Title Commitment in Texas Real Estate Transactions
The title commitment is a crucial document in most Texas real estate transactions, but many property buyers, especially residential home buyers, may not fully understand what it does or why it is so important. Title insurance is not required to close a real estate deal, but to make an analogy that many Texans will appreciate, a title policy is like a gun: it’s better to have it and not need it than to need it and not have it.
Most contracts to purchase real property will be contingent upon several items, one of them being a review of the property’s title by the prospective buyer. Within a few days after the execution of the agreement, the title company will deliver the title commitment to the parties, and then the buyer will have a relatively short period of time (15 days is common in residential deals, possibly more for commercial transactions) to review the title commitment and to make any objections to the commitment (and, by extension, the proposed title insurance policy).
The Texas title commitment consists of four separate schedules: Schedule A sets forth the names of the parties, the title holder, the proposed policy amounts, the prospective insured, and the legal description of the property. Schedule B is a list of items that the title insurance company intends to exclude from coverage under the policy. Schedule C sets out issues that the title company wants to resolve before closing and issuing the policy. Schedule D is a disclosure of fees charged and paid to others in the course of issuing the policy as well as information about the title company. The buyer should always have a qualified real estate attorney review the title commitment and the documents referenced by the commitment and, if necessary, make the proper objections to the title company (or even contemplate terminating the contract if there are unsolvable problems with the title).
Most title objections will surround Schedule B, which lists items to be excluded from coverage under the ultimate policy. Schedule B will list all exceptions to the property’s clean fee simple title, including easements, setback lines, boundary encroachments or irregularities, mineral interests, leases, and others. The buyer’s attorney should object to any leases that are expired, easements that do not appear on the survey, declarations of restrictions that have been terminated, or any other matter that is not a proper exception to title. The buyer can also request, for an additional premium, the amendment of the so-called boundary exception so that it is reduced to “shortages in area,” which gives affirmative coverage for any boundary discrepancies or encroachments listed on the survey.
The list of items on Schedule C is also important to review, as it contains a list of items that must be cleared before the title company will issue the policy. Schedule C can cause disagreements between buyers and sellers, particularly if there is significant money required to release a lien, or catch up with back tax payments, or collect signatures from heirs or other interested parties.
A good real estate attorney can help the buyer negotiate with the seller and the title company to resolve all of these issues and ensure a smooth closing and a clean transfer of title.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our real estate practice can be found here.