A Title Commitment is a document describing the rights being conveyed in real property during a property transaction, as well as any restrictions or rights that others may have on that property. The Title Commitment is prepared in advance of Title Insurance being issued. The Title Commitment is a critical piece of information that alerts the buyer, lender and other transaction parties of any issues that could cloud the title to the real estate or restrict the use of the property. Essentially, the Title Commitment is used to determine that the seller has the right to sell the property, and the buyer will receive all the rights to the property (and the lender can foreclose on the collateral, if necessary down the road).
What’s described in the various Schedules of the Title Commitment?
Schedule A: Contains the general information about the transaction and what rights or interests are being conveyed in the property. This includes, but is not limited to, the current owner name, the buyer name, the lender name, legal description of the property, benefitting easements (usually part of the insured estate and may be attached to the property legal description), and the property sale price.
Schedule B: Describes any restrictions on the use of the property and rights or interests that others may have over the use of the property (such as utilities easements or deed restrictions), as well as any proposed exceptions that will not be covered by the title insurance policy.
There are a number of limitations to the property rights, which include unpaid property taxes or mortgages, liens against the property or easements burdening the property. Common exceptions to title insurance include unrecorded information, easements and rights of way as well as zoning or building restrictions.
Each limitation and exception listed should reference a Supportive or Underlying Document, from which the item was identified such as previous surveys, covenants, mortgages or other documents. These documents must be provided to the surveyor.
Schedule C: Contains any issues that must be resolved in order for the property transaction to close.
Schedule D: Describes information on the title insurance policy, including all parties who will collect premiums from the insurance policy, the cost of the policy, the loan amount, and any title insurance endorsements.
A thorough Title Commitment Review is essential and often the lender is the most scrutinizing reviewer of the title commitment. Once all requirements and conditions are met, then the Title Insurance policy is issued. A Title Commitment Review is generally conducted by the professional surveyor conducting the ALTA/ACSM Land Title Survey, an attorney or a third party due diligence firm. Partner Engineering and Science recently published a “Guide to ALTA Surveys” – an excellent resource to help you brush up on your knowledge of all things relating to ALTA Surveys. It can be accessed here.