Welcome to this practical guide from The Stejkowski Law Firm. Commercial real estate transactions often involve significant investments, complex negotiations, and multiple stakeholders. Whether you are purchasing an office building, industrial facility, retail center, or development land, one critical step in the process is ensuring the property has clear and marketable title.
Title problems, also known as defects, often delay closings, jeopardize financing, or even expose buyers to costly legal disputes after the purchase. Identifying and resolving these issues before completing a transaction is essential for protecting your investment.
After 30+ years as a lawyer, title issues are almost part of my DNA. Every time I say I have seen every possible crazy situation relating to real estate, another, even crazier, one pops up! This is why having an experienced commercial real estate lawyer is so often vital to completing a smooth transaction.
In this article, we’ll explore some of the more common title issues in commercial real estate and explain the legal solutions that can help resolve them.
Why Title Clarity Matters in Commercial Real Estate
When you purchase real estate, you are not just buying land or buildings: you are acquiring legal ownership rights. Title establishes who owns the property and what claims or restrictions may affect it.
Clean title ensures that:
- The seller has the legal authority to transfer ownership
- No undisclosed claims or debts are attached to the property
- Property boundaries are accurately defined
- The property can be used as intended
Because commercial properties often have a long history of ownership, financing, and development, title records may contain complications that require careful legal review.
Liens: Hidden Financial Claims Against the Property
One of the most common title defects involves liens—legal claims against a property used to secure payment of a debt.
Examples of liens that may appear during a title search include:
- Mortgage liens from prior lenders
- Tax liens for unpaid property taxes
- Mechanic’s liens filed by contractors or suppliers
- Judgment liens resulting from lawsuits
If these liens are not satisfied before closing, they may transfer with the property and become the responsibility of the new owner.
How Liens Are Resolved
Most liens can be resolved through:
- Paying off the outstanding debt at closing
- Negotiating lien releases with creditors
- Escrowing funds until disputes are settled
- Filing legal actions to remove invalid liens
In many transactions, attorneys coordinate with lenders and title companies to ensure all liens are properly released before ownership transfers. Sometimes liens paid off many years ago are still on the title and need to be handled one way or the other, usually through the title company.
Easements: Rights Granted to Others to Use the Property
An easement gives another party the legal right to use a portion of the property for a specific purpose. While easements are common and often harmless, they can sometimes interfere with development or business operations.
More common examples include:
- Utility easements for power, water, or telecommunications lines
- Access easements for neighboring properties
- Drainage or stormwater easements
- Shared driveway or parking easements
In some cases, easements may restrict where structures can be built or limit how land can be used.
Addressing Easement Concerns
Resolving easement issues may involve:
- Reviewing recorded documents to understand the scope of the easement
- Negotiating modifications or relocations with the easement holder
- Obtaining title insurance coverage for certain risks
- Adjusting development plans to comply with easement restrictions
Proper due diligence during the purchase process helps investors understand whether an easement will affect the property’s intended use. If there is a lender involved that lender and its attorney must also be satisfied any risks associated with such easements are acceptable and do not materially impair the use of the property
Boundary Disputes and Survey Problems
Boundary issues arise when the legal description of a property conflicts with physical conditions on the ground or with neighboring parcels.
Common causes include:
- Outdated or inaccurate legal descriptions
- Encroachments such as fences, buildings, or driveways crossing property lines
- Discrepancies between surveys and recorded plats
- Overlapping claims between neighboring property owners
Boundary disputes can delay development projects and may lead to litigation if not addressed early.
Resolving Boundary Issues
Solutions often include:
- Commissioning a professional land survey
- Negotiating boundary agreements with neighboring owners
- Recording corrected legal descriptions
- Filing quiet title actions in court to resolve ownership disputes
By addressing these issues before closing, buyers can avoid future conflicts and ensure their property rights are secure.
Breaks in the Chain of Title
Another potential issue involves a break in the chain of title, meaning the historical record of property ownership contains gaps or inconsistencies.
This can happen when:
- A prior deed was never properly recorded
- Ownership transferred through an estate without proper documentation
- Corporate entities dissolved or changed names without updated filings
A break in the chain of title can create uncertainty about whether the seller truly has the authority to transfer ownership.
Legal Solutions for Chain-of-Title Problems
Attorneys may resolve these issues through:
- Obtaining corrective deeds
- Recording affidavits of heirship or ownership
- Filing quiet title lawsuits to clarify ownership rights
- Working with title insurers to confirm insurability
These steps help restore a clear ownership history and allow the transaction to move forward.
The Role of Title Insurance
Even with careful investigation, some title defects may remain undiscovered. That is where title insurance plays a critical role.
Title insurance policies protect buyers and lenders from financial losses resulting from:
- Undiscovered liens
- Fraud or forged documents
- Unknown heirs claiming ownership
- Recording errors in public records
Most commercial real estate lenders require title insurance as a condition of financing, and many investors choose to purchase owner’s policies for additional protection.
Why Early Due Diligence Is Critical
The earlier title issues are discovered, the easier they are to resolve. For this reason, experienced real estate professionals typically conduct a full title search and review early in the transaction process.
This allows time to:
- Identify potential defects
- Negotiate solutions with sellers
- Coordinate with lenders and title companies
- Ensure the property can be used as planned
Attempting to resolve title problems at the last minute can delay closings and create unnecessary risk.
Work With an Experienced Commercial Real Estate Attorney
Commercial real estate transactions often involve complex title histories, multiple financing layers, and detailed legal documentation. Having experienced legal counsel can help ensure potential title issues are identified and addressed before they become costly problems.
At The Stejkowski Law Firm, we assist buyers, sellers, and investors with comprehensive title review, transaction structuring, and resolving complex commercial, agricultural, and other non-residential real estate matters. Our goal is to help clients move forward with confidence, knowing their property rights are protected.
Final Thoughts
Title defects such as liens, easements, boundary disputes, and chain-of-title gaps are common in commercial real estate transactions. While these issues can seem intimidating, they are old hat to veterans, and most can be resolved through careful legal analysis and strategic planning.
The key is early identification and proactive resolution. By addressing title concerns before closing, investors can protect their capital, avoid unexpected liabilities, and ensure their real estate investments start on solid legal ground. Likewise, sellers can help smooth the process by identifying any known issues up front.
If you are preparing to buy, sell, or develop commercial property and want guidance on title issues or transaction structure, contacting an experienced real estate attorney can make all the difference. The Stejkowski Law Firm is here to help you navigate every step of the process with clarity and confidence.
