Buying commercial property in California can support your next stage of growth, but title issues may complicate the transaction. A lien, ownership dispute or unexpected restriction can affect your closing timeline or how you use the property.
Before closing, watch for these five common title issues:
1. Unreleased liens
A lender, contractor or taxing authority may have a recorded lien against the property. If the lien affects the seller’s ability to transfer the agreed interest, it may need to be paid, released or otherwise addressed before closing.
2. Errors in public records
Incorrect names, legal descriptions or recording information can create questions about ownership or the property being transferred. Correcting these errors may require additional documents before the transaction can move forward.
3. Conflicting ownership claims
Former owners, business partners or heirs may claim ownership rights in the property. These disputes can raise questions about whether the seller has the authority to transfer all the ownership rights you expect to receive.
4. Boundary or encroachment issues
A survey may reveal that a building, fence, driveway or other feature crosses a property line. Boundary issues can affect access, future construction or how you plan to use the property. Additional surveying or agreements between property owners may be necessary to clarify the issue.
5. Easements or use restrictions
Easements may give someone else the right to use part of the property for access, utilities or other purposes. Other recorded restrictions may also limit development, parking or certain commercial uses.
Understand what the title means for your investment
A title issue does not always prevent a commercial purchase, but you need to understand how it could affect your ownership and intended use before closing. Title insurance may protect you from certain title problems that surface later, depending on what the policy covers and excludes. If your preliminary title report lists a lien, ownership claim or restriction you do not understand, legal guidance can help you evaluate its effect on the transaction and your plans for the property.