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As an Arizona real estate lawyer I have met with hundreds of people who have questions about real estate transactions they are involved in or considering getting involved in. Many of these questions surround the myriad of documents that are typically associated with the purchase of real estate. One of these documents is the Preliminary Title Report.

Most people who purchase real estate will review dozens of documents that they are expected to understand before closing the deal. The Preliminary Title Report is prepared by the title company selected by the parties and/or the lender who will be financing the purchase, and it constitutes an offer on the part of the title insurance company issue a title insurance policy covering the real estate at issue, subject to the exceptions stated in the report.

The exceptions really are the primary points of interest for the buyer who is evaluating a property, and buyers should reserve the right to cancel the transaction pending the opportunity to review and approve the title report and the stated exceptions. These exceptions may indicate potential problems with the property, so it is vitally important for the report to be carefully reviewed and understood as soon as it is received. The exceptions identified in a Preliminary Title Report are the same items that will be shown as exceptions to coverage in the title insurance policy upon closing, subject of course to changes that may occur before the time of closing (hence the designation as “preliminary”).

The report is issued in response to an application for title insurance,typically for the purpose of facilitating due diligence requirements and confirming the availability of a policy in a form and content approved by the parties to the transaction. In some instances a party may wish to understand what defects or problems exist associated with title to a certain property, but not necessarily in connection with a contemplated sale or purchase. If that is the case, instead of requesting a Preliminary Title Report, the party should consider a Condition of Title Report, which will identify the same items that would be listed as exceptions, and which is generally less costly.

Significantly, the Preliminary Title Report disclaims liability and typically states that it is being provided solely to facilitate the subsequent issuance of a title insurance policy. Prior to that issuance, the title insurer purports to assume no liability for errors in the report. In other words, any claim asserting a defect in title must be made under the title policy and not the Preliminary Title Report. The Preliminary Title Report includes a number of items, including the exceptions referenced above. These items include:

The legal interest interest in the property that is to be covered.
The legal owner of the estate or interest who is to be insured under the policy if and when it is issued.
The legal description of the parcel of land involved.
The exceptions, including liens, judgments, claims, encumbrances and other risks or potential risks, which will not be insured against if a title policy is issued.

Many begin the dream of becoming an entrepreneur by running their business out of their home. Reason can range from saving on expenses, or they simply do not need a lot of space to run their business. For Jennifer Manriquez of the Bilingual Fun Co., she found working from home provided a perfect balance between family and career. “At the moment, the home-based setup is the right balance for me. With my young children’s busy schedules and daily lives, the flexibility it provides me is definitely worthwhile.”The reality of a home based business owner is facing the day they outgrow their home office. Unfortunately for some, that day arrives much faster than expected. Therefore, it is important to remain sensitive to the signs that your home is no longer the place for an office. Have a plan in place to identify the warning signs so that you can be prepared.Product based businesses can easily expand beyond the walls of a home. When the dining room table and/or family room have become your warehouse, this may be a sign you need a separate warehouse or possibly expand to a store front.The flow of customers and vendors through your front door may also be an indication that an alternate location may be needed. The increased traffic may be an issue for your family, but many neighborhoods and homeowners associations do not permit this type of traffic. It can also be an issue with your business and/or homeowners insurance and the amount of liability coverage for which you are protected.An outside office may be more conducive if you struggle separating yourself from your work. If you find you are sneaking into your office after dinner to catch up on a few things or you spend a few hours here and there on weekends working on projects. For some, it is easier to have a defined separation between work and home locations.As your business grows, there may come a point that you need to add staff. A home-based business can pose many challenges if you need your employees to work in close proximity to yourself. As Jennifer Manriquez sees in her plans, “I envision more space for additional employees one day. I have found that I am more productive if I am able to delegate some of the tasks that are very time consuming. I would like to have an office space specifically for my own staff so that they have the resources, materials, and space for completing the necessary work”. Again, your homeowner’s policy may not cover liability exposures for your employee’s, therefore; you will need to have a separate work location once you bring employees onboard.When you get to the point of exploring possible locations, assess what type of an office you need. Look down the road for future needs to prevent frequent moves. Will you be adding staff within the next year or two? Will you need additional space for additional equipment as your business grows? If so, keep that in mind so you have a location for expansion, otherwise, you will incur additional costs and headaches in moving.Consulting with a commercial real estate agent will provide you with the expertise to find a location to suit your needs and help negotiate the best cost per square foot. They will also help navigate the many contractual agreements to consider in a lease, such as, build-out expenses, utilities, security, maintenance, and rate increases. Successfully choosing your new location for your business will help your business become more successful.