Chicago Title Commercial Reference Guide

2024 ARIZONA COMMERCIAL TITLE REFERENCE GUIDE

Chicago Title is a member of the FNF family of companies and the nation’s largest group of title companies and title insurance underwriters. Collectively, we issue more title insurance policies than any other title company in the United States. Our standings with third-party rating agencies are a testament to our longevity, financial strength, and claims paying ability. We have consistently ranked on the FORTUNE 500® list.

ARIZONA REAL ESTATE LAWS & CUSTOMS

CUSTOMARY FEE SPLIT

COMMERCIAL ACTIVITY REPORT REFERENCE GUIDE

Chicago Title’s Commercial Activity Report (CAR Report) is a comprehensive informational resource offered to clients on a weekly basis since its inception in 2011. The report was originally created to track commercial foreclosures but has adapted over the years to include New Notice of Trustee Sales, Upcoming Trustee Sales, Trustee Sale Results, Commercial Sales, Commercial Loans, and Commercial Refinance data.

NEW NOTS - NEW NOTICE OF TRUSTEE SALE RECORD

• Hyperlinked APN’s

• New NOTS posted 10-15 days following recording

• Owner phone numbers in comments when hovering over “Owner”

UPCOMING TRUSTEE SALES

• Next 90 days

TRUSTEE SALES RESULTS

• All properties not still on “Upcoming” list

• “Owner” column = previous owner

• “Foreclosure Stage” definitions

• “Sold” = loan paid off, new owner

• “Released” = loan paid off, same owner

• “Canceled” = brought loan current, but not paid off

• “Bank Owned” = bank took the property back

• “3rd Owned” = investor purchased

COMMERCIAL SALES

• COMMERCIAL LOANS

• COMMERCIAL REFI’S

Source: PropertyRadar, Maricopa County, $50,000 minimum

PREMIER SERVICES

EXPERIENCE THE POWER OF OUR ALL NEW PREMIER SERVICES FEATURING:

• New Advanced Search capabilities, helping you locate that hard-to-find property

• Predictive Address Search eliminates the guesswork when searching for a property

• State-of-the-Art Advanced Searches, giving you the option of searching by Address,

• Owner, APN or Street Look-Up

• With the interactive map feature you can select any property on the map to make sure you have the correct property

• Quicker registration helps you get to what you need faster

• Open an order quicker and easier which helps get the Preliminary Title Report in your hand where it should be

• Uses Responsive Technology so you can work anywhere and on any device, including Desktop Computers, Tablets and Smart Phones

THE ALL NEW PREMIER SERVICES WILL REVOLUTIONIZE THE WAY YOU DO BUSINESS.

To request your report, please contact any of our Commercial Sales team members and include the property address or APN.

PROPERTY INFORMATION CHECKLIST

‡ Copy of Vesting Deed - Confirms current owner

‡ Copy of Affidavit of Value - Gives Price Paid and down payment

‡ Copy of Deed of Trust - Gives Information on type of loan

‡ CCR’s (If applicable) - Details owners responsibilities and HOA’s

‡ Check Property Taxes - Check status of Property taxes

‡ Verify Parcel Numbers - If Parcel # changed, check for back taxes.

‡ Verify the number of parcels - Check for cross-collateralized parcels

‡ Verify Legal NOTS matches Legal in DOT - Establish the Priority of DOT

‡ Verify Lien position of Loan - Indicates the parcel may be smaller than the property the loan was originally recorded on

‡ Search for Partial Releases of the Original DOT - Verifies the assessor’s site is the same as the legal

‡ Run Owners Name for Tax Liens, etc.

‡ Look for Mechanics Liens, etc.

‡ Check Property Comparables

To request your report, please contact any of our Commercial Sales team members and include the property address or APN.

