During the process of purchasing a property, whether it is for commercial mortgage, bridging finance or even as part of a property development package you may well hear your solicitor talk about title insurance. This insurance basically protects owner (and therefore mortgage companies) from unexpected challenges from a third party. These challenges can take the form of contesting ownership of the land, rights of access to it and restrictions on its use.
Title insurance also covers general defects in the title which might prohibit such things as development and associated access, usually it covers financial loss it can not automatically override a legitimate covenant.
How is Title Insurance Arranged?
Usually the solicitor handling the process will identify a potential problem, or the lender will insist on certain types of indemnity. A one-off premium then buys the policy which gives the owner perpetual cover against the defect. In the event that a claim is made a standard policy will cover legal costs and associated costs with defending the action, and sometimes provide compensation should a challenge be successful.
Who Uses Title Insurance?
Typically it was used to speed up the house buying process in the residential sector, usually to cover fairly mundane things such as rights of access. As the title insurance reduces the lenders risk it has obvious advantages to those lenders “selling” their loan books.
Title insurance is increasingly being used by commercial lenders, again to speed up the whole process. With the commercial lending starting to closely mirror the residential model this should come as no surprise. Aside from the speed advantage this also helps commercial lenders reduce their risk and consequently make their loan book more attractive to investors.
With more lenders accepting a wider variety of title insurance the range of protection has also grown, and along with it the number of firms offering insurance. With this in mind it is worth making sure that your solicitor has obtained the best cover at the best price!