Overview of a Title Commitment
A title commitment is a document issued by a title insurance company, typically after a review of certain publicly available records related to a property. It is sometimes referred to as a commitment for title insurance, depending on the jurisdiction. The title commitment outlines the terms and conditions under which a title insurance policy will be issued, the requirements that must be satisfied before the policy takes effect, and the exceptions that the policy will not cover.
The document is generally issued after a purchase agreement has been executed and before closing. It is not the title insurance policy itself—it is a preliminary document that reflects the title insurance company’s intent to issue a policy, subject to the stated conditions. Understanding what a title commitment contains and how to interpret its sections can help set expectations as the transaction moves toward closing.
What Is a Title Commitment?
A title commitment is a formal document in which a title insurance company indicates that is contemplates issuing a title insurance policy for a specific property, subject to the terms, conditions, and requirements set forth in the document. It is sometimes described as a preview of the general structure of the final title insurance policy.
Title Commitment vs. Title Insurance Policy
A common point of confusion involves the distinction between a title commitment vs title insurance policy. The commitment is the preliminary document, issued before closing, that describes what the final policy will cover and what conditions must be met first. The title insurance policy is the final coverage document, issued after closing, that provides indemnity coverage for certain matters affecting the title, subject to the policy terms. The commitment is sometimes thought of as the “offer”; the policy is the “insurance contract.”
Standard Forms
Many title insurance companies use standard forms distributed by the American Land Title Association (ALTA), while others use state-mandated or underwriter-specific forms, depending on the jurisdiction. The current standard form is the 2021 ALTA title commitment. The structure described below follows the ALTA format, which is the most widely used.
How to Read a Title Commitment
A standard title commitment is generally organized into several sections: Schedule A, Schedule B (which typically has two parts), and a Conditions section. Each section serves a different function in describing the proposed title insurance coverage.
Schedule A: Transaction Details
Schedule A of a title commitment contains the basic identifying information about the transaction and the proposed policy or policies (which may include an owner’s policy, a lender’s policy, or both, depending on the transaction). It typically includes the effective date of the commitment, the type of title insurance policy to be issued, the proposed policy amount, the name of the proposed insured, the name of the current owner of the property interest, and the legal description of the property.
The information in Schedule A is worth reviewing for accuracy. Discrepancies in names, policy amounts, or the legal description may need to be addressed before closing.
Schedule B-I: Requirements
The first part of Schedule B lists the requirements that must be satisfied before the title insurance policy can be issued. These are conditions that the title insurance company has identified as necessary for the transaction to proceed to closing and for the policy to take effect.
Common requirements may include the execution and recording of a deed transferring ownership, the payoff and release of existing liens, encumbrances,or mortgages on the property, the payment of outstanding property taxes or assessments, the payment of the title insurance premium, and the delivery of other documentation the title insurance company has identified as necessary. In some transactions, the title insurance company may also require an affidavit, a survey, or documentation evidencing authority to convey the property.
Many of these requirements are standard items that are typically coordinated as part of the ordinary closing process. Others may involve additional steps from the buyer, the seller, or other parties involved in the transaction.
Schedule B-II: Exceptions
Schedule B of the title commitment also includes a list of exceptions—matters that the title insurance policy will not cover. These are items that the title insurance company has identified during its review of publicly available records and that would be excluded from coverage under the policy if issued.
Exceptions generally fall into two categories. Standard exceptions are broad exclusions that appear on most title commitments, such as matters that would be disclosed by an accurate survey, rights of parties in possession, and easements or claims not shown in the public records. Special exceptions are specific to the property and are based on items identified during the title review, such as recorded easements and rights-of-way, restrictive covenants, homeowners’ association declarations, mineral reservations, or other recorded instruments.
Special exceptions may also include recorded encumbrances or liens that are not intended to be cured, satisfied, released, or paid off as part of the transaction and that would remain affecting the property after closing.
The exceptions section is a particularly important part of the title commitment, describes the scope of coverage that would be provided under the policy if issued. Matters listed as exceptions would not be covered by the title insurance policy. In some cases, certain standard exceptions may be modified or omitted if additional requirements are met, such as obtaining a satisfactory survey or affidavit, subject to the title company’s underwriting requirements and applicable form provisions. Whether a particular encumbrance or lien is addressed as part of a transaction depends on the transaction structure and the parties’ agreements.
Conditions
The Conditions section of the title commitment contains general terms, definitions, and provisions that apply to the commitment itself. This section typically addresses the title insurance company’s liability, the commitment’s expiration, and the procedures that apply if a claim is made under the commitment. These conditions are generally uniform across commitments issued using the standard ALTA form.
The Title Commitment Process
The title commitment process generally begins after a purchase agreement has been executed. The title insurance company, or an affiliated title or settlement entity acting on its behalf, conducts a review of publicly available records, including deeds, mortgages, liens, easements, judgments, tax records, and other instruments that may affect the property’s title. Based on this review, the title insurance company evaluates and the information identified for purposes of preparing a title commitment, subject to its underwriting guidelines and the information available at the time of review.
Once issued, the title commitment is typically provided to the buyer, the seller, the lender (if applicable), and their respective representatives. The parties then work to satisfy the requirements listed in Schedule B-I and review the exceptions in Schedule B-II.
What Happens After the Title Commitment Is Issued
After the title commitment is issued, the closing team generally works to address the listed requirements. This may include coordinating payoff statements for existing liens, obtaining necessary documentation, and addressing matters identified in the commitment. What happens after title commitment issuance depends on the complexity of the transaction, the number and nature of the requirements, and the responsiveness of the parties involved.
Once all requirements have been satisfied and the transaction closes, the title insurance company may issue the final title insurance policy in accordance with the terms described in the commitment.
Timeline Considerations
The time between the issuance of a title commitment and closing varies by transaction. How long to close after title commitment depends on factors such as the complexity of the title, the number of requirements to be satisfied, lender processing timelines, and local custom. There is no standard timeframe, and individual transactions may vary.
How long is a title commitment good for also depends on the title insurance company and the jurisdiction. Commitments typically have an expiration period stated in the Conditions section. If the commitment expires before closing, an updated commitment may need to be issued.
Who Typically Pays for the Title Commitment
Who pays for title commitment costs can vary by state, local custom, and the terms negotiated in the purchase agreement. In many jurisdictions, the cost of the title commitment may be included as part of the overall title-related charges paid at closing, depending on local practice and transaction structure. Which party pays for these fees—the buyer, the seller, or some combination—may depend on regional practice and the terms of the transaction.
In areas where the seller customarily pays for the owner’s title insurance policy, the cost of the title commitment may be reflected as part of that charge . In other areas, the buyer may be responsible for some of these costs.
Practices regarding the allocation of titlerelated costs can vary significantly by state, locality, transaction type, and negotiated agreement, and should be confirmed based on the specific transaction circumstances.