CONSTRUCTION LOAN UNDERWRITING

ITEMS NEEDED:

• Construction Loan Agreement - Necessary to determine terms of the loan (including disbursement process), required equity by lender and loan guarantors

• Sources & Uses of Funds - Necessary to determine where the funds for the project are coming from and to show how they are being used in relation to the development of the project

• Schedule of Loan Draws

• Project Description (may not be needed when full appraisal received)

• Appraisal

• Pre-Close Inspection – Used to determine if there are any pre-start issues that need to be considered.

• Project Budget - Necessary to determine the cost to develop the project. Will generally provide more detail than the sources and uses.

• General Contractor’s Construction Contract

• Current Financial Statements from all borrowers and loan guarantors for indemnification review purposes.

• Indemnity From Borrower in Their Official and Individual Capacity and any other party the Company deems necessary to support the coverage being requested by the proposed insured

• Invoices and Lien Waivers (may be required, depending on current status of construction)

COMMERCIAL ESCROW CHECKLIST

OPENING ESCROW

‡ Parcel #(s), legal description, address: Any or all

‡ Earnest Money: Must be “good funds”

‡ Purchase and Sale Agreement (PSA)

‡ Loan Amount (leave blank if all cash): $

CONTACTS (ADDRESSES, PHONE NUMBERS, EMAIL ADDRESSES, FAX NUMBERS)

‡ Buyer

‡ Seller

‡ Buyer’s Broker (include transaction coordinator / assistant if applicable)

‡ Seller’s Broker

‡ Lender (include processor if applicable)

‡ Loan Broker (if applicable)

‡ Buyer’s Attorney (include paralegal(s) if applicable)

‡ Seller’s Attorney

‡ Lender’s Attorney

‡ Surveyor

‡ 1031 Accommodator

DUE DILIGENCE (WHERE APPLICABLE)

‡ Survey

‡ Phase One

‡ Building Inspector

‡ Pest Inspection

‡ Appraiser

‡ Structural

‡ Utilities

‡ Soils Engineer

‡ CPOA (Commercial Property Owners Association): if applicable

COMMERCIAL ESCROW CHECKLIST (CONT.)

DURING ESCROW

‡ Critical Dates Letter: From Escrow

‡ Order Rental Tax Status (if applicable)

‡ Parties’ Organization Documents - may need 2 or more levels of organizational documents

‡ Lender Demand Statements

‡ FIRPTA Status

‡ Determine if Speculative Builder Tax is applicable

‡ Review and clear title issues

‡ Rent Roll(s)

‡ Estoppels (if applicable)

‡ SNDAs (Subordination and NonDisturbance Agreements)

‡ Contingency Waiver(s): Per Critical Dates Letter

‡ Title company inspection

‡ Indemnity Package if there is broken priority

‡ Survey

‡ Lender’s Documents

‡ Pro-forma Policy of Title

‡ Pre-Audit (Settlement Statement Review)

PRIOR TO CLOSING

‡ 1031 Documents (if applicable)

‡ Closing Instructions (Lender, Buyer, Seller) Use of Funds Clause

‡ Broker’s Commission Instructions

‡ Lender’s Commission Instructions

‡ Legal Fee Instructions (if applicable)

‡ Proceeds Instructions

POST CLOSING

‡ Closing Notices, settlement statements, and recorded document copies sent

‡ Title Policy issued

SPOTTING RED FLAGS ON A TITLE COMMITMENT

THE BEST WAY TO SPOT RED FLAGS ON YOUR TITLE REPORT IS TO READ IT THOROUGHLY!

Legal Description, Vesting, Buyer Name

Liens

Judgment Lien

Mechanic’s Lien

Tax Lien

Lis Pendens

Judgment

(Notice of) Trustee’s Sale

Old or Paid Off Deeds of Trust Never Reconveyed

Notice of Violation

Confirm these items are listed correctly.

A charge upon property for the purpose of securing the payment or discharge of a debt or obligation. Some, like Deeds of Trust are common. Others are Red Flags, like:

A statutory lien created by recording a judgment, or an abstract, ordering the payment of a sum of money is a Red Flag.

