Title and Survey Due Diligence Guide

What Is Title and Survey Due Diligence in Commercial Real Estate?

Title and survey due diligence is the process of verifying legal ownership, identifying encumbrances, and confirming physical boundaries before closing a commercial real estate transaction. Unlike residential purchases where title review is largely routine, commercial deals involve layered ownership structures, complex easements, and property boundaries that directly affect value and development potential.

For CRE investors, title and survey defects can delay closings by weeks, reduce property value by hundreds of thousands of dollars, or kill deals entirely. A disciplined approach to title and survey review protects your investment and satisfies lender requirements for acquisition financing or permanent loans.

This guide covers every step of the title and survey due diligence process, from ordering the title commitment to resolving defects before closing. Whether you are acquiring a multifamily complex, office building, or industrial property, these procedures apply to virtually every commercial transaction.

What Does a Title Commitment Include and Why Does It Matter?

A title commitment is the title company's written pledge to issue a title insurance policy, subject to specific conditions and exceptions. It is the single most important document in your due diligence package because it reveals the current state of legal ownership and every recorded claim against the property.

Every title commitment contains three schedules:

Schedule A lists the proposed insured, the type of policy (owner's or lender's), the policy amount, the legal description, and the current vested owner. Verify that the seller's name matches exactly, as discrepancies can indicate fraud or chain-of-title breaks.

Schedule B-I contains the requirements that must be satisfied before the policy will be issued. These typically include paying off existing mortgages, obtaining releases of liens, recording the deed, and providing proof of entity authority for LLCs or corporations.

Schedule B-II lists the exceptions from coverage. These are items the title company will NOT insure against. Standard exceptions include survey matters, rights of parties in possession, unrecorded easements, and mechanic's liens. Negotiating the removal of standard exceptions is a critical part of the process and often requires an ALTA survey.

What Are the Most Common Title Exceptions in Commercial Transactions?

Title exceptions fall into two categories: standard (boilerplate) exceptions that appear on every commitment and special exceptions specific to the property. Understanding both categories helps you evaluate risk and negotiate removals.

Standard exceptions include survey matters not shown by public records, rights of parties in possession other than the owner, unrecorded mechanic's liens, taxes and assessments not yet due, and special assessments. Most standard exceptions can be removed by providing an ALTA survey, obtaining tenant estoppels, and confirming no recent construction work.

Special exceptions are unique to the property and require individual analysis. Common special exceptions include:

• Easements for utilities, access, drainage, or shared parking
• Deed restrictions or restrictive covenants limiting use
• CC&Rs (covenants, conditions, and restrictions) from subdivisions or planned developments
• Mineral rights reservations from prior conveyances
• Tax liens or judgment liens against the seller
• Lis pendens (pending lawsuits) affecting the property
• Building setback lines established by plat or zoning

Each special exception requires review against your intended use. An easement running through a proposed building footprint, for example, could prevent development entirely. Cross-reference every exception with your zoning and entitlements analysis to identify conflicts early.

How Do Lien Searches Protect CRE Investors?

A lien search goes beyond the title commitment to identify all recorded and sometimes unrecorded claims against the property and its owner. Lenders require comprehensive lien searches as a condition of commercial loan approval, but buyers should conduct their own independent searches as well.

The primary lien search categories include:

Judgment and tax lien searches cover federal and state tax liens, civil judgments, and court orders against the seller entity and its principals. These searches typically cover the county where the property is located plus any counties where the seller is organized or headquartered.

UCC (Uniform Commercial Code) searches reveal security interests in personal property and fixtures. A UCC-1 filing on HVAC equipment, elevators, or other fixtures means that equipment may be encumbered by a creditor who could remove it after closing.

Mechanic's lien searches are especially important for properties with recent construction or renovation. In most states, contractors and suppliers can file mechanic's liens for unpaid work even after the property changes hands. Review the prior 6 to 12 months of permits and construction activity.

Bankruptcy searches check whether the seller or any entity in the ownership chain has pending or recent bankruptcy filings. A property sold by a debtor in bankruptcy without court approval may be clawed back by the bankruptcy trustee.

What Is an ALTA Survey and When Do You Need One?

An ALTA (American Land Title Association) survey is a detailed boundary and property survey that meets specific national standards jointly developed by ALTA and the National Society of Professional Surveyors (NSPS). It is the gold standard for commercial real estate transactions and is required by virtually every commercial lender.

An ALTA survey shows:

• Boundary lines with precise metes and bounds descriptions
• Building footprints and improvements with setback dimensions
• Easements (recorded and observable) plotted on the survey
• Encroachments of improvements onto neighboring parcels or vice versa
• Flood zone determination and FEMA map references
• Access points including curb cuts, driveways, and road frontage
• Utility locations including water, sewer, electric, gas, and telecom
• Zoning classification and setback compliance verification
• Parking counts and site features (loading docks, signage, etc.)

The 2021 ALTA/NSPS Minimum Standard Detail Requirements include a menu of optional "Table A" items that buyers and lenders can select. Common Table A items for commercial transactions include items 1 (monument placement), 6 (zoning report), 8 (wetland delineation boundaries), 11 (utilities), and 19 (plottable offsite easements).

