A Title Commitment is a promise to issue an insurance policy on a piece of property. A Title Commitment is equivalent to a binder for other types of insurance, which commits, or binds, the insurance company to issue the policy as set forth in the commitment.
The Title Commitment is organized into five main parts:
Who is being insured—generally, the lender and any future investors are the insureds, along with the purchasers of the property, assuming an Owner's Policy is being issued.
The amount of the insurance—usually the loan amount for the mortgagee and the sales price for the owner.
What is being insured—the legal description of the property
What is required to insure the title
Proof of taxes paid.
Inchoate Lien Affidavit, also known as Sellers'/Owners' Affidavit, to be signed at closing, indicating that the Seller/Owner is not aware of any facts or circumstances which would adversely affect title to the property.
Cancellation of any open mortgages, judgments or liens that the abstractor found bearing against the property.
Survey of the property by a licensed surveyor or a survey waiver to be signed at closing.
What is not insured—those matters affecting the property which in some way limit the free use of the property, usually called “exceptions.” Most exceptions are customary and do not affect the marketability of the property. Some of the typical exceptions in a policy include:
Servitudes/Easements—the right, usually granted to a utility company, to make limited use of a portion of the property to serve the insured property, as well as neighboring properties.
Restrictions/Covenants—rules and regulations, usually established by the developer of the subdivision, which prohibit property owners in the subdivision from doing things which could have a detrimental effect on quality of life or property values.
Oil, Gas and Mineral Titles—in Louisiana, mineral rights are governed by an exceptionally complex set of laws. In most cases, therefore, the title company will not insure for mineral rights.
Miscellaneous exceptions—the title insurance may not cover any unusual findings about a piece of property; these exceptions will be pointed out by the title attorney.