A statutory lien in favor of persons contributing labor, material, supplies, and so on to a work of improvement upon real property is a Red Flag

A tax lien is a legal claim against the assets of an individual or business that fails to pay taxes owed to the government and is a Red Flag. If the obligation is not satisfied, the creditor may proceed to seize the assets.

A recorded notice of the pendency of an action is a Red Flag.

A final determination in a court of competent jurisdiction of the rights of the parties to an action or proceeding is a Red Flag.

Foreclosure sale conducted by the trustee in the exercise of a power of sale is a Red Flag.

A Deed of Trust is a three party security instrument conveying title to land as security for the performance of an obligation. Also called “trust deed.” Watch out for old trust deeds from a previous owner (or sometimes the current owner if they have refinanced). Trust deeds listed that have already been paid, or that look like it was taken out by a previous owner and not reconveyed are Red Flags

These will sometimes be recorded by the fire department, the health department, or the local zoning enforcement division in situations where the property violates a local statute are Red Flags.

Not all Red Flags are bad, but they do need to be addressed. Contact your title representative or escrow officer for further assistance if you see one of these Red Flags on your Title Commitment.

TITLE INSURANCE COVERAGE

STANDARD VERSUS EXTENDED

Do you know which type of title coverage is right for your next transaction? Read below to view the differences between standard and extended coverage. Questions about how much coverage you need? Contact Chicago Title. Our experienced title and underwriting professionals will guide you.

Protection Against Hidden Risk Factors: Standard Extended Fraud, Forgery

Undisclosed Heirs

Mistaken Legal Representation

Defective Deeds

Confusion of Similar, Identical Names

Incomplete, Incorrect Delivery

Unwanted Litigation

Status (Marital, Corporate, Financial)

Powers of Agents

Errors in Public Records

Defects in Legal Proceedings

Competency (Minority, Incapacity)

Protection Against Loss By: Standard Extended

Title Vested Other Than Stated

Previous Undisclosed Defect, Lien, Encumbrance

Unmarketable Title

Priority of Insured Financing Document (Mortgage, Trust Deed)

Lack of Access

Construction Liens

TITLE INSURANCE COVERAGE (CONT.)

THE FOLLOWING EXCLUSIONS MAY AFFECT YOUR TITLE INSURANCE PROTECTION:

Exclusions From Coverage: Standard Extended Any Laws, Ordinances or Governmental Regulations Restricting Use

Rights of Eminent Domain

Unmarketable Title

Defects, Liens or Encumbrances Created by Insured, or That the Insured Was Unaware of

Usury or Truth-In-Lending Laws

Rights of Title to Property Beyond the Lands Expressly Described

THE FOLLOWING EXCEPTIONS MAY AFFECT YOUR TITLE INSURANCE PROTECTION. OUR EXTENDED TITLE INSURANCE COVERAGE SATISFIES MOST OF THESE CONCERNS:

Protection Against Loss By: Standard Extended

Taxes, or Assessments Which Are Not Shown as Existing Liens, or a Notice of Future Proceedings Which May Result in Future Tax or Assessment Liens

Facts, Rights, Interests or Claims not Shown by Public Records Which Could be Ascertained by an Inspection or by Making an Inquiry of Person in Possession

Easements, Claims of Easement or Encumbrances, Not Shown in Public Records, Unpatented Mining Claims, Reservations or Exceptions in Patents, Water Rights, or Claims, or Title to Water

Defects, Liens or Encumbrances Created by the Insured, or That the Insured Was Unaware of

A Lien, or a Right to Lien, Imposed by Law, and Not Shown in Public Record

Discrepancies, Conflicts in Boundary Lines, Shortage in Area, Encroachments, or Any other Facts Which a Correct Survey Would Disclose

ENDORSEMENTS AT A GLANCE

Contiguity-Multiple Parcels: Provides coverage against loss or damage by reason of the lack of contiguity of the multiple parcels described in Schedule A.

Location-Improvements: Provides coverage to the named insured for loss or damage resulting from the specified improvement not being located upon the land described in the policy.

