Investor · Denver, CO · Member since 2016 · 1 post · 0 votes
I'm currently under contract to purchase a house that's scheduled to close in several weeks. The seller just told my agent that we should terminate the deal because one of the contractors who worked on the house has threatened to place a lien on the house. I'm wondering:
1. Can a contractor place a lien on a property that's transferred ownership if the work was contracted by the previous owner and completed prior to the transfer of ownership?
2. Would such a lien be covered by title insurance if it's placed a.) while the contract is pending or b.) after the closing?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
Title insurance will exempt it if it exists prior to closing, and won't cover it if filed after closing. This is a seller problem, he needs to work it out. You need to know your state laws on this, a talk with an attorney should happen. In most states, the seller could "bond off" any lien filed, by placing a certain amount of cash (here it's 110% of the lien amount) in a suitable escrow/court account, and the lien would be removed from the property.
In all places where we have done business, a contractor can place a lien on a property for work completed for which s/he has not been paid, even if ownership of the property transfers.
If you are aware of the lien prior to Close and the title insurance coming into effect, it quite likely will be deemed pre-existing and not covered. If the lean is registered after Close and you learn of it at that time, it may be covered (read the police or ask the attorney / title company who is selling the policy).
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
Title insurance will exempt it if it exists prior to closing, and won't cover it if filed after closing. This is a seller problem, he needs to work it out. You need to know your state laws on this, a talk with an attorney should happen. In most states, the seller could "bond off" any lien filed, by placing a certain amount of cash (here it's 110% of the lien amount) in a suitable escrow/court account, and the lien would be removed from the property.
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
10y
Might be a seller tactic to not sell to you because he had a better offer. Dig deeper. The disclosure from the seller scares me though, not knowing your state laws, there's always a tendency that it will pass along to you, the best solution for me is to email title company/attorney about the situation, that way if they say something, you have it on record, over the phone conversation falls down on he said she said, while email transcripts are admissible in court.