Due Diligence. When you sign a contract to purchase a commercial property, or obtain a commitment for a loan or a refinance, and you place an order with Loudoun Commercial Title, we have abstractors do a title search of the property. This involves a review of the "chain of title," that is, the records of conveyances from the individuals or entities who previously owned the property. This title search determines what easements may have been granted by prior owners for utilities, or for the benefit of adjoining landowners, whether protective covenants encumber the property, and whether prior owners have properly conveyed the property (insofar as can be determined by a search of the public records). Many commercial properties in Loudoun County were the subject of bankruptcies and foreclosures in the early 1990's, presenting potential conveyancing and title insurance issues. The abstractor also checks to see that real estate taxes have been paid, whether any judgments have been recorded against the current or any past owner, whether state or federal tax liens have been filed against the current or any past owner, whether mechanics' liens for work performed on the property have been filed, and so forth. We receive a title report which we use to prepare (working with underwriters for the insurance companies that we represent) a commitment for title insurance. Thus, the title report is an important part of your due diligence for purchasing a commercial property.

The title insurance commitment also plays an important role in your due diligence for a commercial purchase or refinance. The commitment will include a listing of the recorded easements and encumbrances on the property. You will receive copies of these "title exceptions" for review by you, your attorney, and your surveyor or civil engineer. It will also include, as "Schedule A" a list of the conditions that have to be satisfied for issuance of the policy. These conditions will vary based on the type of transaction, and also based on the nature of the Seller--you will have different requirements if the seller is a natural person, a corporation, a partnership, or a limited liability company. Taken together, these requirements provide a "road map" for the steps that must be taken to ensure a valid conveyance.

Settlement Services. The settlement, or formal closing, of a real estate transaction does not occur by itself. Someone has to coordinate the title due diligence process, the assembly of the documents required to close, and the preparation of a settlement statement showing the sources and uses of funds required for closing. If the title commitment shows an existing mortgage or deed of trust lien on the property that must be paid off, someone must coordinate the payoff of the existing loan and make sure adequate funds for this purpose are shown on the settlement sheet. Someone has to ensure that the real estate taxes and other appropriate charges are prorated between the purchaser and seller.

Loudoun Commercial Title provides this important service. Many pieces of paper, faxes, and emails, and information are exchanged between Loudoun Commercial Title, our customers, the attorneys, the current lender, the prospective lender, and the other parties to the transaction. We also conduct the settlement, making sure that the documents are properly executed, appropriate exhibits are attached, lender's instructions and requirements are complied with, and the documents are properly recorded in the appropriate land records. After the recordation of documents, Loudoun Commercial Title disburses fund to sellers, lenders, real estate agents, local governments (for recordation taxes and charges, or to pay real estate taxes), and other vendors such as surveyors. We work to ensure that all parties receive the required copies of their documents, and that the Lender receives its original loan documents in a timely manner for funding. We coordinate issuance of the title insurance policy showing satisfaction of closing requirements and the recordation information for the closing documents.

Title Insurance. After completion of the closing, purchasers of title insurance receive a policy of title insurance, which provides you with long term protection against the claims, risks and matters described in the policy, subject to the limitations and exclusions contained in the policy. You should retain the policy with your permanent records, because the policy provides you with protection not only during your period of ownership, but also after you sell the property, if a claim is made against you by a successor owner for events that occurred prior to your ownership.

Loudoun Commercial Title also facilitates the financing of new construction by assisting with the underwriting and issuance of affirmative mechanics' lien coverage. Mechanics' liens are unquestionably a substantial risk of the new construction process. Mechanics' liens are filed when general contractors, subcontractors, or materialmen are not paid for work done on a construction job. In Virginia, a mechanics' lien claimant who properly perfects his claim will have priority over a recorded deed of trust, even if the deed of trust was recorded prior to the filing of the mechanics' lien. For this reason, lenders making construction loans require affirmative insurance against mechanics' liens.

Loudoun Commercial Title assists in the underwriting and issuance of this coverage. Where requested, we facilitate the process by serving as Mechanics' Lien Agent under Virginia law, and administer bring to dates of title in connection with construction loan advances.