Doing Business: Assures that the named entity is qualified to do business in the state.

Survey (Same As): Provides coverage against loss or damage resulting from the failure of the insured property to be the same as depicted on a specified survey.

Subdivision: Provides coverage for loss or damage resulting from the failure of the insured property to be a lawfully created parcel as per state law or local subdivision laws.

Usury: Provides coverage against loss or damage resulting from the failure of the insured loan to comply with the usury laws of the state.

Easement-Damage or Enforced Removal: Provides coverage against loss or damage in the event that a specific easement holder shall (1) cause damage to a building located on the land at date of policy, or (2) compel the removal or alteration of an existing building located on the land at date of policy.

Easement-Existing

Encroachment: Provides coverage for loss or damage as a result of the forced removal of improvements that encroach onto a specified easement.

Water Rights-Surface Damage: Provides coverage for loss or damage to existing improvements caused by the exercise of the right of surface entry for the extraction or development of water.

ENDORSEMENTS AT A GLANCE (CONT.)

Deletion of Arbitration: Deletes the arbitration provision set out in the conditions contained in the policy.

Patent: Provides coverage for loss or damage resulting from the exercise of specified patent rights. Owner

Zoning-Unimproved: Provides coverage against loss or damage due to the land not being zoned as specified use not being permitted under the zoning.

Zoning-Improved: Provides coverage against loss or damage due to forced removal of improvements or a specified use not being permitted.

Environmental Lien-Commercial Properties: Provides coverage against loss or damage due to the priority of any recorded environmental lien under state or federal super lien statutes.

Comprehensive-Improved-With Minerals: Provides coverage against loss or damage due to the priority of any recorded environmental lien under state or federal super lien statutes. Lender

ALTA 9.2-06

ALTA 17-06

Comprehensive-Improved-Future Improvements-Mineral Extraction: Provides coverage against loss or damage due to violations of CC&Rs as of policy date, encroachments, damage to existing improvements as to easements, damage to future improvements due to violations of CC&Rs as of policy date, the existence of a right of surface entry to extract minerals over the insured property and forced removal of encroachments.

Owner Extended

Access and Entry: Provides coverage against loss or damage by reason of a failure of actual vehicular or pedestrian access to a named physically open street or the lack of the right to use curb cuts for access. Owner Extended Lender

ENDORSEMENTS AT A GLANCE (CONT.)

Indirect Access and Entry: Provides coverage against loss or damage by reason of a failure of actual vehicular or pedestrian access over a described easement to a named physically open street or the lack of the right to use curb cuts for access

Utility Facility: Provides coverage for loss or damage resulting from the lack of utilities available for connection to the insured property.

Multiple Tax Parcel: Provides coverage against loss or damage by reason of the failure of the land to be separately identified tax parcels or any easement described in Schedule A of the policy being cut off or disturbed by the non-payment of real property taxes.

THE EXCHANGE PROCESS

THE EXCHANGE PROCESS

An exchange is rarely a swap of properties between two parties. Most exchanges, whether they are simultaneous or delayed, involve three parties: the investor (exchanger) who is doing the exchange, the buyer who is purchasing the exchanger’s old (relinquished) property and the seller who is selling the exchanger a new (replacement) property. To create the exchange of assets and to obtain the benefit of the “Safe Harbor” protections of the tax code to prevent actual or constructive receipt of the exchange proceeds, which would disqualify the exchange treatment, prudent exchangers use the services of a “Qualified Intermediary,” such as Investment Property Exchange Services, Inc. (“IPX1031”). IPX1031, as the Qualified Intermediary, becomes a fourth party principal in both simultaneous and delayed exchanges. As illustrated in the below diagram, the steps for completing an exchange with IPX1031 are relatively simple.

BUYER SELLER EXCHANGER QUALIFIED INTERMEDIARY

REPLACEMENT DEED

RELINQUISHED DEED

• The exchanger signs a contract to sell a relinquished property to the buyer.

