Transactions

On Behalf of | Jun 21, 2019 | Construction Law |

Buying commercial property in Florida involves issues that are both similar to and unique from the issues involved in residential real estate transactions. One of the similarities – and an issue that is often overlooked in both commercial and residential transactions – is the importance ensuring clear title to the property.

While it may seem unlikely that the entity that is selling you a piece of commercial real estate is the rightful owner, title issues come up more often than most people realize. In fact, there are a variety of potential issues to address, and conducting thorough title research is an important part of the due diligence process.

Potential Title Issues in Commercial Real Estate Transactions

The following is a non-exclusive list of potential title issues that can cause problems for purchasers in commercial real estate transactions:

1. Recording Issues

Real estate deeds and certain other documents are subject to recording at the county level. While a title search should reveal a complete list of ownership transactions for the subject property, this will not invariably be the case. Mistakes happen, and if a prior deed was not properly recorded, this could impair a subsequent buyer’s interest in the property.

2. Survey Flaws and Boundary Disputes

Property surveys can suffer from flaws as well, and this can lead to boundary disputes with adjacent property owners. When buying a commercial property, it is important to commission an independent survey and compare the results with the plats in the existing record.

3. Unknown Liens on the Property

Liens encumbering commercial properties can arise from financing arrangements, construction contracts, and various other occurrences and transactions. While the seller should have a complete record of any liens on the property, once again, mistakes happen. The sale of a commercial property generally will not affect the rights of a pre-existing lienholder; and, while the seller will ultimately remain liable, the unwitting buyer of the encumbered property can still find itself in the middle of costly litigation.

4. Easements, Rights of Way and Other Entitlements

Undiscovered easements, rights of way and other entitlements can cloud title for commercial real estate purchasers as well. Similar to liens, these encumbrances can arise under a variety of circumstances that may or may not result in the creation of records that are easily discoverable by a buyer.

Can’t I Just Buy Title Insurance?

In order to mitigate the risk of loss due to title defects, buyers can buy title insurance from reputable insurers. However, as title insurance does not cover all potential defects, it is necessary to conduct adequate title research as well. These steps, coupled with careful negotiation of the terms of purchase, can provide comprehensive protection against adverse claims following a commercial real estate acquisition.

Speak with a Fort Lauderdale Commercial Real Estate Attorney at Saavedra | Goodwin

Our attorneys represent businesses in all aspects of commercial real estate sale and leasing transactions. If you are contemplating a transaction in the Fort Lauderdale area, you can call (954) 928-9568 or contact us online for a confidential initial consultation.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin