What is included in a title insurance commitment regarding existing liens?

A title insurance commitment is a crucial document that outlines the terms of the title insurance policy that will be issued. It fundamentally serves to identify any existing liens, encumbrances, or title defects that may affect the ownership of a property.

The correct answer indicates that only those liens that are recorded are included in the title insurance commitment. This is significant because recorded liens are officially documented in the public records, making them a matter of public knowledge and legally binding upon subsequent purchasers or interest holders. Typically, the title insurance company conducts a search of public records to identify any such recorded liens that might affect the title, ensuring that the insured party is aware of these encumbrances before a transfer of ownership takes place.

Liens that are not recorded do not have the same protections and rights, which is why they are not considered in the title commitment. As a result, understanding that the commitment only reflects recorded liens helps property purchasers ascertain potential financial obligations or claims against the property, providing them with valuable information to make informed decisions.

This context plays an essential role in the due diligence process for any real estate transaction, ensuring that buyers are fully informed of all existing claims against the property that are recognized legally, which could impact their ownership rights.