Delayed Exchange Flowchart

• IPX1031 and the exchanger enter into the exchange agreement to retain IPX1031 as the Qualified Intermediary and the exchanger assigns the exchanger’s rights in the sale contract to IPX1031, including the right to receive the exchange funds.

The Exchange Process

• At the closing of the relinquished property the exchange funds are wired to IPX1031 and IPX1031 instructs the settlement officer to transfer the deed directly from the exchanger to the buyer.

Anexchangeisrarelyaswapofpropertiesbetweentwoparties.Mostexchanges,whethertheyaresimultaneousordelayed, involvethreeparties:theinvestor(exchanger)whoisdoingtheexchange,thebuyerwhoispurchasingtheexchanger’sold (relinquished)propertyandthesellerwhoissellingtheexchangeranew(replacement)property.Tocreatetheexchangeof assetsandtoobtainthebenefitofthe“SafeHarbor”protectionsofthetaxcodetopreventactualorconstructivereceiptof theexchangeproceeds,whichwoulddisqualifytheexchangetreatment,prudentexchangersusetheservicesofa“Qualified Intermediary,”suchasInvestmentPropertyExchangeServices,Inc.(“IPX1031”).IPX1031,astheQualifiedIntermediary, becomesafourthpartyprincipalinbothsimultaneousanddelayedexchanges.Asillustratedintheabovediagram,thesteps for completing an exchange with IPX1031 are relatively simple.

• The exchanger has a maximum of 180 days in the exchange period (or until the tax filing deadline, including extensions, for the year of the sale of the relinquished property), to acquire all replacement property.

The exchanger signs a contract to sell a relinquished property to the buyer.

IPX1031andtheexchangerenterintotheexchangeagreementtoretainIPX1031astheQualifiedIntermediary andtheexchangerassignstheexchanger’srightsinthesalecontracttoIPX1031,includingtherighttoreceivethe exchange funds.

AttheclosingoftherelinquishedpropertytheexchangefundsarewiredtoIPX1031andIPX1031instructsthe settlement officer to transfer the deed directly from the exchanger to the buyer.

Theexchangerhasamaximumof180daysintheexchangeperiod(oruntilthetaxfilingdeadline,including extensions, for the year of the sale of the relinquished property), to acquire all replacement property.

• Unless the exchanger can acquire all replacement property within the first 45 days from the close of the relinquished property, the exchanger must identify possible replacement properties in writing to IPX1031 within the 45-day identification period.

Unlesstheexchangercanacquireallreplacementpropertywithinthefirst45daysfromthecloseoftherelinquished property,theexchangermustidentifypossiblereplacementpropertiesinwritingtoIPX1031withinthe45-day identificationperiod.

Theexchangersignsacontracttopurchasethereplacementpropertywiththesellerandtheexchangerassignsthe exchanger’s rights in the purchase contract to IPX1031.

AttheclosingofthereplacementpropertyIPX1031wirestheexchangefundstocompletetheexchangeand IPX1031instructs the settlement officer to transfer the deed directly from the seller to the exchanger.

• The exchanger signs a contract to purchase the replacement property with the seller and the exchanger assigns the exchanger’s rights in the purchase contract to IPX1031.

Sample Cooperation Clause for the Sale Contract

BuyerherebyacknowledgesitistheintentoftheSellertoeffecta§1031taxdeferredexchange,whichwillnotdelaythe closingorcauseadditionalexpensetotheBuyer.TheSeller’srightsunderthisagreementmaybeassignedtoInvestment PropertyExchangeServices,Inc.,aQualifiedIntermediary,forthepurposeofcompletingsuchanexchange.Buyeragrees tocooperatewiththeSellerandInvestmentPropertyExchangeServices,Inc.tocompletetheexchange.(SwitchBuyerand Seller in the Cooperation Clause for the Purchase Contract.)

• At the closing of the replacement property IPX1031 wires the exchange funds to complete the exchange and IPX1031instructs the settlement officer to transfer the deed directly from the seller to the exchanger.