Title insurance plays a pivotal role in commercial real estate transactions, offering protection to buyers, lenders and other stakeholders against unforeseen claims or defects in property titles.
However, legal complexities can arise for title insurance companies operating in Idaho due to the state’s unique property laws, regulatory environment and market dynamics. While title insurance is a valuable offering, these companies may ultimately need to navigate several potential legal challenges.
Boundary disputes and survey errors
Commercial properties often involve larger parcels of land, making them prone to boundary disputes and survey discrepancies. In the Gem State, boundary issues may arise due to:
- Historical inconsistencies in property records
- Misaligned fences
- Encroachments
If the survey report provided to a title company is inaccurate, title insurance policies may not cover these errors, leaving insurers vulnerable to legal disputes.
For instance, a commercial developer may acquire a property based on an old survey only to discover that part of the land overlaps a neighboring parcel. If the title company failed to detect or disclose the issue, it could face legal action for negligence.
Unrecorded liens and easements
Another significant legal risk for title insurers in Idaho involves unrecorded liens and easements that may affect the property’s marketability. State law mandates that most liens and easements be recorded with the county clerk to be enforceable.
However, some might not be properly documented, particularly private easements or contractor liens, which can create title defects after the policy is issued. Suppose an unrecorded mechanic’s lien surfaces after a commercial property transaction is closed. In that case, the title insurer may be forced to reimburse the insured party for financial losses.
Fraud and forgery in transactions
Fraudulent deeds and forged signatures present another legal challenge for title insurers in the Gem State. Fraudulent conveyances, where someone transfers property without legal authority, can jeopardize ownership. In commercial real estate, where high-value assets are involved, the stakes are even higher.
A fraudster might forge the seller’s signature on a deed to transfer ownership, and the fraud may only come to light after the title policy has been issued. Title insurers could be liable for financial losses if the fraudulent transfer invalidates the insured title.
Title insurance companies that run into legal trouble during commercial real estate transactions may experience costly litigation and financial losses. However, with reputable legal support, these companies can better protect their interests and those of their clients.
