Most attorneys have incorporated into their real estate closing procedures the procurement of an affidavit regarding mechanics and materialmens liens (lien waiver). It has become increasingly important to follow this practice for the protection of the attorney, lender, owner and title insurer.
We are experiencing a volatile economy, and, unfortunately, in such times, we encounter more cases of dishonesty and fraud. In the title insurance business, a high percentage of the claims come from contractors and subcontractors filing claims of lien because of not being paid for the job performed. These claims of lien can alter the lien of a deed of trust in the real estate transaction to a junior position rather than the intended first position, causing the lender to "lose priority".
It is for this reason that you will notice that one of the requirements on our commitments has added language. That requirement now reads as follows, and for purposes of this article only, the added language is italicized:
"The attorney must certify that the appropriate lien period has expired prior to closing, or; (1) if labor, services or materials have been furnished and the improvements completed within 120 days of closing and recording, an acceptable affidavit and agreement for completed improvements must be submitted or (2) if any Deed of Trust to be insured secures a construction loan, or a combination construction/permanent loan, a satisfactory affidavit of non-commencement of construction must be submitted indicating that the Deed of Trust has been or will be recorded prior to commencement of construction."
For underwriting purposes at Statewide Title this will mean that, an executed lien waiver must be received with the final title opinion, or the attorney must certify that the lien period expired prior to the real estate closing. If we receive neither, a courtesy phone call may be made to the attorneys office to see if a lien waiver is in the file or can be obtained or if the attorney can certify that the lien period has expired. If neither a lien waiver can be obtained and the attorney states "unknown" as to the expiration of the lien period, a lien exception will be added to both the owners and the lenders policies.
The Statewide Title final title opinion that is sent with all commitments, states: "All requirements of the Commitment have been met except:" If we receive the final title opinion, with that section left blank or the word "none" inserted, we will assume that the attorney is certifying that the lien period has expired. If the bar form or another form that reads similarly to "The following requirements have been met", the attorney must state that the lien period has expired or send a lien waiver, and if neither is received, a lien exception will be added as noted above.
In the case in which a final title opinion is received where no commitment has been issued, we will need a lien waiver or certification from the attorney as to the expiration of the lien period.
We do not intend to make the real estate closing process more cumbersome than it has already become, but we feel that securing a lien waiver is reasonable and necessary for the protection of all parties involved in the real estate closing. We also realize that most attorneys are already following this practice, for which we are appreciative.
If you need a supply of Affidavits Regarding Liens, please contact your Statewide Title marketing representative, or call any of our four offices, and a supply will be delivered or mailed to you. Those of you enjoying the use of Statewide Title Online, can generate a lien waiver automatically from the commitment.