In most states their is a statute of limitations in CA 10 years against defects in construction.  

We were scheduled to close tomorrow, and I was just informed that they need an extension to clear a defect in the title.First, I was irritated and was just going to say okay and go with it.  

That should keep you personally free from any defect, like foreclosure.  

You may want to include a stipulation in a building policy that nothing should be stored within X inches ( it will be in your installation manual) of the equipment, the thermal overload may just be defective like he said.

The title insurance company will not bind title insurance coverage until the defect is resolved, and the lender will not make the loan without title insurance. 

Sounds defective to me.

Since we moved in, we have found numerous undisclosed/concealed defects in the home (e.g. gap between slab foundation and subfloor).

@Andrea Tapp, sellers are required to disclose known defects in all 50 states.

If the title to all or any part of the Property is unmarketable, or is subject to liens, encumbrances, easements, conditions, restrictions or encroachments other than those excepted in the preceding sentence, Seller will be responsible for remedying or removing the title defect or at its election may choose not to cure the title defect in which case the Buyer may waive the title defect and proceed to Closing or may terminate this Agreement in which case any Earnest Money deposit and/or any other funds held in escrow by the Closing Agent shall be refunded to the Buyer.4.

I will take care of all damages caused BY tenant, but ask building defects be handled by said owner/landlord."