Cost and timing: ALTA surveys for commercial properties typically cost $3,000 to $15,000 depending on property size, complexity, and location. Standard turnaround is 2 to 4 weeks, though expedited service is available for an additional fee. Order the survey immediately upon contract execution to avoid delays.

How Do ALTA Surveys Differ from Other Survey Types?

Not all surveys provide the same level of detail. Understanding the differences helps you order the right survey for your transaction and avoid paying for unnecessary work or, worse, getting insufficient information.

A boundary survey simply establishes property corners and lines. It does not show improvements, easements, or encroachments. A location survey adds building footprints but lacks the detail required by title companies to remove standard survey exceptions. An as-built survey shows improvements as constructed and is useful for construction projects but may not meet ALTA standards.

Only a full ALTA/NSPS survey provides the comprehensive detail required by commercial lenders and title companies. If you are obtaining commercial financing, the lender will almost certainly require a current ALTA survey or an update to an existing one.

Survey recertification vs. new survey: If the seller has an existing ALTA survey, you can often have it recertified (updated) by the original surveyor for 40% to 60% of the cost of a new survey. This only works if the survey is recent (typically under 3 to 5 years old) and no significant changes have occurred on the property.

What Are Common Boundary Disputes and How Do You Resolve Them?

Boundary disputes arise when physical improvements, fences, or use patterns do not align with legal boundary lines as shown on the survey. These disputes can range from minor fence encroachments to major building overlaps that threaten the transaction.

Common boundary dispute scenarios include:

• A neighboring building or fence that encroaches onto the subject property
• The subject property's improvements encroaching onto a neighbor's parcel
• Conflicting legal descriptions between adjacent parcels creating gaps or overlaps
• Prescriptive easements claimed by neighbors based on long-term use
• Disputed access roads or shared driveways without recorded easements

Resolution strategies depend on severity:

For minor encroachments (a fence a few inches over the line), the simplest solution is an encroachment agreement between the parties, recorded against both properties. For more significant issues, you may need to negotiate a boundary line adjustment, obtain a quitclaim deed for the encroaching area, or require the seller to remove the encroachment before closing.

Critical encroachments that affect the building footprint or violate setback requirements may require title endorsements, zoning variances, or even deal restructuring. Discuss all encroachments with your title company and attorney during the due diligence period to determine the best path forward. For properties with complex due diligence requirements, consider engaging a specialized real estate attorney.

What Is the Difference Between Owner's and Lender's Title Insurance?

Title insurance protects against losses from defects in title that existed at the time of closing but were not discovered during the title search. Unlike other insurance that covers future events, title insurance covers past events and hidden defects.

Lender's title insurance protects the lender's mortgage interest in the property. It is required by every commercial lender and covers the outstanding loan balance, which decreases over time as the loan is paid down. It does NOT protect the borrower's equity.

Owner's title insurance protects the buyer's full equity interest in the property. It is optional but strongly recommended for every commercial acquisition. The policy amount equals the purchase price and remains in effect for as long as you (or your heirs) own the property.

Need help navigating title requirements for your deal? Schedule a free consultation with our commercial lending team.

Enhanced policies offer broader coverage than standard policies. ALTA Enhanced Owner's Policies cover post-closing risks including certain zoning violations, building permit issues, subdivision compliance, and encroachment of improvements built after closing. The additional premium (typically 10% to 20% more) is well worth the expanded protection.

Simultaneous issue discount: When you purchase both an owner's and a lender's policy at the same time, the title company typically offers a significant discount on the lender's policy. In many states, the simultaneous issue rate for the lender's policy is 60% to 70% less than a standalone policy.

Cost ranges: Title insurance premiums for commercial properties vary by state, property value, and policy type. Expect to pay $2,500 to $25,000 or more for owner's coverage on a typical commercial acquisition. Some states regulate rates (making them uniform), while others allow competitive pricing.

How Do You Resolve Title Defects Before Closing?

Title defects discovered during due diligence must be resolved before closing or accepted as known risks. The resolution process follows a structured approach that balances timing pressure with thorough risk mitigation.

Step 1: Identify and categorize defects. Review the title commitment, lien searches, and ALTA survey together. Classify each issue as: (a) must be resolved before closing, (b) can be resolved through endorsements or indemnities, or (c) acceptable as is.

Step 2: Deliver a title objection letter. Most purchase agreements require the buyer to deliver written title objections within a specified period (typically 5 to 15 days after receiving the commitment). The objection letter should specifically identify each defect and state the required cure.

Step 3: Seller cures defects. The seller then has a cure period (typically 15 to 30 days) to resolve objections. Common cures include paying off liens, obtaining lien releases, recording corrective deeds, negotiating easement modifications, and providing affidavits.

