Typically, a commercial title insurance policy is put in place to insure the fee simple interest of the property owner or its lender(s). Although it provides comprehensive, effective protection for most commercial properties, on its own, this type of policy may overlook one important area — that of tenants.
Commercial tenants often sign a lease of significant duration and make costly leasehold improvements. If the landlord’s title is ever called into question or the permitted use (as disclosed to the insurer) under the lease is prevented because of a matter covered under the policy, the tenant may be exposed to significant risk and potentially devastating losses without proper coverage in place.
Why a Leasehold Endorsement?
A Leasehold Endorsement provides coverage for losses that are above and beyond the usual coverage in a commercial owner’s or loan policy and is available for both a tenant and its lender. FCT adds this endorsement with every leasehold interest we insure. A tenant should ensure they have a Leasehold Endorsement in place as part of its title insurance policy, particularly in the case of a long-term lease or where they plan to spend a significant amount on improvements to the commercial property during the course of the lease. Examples include construction of a building under a ground lease, major capital improvements, significant alterations to a building, etc.
The Insured will receive the same great coverage provided in an FCT title insurance policy, plus the Leasehold Endorsement provides the following additional coverage that includes:
- Transportation of tenant’s personal property to a new leased space, up to 200 km away
- Rent payments due to the real landlord because the tenant made payments in good faith to someone other than real landlord due to fraud, impersonation, title defect, etc.
- Payment of rent based on the terms of the lease that the tenant must continue to pay to the landlord notwithstanding the tenant is no longer in possession
- Damages claimed by subtenants who are dispossessed
- Payment of improvement costs paid out by tenant if not substantially completed when evicted, including:
- Architect, engineering, and construction management fees
- Environmental testing fees and reviews
- Payment of tenant’s reasonable relocation costs, including agent fees, higher rent, etc.
Every commercial transaction is unique. A title insurance policy enhances a legal professional’s advice, while also providing the client with the best possible coverage available.
The FCT group of companies, based out of Oakville, Ontario, is a leading provider of real estate technology in Canada, delivering data-driven solutions spanning residential and commercial title insurance, default and recovery, and mortgage processing and valuation services. FCT serves approximately 450 lenders, 43,000 legal professionals and 5,000 recovery professionals, as well as mortgage brokers, real estate agents and builders, nationwide. FCT is a subsidiary of First American Financial Corporation (NYSE: FAF), one of the largest title insurers in the United States with a global presence.
FCT is proud to be certified as a Great Place to Work by The Great Place to Work® Institute and has been named as one of Canada’s Top 50 Best Workplaces for eight consecutive years (2015-2022).