Understanding the Commitment for Title Insurance
The Commitment for Title Insurance is a preliminary document issued by a title company when there is a bona fide order for one or more policies of title insurance. This document outlines the conditions of the property and any requirements that must be met before the title insurance policy is issued. The commitment is typically valid for ninety (90) days from its effective date.
Essentially, the Commitment for Title Insurance informs the prospective insured parties (e.g., buyers, lenders) about the condition of the property’s title and any exceptions or conditions that need to be resolved before the final policy is issued. The seller is usually required to provide the Commitment to the buyer as part of the sale contract. If the transaction involves a loan, the lender will also require a Commitment during the loan process.
Components of a Commitment for Title Insurance
A Commitment for Title Insurance is organized into four key schedules:
SCHEDULE A
This schedule outlines the basic details of the commitment, including:
- The effective date of the commitment.
- The names of the insured parties (e.g., buyer, lender).
- The sale price and loan amount.
- The type of estate or interest in the land (e.g., fee simple, leasehold).
- The name of the current titleholder.
- The legal description of the property in question.
SCHEDULE B
Schedule B lists any recorded exceptions that affect the property’s title, such as:
- Easements
- Restrictions
- Liens
- Mineral rights (e.g., oil and gas reservations)
- Ad valorem tax status (indicating taxes are paid through a specific year)
This schedule essentially limits the liability of the title insurance policy by identifying these exceptions.
SCHEDULE C
This schedule outlines specific requirements that must be fulfilled before the title insurance policy can be issued. These might include:
- Satisfying outstanding liens
- Providing certain documents or affidavits
- Resolving title defects
SCHEDULE D
Schedule D provides a disclosure of the title company’s and underwriter’s ownership, officers, and financial interests. It also details the premiums to be charged for the policies and identifies the recipients of these premiums, as required by state regulations.
Regulation and Standardization
All Commitment forms provided by title insurance underwriters are standardized in terms of content, although the formatting may vary slightly. The title insurance industry in Texas is regulated by state law, specifically under the Rules, Rates, and Forms for writing Title Insurance as established by the Texas Department of Insurance (TDI). These regulations ensure consistency and transparency across all title insurance commitments issued in the state.