From everyday homebuying to commercial real estate, every property transaction should have title insurance. However, commercial transactions have a slightly different focus than residential properties. While home title insurance will focus primarily on liens and outstanding debts, storefronts usually deal with larger amounts of money and ensure compliance with various aspects of business ownership.

Below are a few key differences between commercial and residential title history and insurance:

UCC Liens

We’ve often discussed how liens can stand in the way of finalizing a home sale. Similarly, a Uniform Commercial Code (UCC) lien can halt a commercial property purchase or investment if a business has failed to pay a debt, didn’t pay taxes or files for bankruptcy. Essentially, a business that has a UCC lien on a property borrowed money for a property or piece of equipment that it could not pay for. Many standard title insurance policies will not cover the cost of a  UCC lien, so it’s important to find out if your title insurance agency offers a plan for business transactions that includes UCC liens.

Higher Prices

Commercial real estate transactions usually mean a larger price tag. This means insurance will also be more expensive. Ultimately, residential and commercial title insurance cover many of the same issues, but issues found in the history of a commercial property are often more expensive to fix. This high cost makes title insurance a critical step in the purchase of commercial real estate. The extra closing costs associated with fixing a bad business property can be a major setback, especially for small businesses.

Focus on Zoning

Commercial title investigations will focus heavily on zoning violations of previous owners or even in initial construction. The regulations around commercial real estate are typically stricter, meaning complex zoning laws must be a focal point of investigation, coverage and pre-purchase decisions. If there are issues in the history of a business property, title insurance can help minimize the cost resolving them prior to opening a business.

Price and Scope of Coverage

While it’s typically more expensive to purchase commercial coverage, title insurance tends to cover more in business transactions. This can include property damage from past physical damage like fire, theft, flooding and much more. This is another reason why investing in commercial-grade insurance is a critical aspect of purchasing a business property.