Commercial real estate transactions involve significant capital, complex due diligence, and tight timelines. Yet even the most promising deals can unravel at the eleventh hour when unexpected title issues surface. Understanding these potential pitfalls—and addressing them early—can mean the difference between a successful closing and a costly delay or failed transaction.
Here are five of the most common title issues we see derail commercial real estate deals, along with strategies to navigate them.
1. Unresolved Liens and Judgments
Perhaps the most frequent obstacle in commercial transactions is the discovery of liens that weren’t anticipated or disclosed. These can include mechanic’s liens from contractors who were never paid for previous improvements, tax liens from unpaid property or income taxes, or judgment liens resulting from lawsuits against the current or former owner.
The challenge with commercial properties is that lien amounts tend to be substantially higher than in residential transactions. A mechanic’s lien on a commercial building renovation could easily reach six or seven figures. Worse, some liens may have been improperly recorded or may involve disputes about validity that take time to resolve.
How to protect yourself: Request a preliminary title report as early as possible in your due diligence period. This gives you time to identify liens, negotiate their payoff as part of the transaction, or walk away if the seller cannot deliver clear title.
2. Boundary Disputes and Survey Discrepancies
Commercial properties often have complex boundaries, shared access points, and improvements that may or may not fall within the legal property lines. When a fresh survey reveals that a building encroaches onto neighboring land, that a fence line doesn’t match the legal description, or that parking areas extend beyond the property boundary, the entire deal can grind to a halt.
These issues become particularly problematic when the encroachment involves a structure that cannot easily be moved, or when the neighboring property owner is unwilling to grant an easement or sell the affected land.
How to protect yourself: Commission an ALTA/NSPS survey early in the process and compare it carefully against the legal description in the deed and any existing surveys on file. Address discrepancies before you’re deep into financing and approaching your closing date.
3. Easement and Access Issues
Commercial properties depend on reliable access—for customers, deliveries, utilities, and emergency services. Title searches sometimes reveal easements that restrict how portions of the property can be used, or conversely, fail to include necessary easements that the property has historically relied upon.
Common problems include discovering that the primary access road crosses a neighboring parcel without a recorded easement, finding utility easements that run through areas planned for development, or learning that shared parking arrangements were never formally documented.
How to protect yourself: Review all recorded easements with your attorney and verify that the property has legally documented access to public roads and utilities. If the property relies on informal arrangements with neighbors, formalize these before closing.
4. Chain of Title Defects
A clean chain of title means there’s an unbroken sequence of ownership transfers from the original grant to the present day, with each transfer properly documented and recorded. Gaps or irregularities in this chain can create uncertainty about who actually owns the property.
In commercial transactions, chain of title problems often arise from corporate mergers and acquisitions where real estate assets weren’t properly transferred, estates where property passed to heirs without proper probate proceedings, or old conveyances with defective legal descriptions or missing signatures.
Some defects may seem minor on the surface but can create significant risk. A deed signed by a corporate officer who lacked proper authority, for instance, could potentially be challenged years later.
How to protect yourself: Work with an experienced title company that will thoroughly examine the chain of title going back decades, not just the most recent transactions. When defects are found, curative documents or quiet title actions may be necessary—processes that take time but protect your investment.
5. Unreleased Mortgages and Deeds of Trust
When a commercial property changes hands multiple times or is refinanced repeatedly, documentation errors can accumulate. One of the most common is the failure to record a satisfaction or release when a mortgage is paid off. The loan may be long since satisfied, but if the release was never recorded, the old lien still appears as an encumbrance on title.
Tracking down releases for old mortgages can be surprisingly difficult. Lenders merge, change names, or go out of business entirely. The personnel who handled the original loan may be long gone, and locating the appropriate party to execute a release can take weeks or months.
How to protect yourself: Identify any unreleased mortgages early and begin the process of obtaining releases immediately. Your title company can often assist in tracking down the appropriate parties and preparing the necessary documentation.
The Value of Early Due Diligence
The common thread in all these issues is time. Title problems that are discovered with months to spare can usually be resolved. The same issues discovered days before closing can kill a deal outright.
That’s why experienced commercial real estate professionals make title review one of the first steps in their due diligence process—not an afterthought to be handled in the final days before closing. By engaging your title company early, you give yourself the runway to identify issues, explore solutions, and make informed decisions about how to proceed.
Partner with Experts Who Know Commercial Transactions
Commercial real estate title work requires specialized expertise. The stakes are higher, the issues more complex, and the timelines often more demanding than in residential transactions. Working with a title company that understands the unique challenges of commercial deals can help you anticipate problems before they arise and resolve them efficiently when they do.
If you’re planning a commercial real estate transaction, we’re here to help you navigate the title process with confidence. Contact Us to discuss your upcoming deal and learn how we can support a smooth path to closing.
This article is for informational purposes only and does not constitute legal advice. Consult with qualified legal and title professionals regarding your specific transaction.