A zoning endorsement can be an important title insurance coverage in a commercial transaction, because zoning issues are much more important in commercial and investment transactions than in residential transactions. Bob Gordon, President of Loudoun Commercial Title, has extensive experience with land use and zoning issues and will work with customers to ensure that the necessary due diligence is performed for issuance of ALTA zoning endorsements.

Enhanced Residential Owner's Policy Of Title Insurance. Due to competitive pressures in the title insurance industry and the desire of purchasers for greater degrees of protection against losses not covered by the standard residential policy (such as subdivision, building permit, zoning, and other types of risks), the industry in 1998 formulated a residential policy with enhanced forms of coverage.

The standard owner’s policy covers you for defects and liens in the history of your title through the date and time your deed is recorded in the public records. The ALTA Homeowner's Policy of Title Insurance provides enhanced coverage for many additional risks.

Both Owners Policies Include Protection Against:

• Mechanics' Lien Coverage
• Third Party claims an interest in the title
• Improperly executed documents
• Pre-Policy forgery, fraud or duress
• Non-recorded restrictive covenants
• Defective recording of documents
• Prior recorded liens not disclosed in the policy
• Unmarketability of the title
• Policy insures anyone who inherits the property from you

Additional Coverages In Enhanced Policy:

• Policy insures the Trustee of your estate-planning trust
• Policy insures the beneficiaries of your trust upon your death
• Automatic increase in coverage up to 150% (not based on inflation)
• Post Policy Forgery
• Post Policy encroachment onto insured land
• Legal right to ACTUAL vehicular and pedestrian access
• Coverage for certain losses due to Building Permit violations
Coverage for certain losses due to existing violation of subdivision law
• Post policy structural damage from third party easement for mineral extraction
• Violation of restrictive covenants identified in the Policy:
      Resulting in loss from correction or removal
      Resulting in loss of title
      Resulting in loss of use where single family dwelling prohibited
• Forced removal of existing structures that:
      Encroach onto an easement identified in the Policy
      Violate a building restriction line identified in the Policy
      Encroach onto neighbor's land (subject to limits of liability)
• If land cannot be used for single family dwelling under zoning ordinance

Mechanics' Liens And The Mechanics' Lien Agent. A mechanics' lien is a lien to secure payment for work and materials during the construction or repair of a property. In Virginia, mechanics' liens filed by contractors, subcontractors or material supplier have a high priority over construction loans and, therefore, are of great concern to lenders. The Virginia mechanics' lien will also survive a foreclosure or any other sale of the property. Bankruptcy will not defeat lien rights.

When a project involves construction of one and two family residential dwellings, a real estate owner may (but is not required to) designate a mechanics' lien agent (MLA) when a building permit is issued. If an MLA is designated, then any contractor supplying labor and materials to this project must provide notice that the contractor seeks payment for labor performed or materials furnished. This notice must be provided within 30 days of the contractor beginning work on the property. If proper notice is not given, the claimant may not legally place a mechanics' lien but would have to seek other legal remedies to enforce payment. The contractor can provide notice at a later time but can then lien only for labor and materials furnished after the notice.

If no MLA is designated, the property is subject to mechanics' liens from all contractors who have supplied material or services during construction.

The Mechanics' Lien Agent Statute has reduced the number of valid mechanics' liens filed. Because of the notices to the MLA, all parties to the transaction are in a much better position to know whether all contractors have been paid decreasing the chances that a mechanics' lien will be placed after completion of the project.

Mechanics' lien underwriting for commercial transactions is significantly more complicated, and no mechanics' lien agent protections are available. However, Loudoun Commercial Title has considerable experience in this area. Contact us with your questions or requirements.

Fee Structure. Our fee structure for commercial services will depend on the size and nature of the commercial transaction. You should note that title insurance premiums for commercial transactions are based on the rates set by the title insurance companies for which we act as agents. These vary based on the purchase price or loan amount, on the type of transaction (purchase and sale, loan, etc.), and depending on whether a party to the transaction qualifies for a "reissue" rate based on a recent title insurance policy from the same lender. For our residential fee schedule, click here.