A commercial title commitment is a roadmap, not just a formality. In Texas, understanding the exceptions in Schedule B and the requirements in Schedule C is critical. Missed restrictive covenants or unresolved liens can derail an acquisition, expose your investment to significant liability, and restrict future property use.
Navigating a commercial real estate acquisition is a high-stakes endeavor. While buyers often rely heavily on their brokers, a title commitment from a title company is ultimately a legal document. For Texas commercial properties, this preliminary report is the foundation of your future ownership, detailing exactly what the title company is—and is not—willing to insure.
Reading a title commitment can feel like navigating a maze of legal jargon, but spotting these crucial warning signs early can save your deal.
- The Disappearing Act: Discrepancies in Schedule A
Schedule A is the “who, what, and where” of the transaction. It defines the current owner of record, the legal description of the property, and the estate being sold.
- The Red Flag: The legal description on the title commitment does not match the legal description in the Purchase and Sale Agreement (PSA).
- The Risk: Commercial properties are often made up of multiple parcel numbers or complex metes-and-bounds descriptions. If the title company missed an adjacent lot or generated a report based solely on a street address, your future development or property use could be compromised.
- The Fix: Always overlay the commitment’s legal description with a recent, ALTA/NSPS land survey to ensure every inch of the land you are paying for is being conveyed.
- The Exclusions Trap: Schedule B Exceptions
Schedule B lists the standard and specific exceptions to the title insurance policy. These are conditions, encumbrances, or third-party rights that the title company will not cover.
- The Mineral Reservation: Texas is historically a mineral-heavy state. It is very common to see prior deeds reserving oil, gas, and other mineral rights. Since the mineral estate is dominant, an implied right of ingress and egress exists allowing the holder of the subsurface estate to use some portion of the surface to test and drill for minerals. The use must be reasonable and they cannot impede the surface use or destroy existing structures. Usually if the right was reserved a long time ago then all the minerals in the land have been extracted or are not present today, so research is needed to determine whether this is indeed the case or surrounding properties have existing extraction equipment on them, which indicates there is risk that the subsurface estate owner may want to use the property being sold to drill for minerals.
- The Survey Exception: Title commitments typically come with a standard printed exception for “discrepancies, conflicts, or shortages in area or boundary lines”. If you fail to supply an adequate, acceptable survey, the title company will maintain this exception, meaning your policy won’t cover boundary disputes or encroachments.
- The Encroachments: A careful review might reveal utility, drainage, or ingress/egress easements. A red flag arises when these easements cut through the buildable footprint of the property, restricting your ability to expand or develop. Generally, if this is the case the local government or easement owner will provide written permission to build through their easement in whole or in part if it is not being used. Sometimes this permission is granted gratis or sometimes it must be purchased.
- The Unresolved Requirements: Schedule C
While Schedule B tells you what won’t be covered, Schedule C outlines the requirements that must be met before the title policy can be issued. These are conditions the seller must clear before the title company will hand over a clean title.
- Unreleased Deeds of Trust and Mortgages: It is remarkably common to see paid-off, but unreleased, mortgages from previous owners. If the title company requires a release of lien, but the prior lender is out of business or the seller cannot track down the trustee, it can delay or sink the closing. There are numerous work-arounds on this, and some involve a reduction in the purchase price for the increased risk, and sometimes adding the issue to an exception in Schedule B is satisfactory to all parties.
- Mechanic’s Liens and Tax Liens: Any outstanding ad valorem (property) taxes, city tax liens, or contractor/mechanic’s liens must be resolved by the seller at or before closing. If a long list of liens exists, you must ask if it is realistically feasible for the seller to clear them all prior to the closing date. Generally the seller will bond around such liens or reduce the purchase price accordingly.
- Pending Civil Actions and Lawsuits: Watch for notices of pending litigation (lis pendens) or unresolved court judgments against the seller or the property. A judgment against a previous owner could cloud the title, and you cannot legally transfer unmarketable title without resolving these claims. Judgments can remain on record for up to 20 years against the seller.
Why You Need Legal Counsel for Commercial Acquisitions
Real estate agents and brokers are excellent at negotiating the economic terms of a commercial deal, but they are not legally permitted to interpret the long-term implications of deed restrictions, zoning limitations, or complex mineral reservations. In Texas, overlooking even a small detail in a title commitment can destroy the business case for your purchase.
Identifying these issues early in the transaction gives your legal advisor time to negotiate corrective actions with the seller, obtain necessary title policy endorsements (such as the T-19 Endorsement for commercial/zoning issues), or invoke contractual title objection periods. A clear-to-close should mean your investment is legally secure, not that you’ve inherited a hidden, expensive liability.