By Marc Shaw
If you’ve been following our blogs, you already know that owner’s title insurance is a smart investment for any property owner. For a relatively small, one-time premium, your owner’s title insurance policy can provide decades of coverage against title defects like public records errors, undiscovered liens, and competing claims of ownership. But what if you are renting a property for commercial purposes? Do you need title insurance?
Read on to learn more about a different type of policy called leasehold title insurance, which is perfect for business owners who rent commercial property.
While some businesses can conceivably be operated from any location, others are tied to a specific property. Restaurant owners, for example, may have invested significantly in improving a property and building it out to suit their needs. Even if they did move to a different location, they would be responsible for moving expenses, construction costs, and purchasing new equipment.
In other cases, a business might experience a significant decrease in activity if it moves from its current location. A business located in a busy strip mall might have less foot traffic, or a restaurant located next to a hotel might get fewer customers if it moves to a different place. In such situations, an issue that affects the landlord could also impact the businesses that rent space in their commercial properties.
Consider a title defect that calls the landlord’s ownership into question. Say a previously unknown heir would come forward and try to claim ownership of a strip mall. Every single business that leases space in that strip mall could be affected! The landlord’s title insurance policy could protect them in this scenario. Still, it wouldn’t provide any protection for leaseholders who may have to temporarily or permanently close down while the situation is resolved. For those who can easily move to another location, it might not be much of a problem. Still, for others, it could saddle them with relocation expenses or a prolonged closure that ultimately puts them out of business.
That’s where leasehold title insurance comes in. This type of title policy can cover financial losses like decreased revenue and relocation expenses for leaseholders who were affected by a title defect on their landlord’s building. The premium and the amount of coverage provided would vary depending on the stipulations of the individual policy. Still, it could be a crucial lifeline for a business affected by a title defect on a leasing property.
Many types of business owners can limit their risk with a leasehold title insurance policy, but they are not appropriate for everyone. If you are considering buying a policy, ask yourself a few questions first:
-Have I signed a long-term lease agreement?
-Have I invested significantly in improving the leased property to suit my business?
-Would moving to a different location cost me a lot of money?
-Would my revenue be significantly impacted by moving to another location?
If you answered yes to any or all of these questions, leasehold title insurance could be a smart investment for you. If you want to know more, the best thing to do is speak with an experienced title agent like the ones at World Wide Land Transfer. Our team has more than two decades of experience in the title industry, and we have assisted countless clients with obtaining residential and commercial title insurance policies. Call us today if you need commercial title insurance in West Chester, PA, or other communities all across America!
World Wide Land Transfer is a service-oriented PA title company with offices in Philadelphia, New York, and Washington, D.C. With a record of going above and beyond, we are trusted to close everything from complex commercial transactions to residential refinance and purchase transactions.
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