How to Stay Ahead of Commercial Underwriter Concerns in North Carolina

Commercial real estate deals in North Carolina don’t just carry higher price tags—they also come with layered ownership, complicated histories, and greater title exposure. A smooth closing depends on anticipating what your title insurer is looking for. Underwriters aren’t there to block the deal—but they are there to protect the policy. Understanding what sets off their radar is the first step toward a smoother close.

Common red flags—and how to proactively address them:

Complex Entity Structures

Commercial properties are often owned by layered LLCs, trusts, or investment vehicles—especially in multistate portfolios. Underwriters will look for:

●      Certificates of good standing

●      Operating agreements and amendments

●      Resolutions or consents authorizing the transaction

●      Clearly identified signatories

Key Tip: If the ownership structure has changed recently (due to new members, mergers, or reorganizations), highlight this in your title request. It builds trust and prevents last-minute underwriting delays.

Off-Record Agreements or Use Rights

North Carolina is a “pure race” state when it comes to recording matters, meaning the first person to record their interest in a property wins—even if someone else had a prior claim. But underwriters are still concerned about agreements that exist off-record and impact title, especially if:

●      A tenant has unrecorded rights to use parking or common areas

●      A shared driveway isn't documented

●      A REA governs signage, hours, or permitted uses

Key Tip: If the buyer is relying on access, utilities, or shared services via an unrecorded document, flag it immediately. Underwriters may require it to be recorded, summarized in the commitment, or excluded from coverage.

Active or Recent Construction

Construction equals lien risk, and in NC, that risk can arise even before a lien is filed, through the mechanic’s lien statutes in N.C.G.S. § 44A. Insurers will ask:

●      Has a Notice to Lien Agent (NLA) been filed and served?

●      Are lien waivers complete and properly executed?

●      Are any unpaid invoices pending?

Key Tip: Construction liens are one of the most common causes of post-closing title claims. The earlier you identify construction on-site, the more time you’ll have to collect waivers or resolve NLA issues.

Survey and Site Conflicts

Surveys don’t just verify boundaries, they can identify red flags such as:

●      Unrecorded encroachments

●      Buildings over lot lines

●      Shared driveways with no written easement

Key Tip: A recent ALTA survey that matches legal and physical reality can often unlock affirmative endorsements. An outdated or vague survey might generate broad exceptions that can jeopardize your client’s lender coverage.

Zoning and Land Use Concerns

Insurers want to know the use of the land is lawful and insurable—not just today, but post-closing. You’ll need clarity around:

●      Whether the current or proposed use conforms to zoning

●      Any conditional approvals or variances

●      Split-zoned parcels or overlay districts

Key Tip: Provide a zoning letter, board approval, or site plan as early as possible. Without documentation, you risk a zoning exception or even a full decline of endorsement.

Environmental Liability

While title insurance doesn’t cover environmental contamination, it does care about any recorded notices or land-use restrictions tied to cleanup obligations.

Key Tip: If there’s a known brownfield or ELUR (Environmental Land Use Restriction), disclose it immediately. Some insurers will offer limited coverage, but only if a full file is provided.

Bottom Line: Red flags don’t mean “no.” They mean “not yet.” 

The key is identifying them early, working with your underwriter transparently, and locking in solutions that satisfy all parties.

Have Questions?

As your go-to partner for closings across North Carolina, our team is here to answer any questions you have about underwriting red flags.