Step 4: Title endorsements. For issues that cannot be fully cured, title endorsements provide additional coverage. Common commercial endorsements include:

• ALTA 9 (Comprehensive): Covers restrictions, encroachments, and mineral rights
• ALTA 3.1 (Zoning): Confirms zoning compliance for a specific use
• ALTA 28 (Easement): Insures against damage from easement exercise
• ALTA 17 (Access): Confirms legal access to a public road
• ALTA 19 (Contiguity): Confirms adjacent parcels form a single site

Step 5: Escrow holdbacks. When a defect cannot be resolved before the closing deadline, the parties may agree to hold a portion of the purchase price in escrow until the defect is cured. Typical holdback amounts are 150% to 200% of the estimated cure cost.

What Does the Complete Title and Survey Due Diligence Timeline Look Like?

Timing is everything in commercial acquisitions. Title and survey due diligence tasks must be initiated immediately upon contract execution because delays cascade through the entire closing process. Below is a typical timeline for a standard commercial acquisition.

Weeks 1 to 2: Order the title commitment, ALTA survey, and lien searches on day one. Begin entity formation or verification if purchasing through an LLC. Contact the title company to discuss Table A items needed for the survey.

Weeks 2 to 3: Receive and review the title commitment. Begin reviewing special exceptions and cross-referencing with the property's appraisal and zoning analysis. Prepare preliminary title objection list.

Weeks 3 to 4: Receive the ALTA survey. Compare survey findings against title commitment exceptions. Identify any encroachments, boundary issues, or easement conflicts. Deliver formal title objection letter.

Weeks 4 to 6: Seller works to cure title defects. Negotiate title endorsements for issues that cannot be fully resolved. Coordinate with lender on title requirements for the loan commitment.

Week 6 to closing: Receive updated title commitment showing cured defects. Review and approve final title commitment and survey. Confirm title insurance premiums and endorsement costs. Coordinate with closing agent for funding.

Ready to move forward with your commercial acquisition? Contact our team for financing guidance through the due diligence process.

What Should You Budget for Title and Survey Costs?

Title and survey costs represent a meaningful portion of closing expenses but are essential investments in deal security. Understanding typical cost ranges helps you build accurate proforma projections.

Total title and survey costs for a typical $2M to $10M commercial acquisition range from $10,000 to $50,000. While this may seem significant, a single undetected title defect or boundary issue can cost far more to resolve after closing.

Most lenders require these costs to be paid at or before closing, though some allow title and survey deposits during the due diligence period. When budgeting, include a 10% to 15% contingency for additional endorsements or survey revisions that may be needed as the review process unfolds.

For financing your commercial acquisition with confidence, explore our acquisition loan programs or contact us directly for a consultation.

Frequently Asked Questions About Title and Survey Due Diligence?

How long does a title search take for commercial property? A commercial title search typically takes 5 to 10 business days for a standard property. Complex properties with long ownership histories, multiple parcels, or prior foreclosures may take 2 to 3 weeks. Expedited searches are available for 1 to 3 business days at a premium.

Can I use the seller's existing title policy instead of ordering a new search? No. A seller's title policy only covers defects existing as of the seller's purchase date. Any liens, judgments, or encumbrances recorded after that date would not appear. A new search covering the gap period is always required for acquisitions.

What happens if a title defect is found after closing? If you purchased owner's title insurance, the title company is obligated to defend against covered claims and pay losses up to the policy amount. Without title insurance, you bear the full risk and cost of defending your ownership or resolving the defect.

Is an ALTA survey required for all commercial loans? Most commercial lenders require a current ALTA survey or a recertification of an existing survey. Some portfolio lenders may waive the survey requirement for smaller loans or properties with recent surveys, but this is uncommon for transactions above $1M.

Who pays for title insurance in a commercial transaction? Payment responsibility varies by market and is negotiable. In many markets, the seller pays for the owner's policy and the buyer pays for the lender's policy. In other markets, the buyer pays both. Review local customs and negotiate this point in your purchase agreement.

What is the difference between a title search and title insurance? A title search is the research process of examining public records to identify the current ownership and any encumbrances on the property. Title insurance is a policy that protects against financial losses from defects that the search may have missed, including hidden risks like forgery, undisclosed heirs, or recording errors.

How do easements affect commercial property value? The impact depends entirely on the easement's type, location, and scope. A utility easement along a property boundary may have minimal impact, while an access easement through a parking lot could reduce usable space and value significantly. Always evaluate easements against your intended use and development plans.

Can title defects prevent me from getting a commercial loan? Yes. Lenders require clean, insurable title as a loan condition. Unresolved liens, boundary disputes, or ownership questions will prevent the lender from issuing a loan commitment. Most defects can be resolved during the due diligence period, but some may require extending the closing timeline or restructuring the financing.

Sources?

1. American Land Title Association (ALTA), "2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys," alta.org, 2021.
2. U.S. Government Accountability Office, "Commercial Real Estate: Characteristics of Loans and Property at Origination," gao.gov, 2024.
3. National Association of Realtors, "Commercial Real Estate Market Conditions and Transaction Costs," nar.realtor, 2025.
4. Federal Deposit Insurance Corporation, "Risk Management Examination Manual: Real Estate Lending Standards," fdic.gov, 2024.