William T. Stuart

Every owner of a closely held business, at one point in time, is going to be involved in a real estate transaction in connection with their business. Whether it’s a lease of a facility or the purchase of a vacant land or a building in connection with their business, at some point in time an owner of a closely held business will be involved in a real estate transaction. For those times when there’s a purchase involved, that transaction will involve a title insurance policy as one of the documents that will be received in the transaction. A title insurance policy is nothing more than an insurance policy that ensures title to a property. It literally insures that there’s no defect, lien or encumbrance against the property at the time of the sale.

Most title insurance policies are on a specific form that’s issued by the underwriters in the state of Wisconsin. Most business owners are familiar with the title insurance policy form but may not be aware of the endorsements that could come with that form. Endorsements are ways that a business owner can expand the amount of coverage which is provided by a title insurance policy. There are many endorsements available to a business owner that could expand out the coverage under the title insurance policy. Those endorsements are available from the underwriters in the State of Wisconsin through a manual that every buyer should get as part of their purchase transaction. The endorsements are generally arranged in different categories:

  • Type of transaction (Is it a loan transaction, a purchase transaction or is it a lease transaction?)
  • Type of property (Is it residential property or is it commercial property?)
  • Whether there are improvements on the property (Is it vacant land, is it improved property or is it about to be improved property?)

Each of these considerations determines which endorsement may be appropriate for you as a buyer of commercial real estate.

Five Title Endorsements for Buyers

There are five endorsements that are typically looked at in any commercial real estate transaction.

  1. Gap Endorsement – A Gap Endorsement provides coverage for that period of time between the time that the title commitment is issued and the closing of the transaction. It literally ensures that there are no defects of title which are created in that gap period. It’s something that every business owner should attain as part of their purchase transaction for commercial real estate.
  2. Zoning Endorsement – Zoning endorsement itself is insurance that the property at issue is subject to a specific zoning classification and that the proposed uses for the property after the closing are allowed under that zoning classification.
  3. Access Entry Endorsement – Literally ensures that the property owner has access to a road street or highway and that their property is not landlocked. It is a critical endorsement when reviewing any kind of commercial property.
  4. Utility Access Endorsement – A property owner should also look at a utility access endorsement, which insures that the property at issue has access to certain utilities such as water and sewer, electric or cable or other important utilities that are critical for the operation of the business.
  5. Covenants, Conditions & Restrictions – It provides insurance that there are no violations of any recorded use restriction or covenant against the property as of the date of closing. It also provides coverage that there are no violations of any environmental protection restriction against the property as of the date of closing.

There are other endorsements that a business owner can consider when engaging in a real estate transaction and not all endorsements will be appropriate for the transaction itself. However, the expansion of title insurance through the use of endorsements may be an effective tool for a business owner when engaging in a real estate transaction.