April 9, 2019
What Happens When Your Title Search Misses A Lien?
When you bought your new house, you did all the right things. In fact, your mortgage lender insisted on a title search – for your protection, and theirs. So, what happens when your title search misses a lien?
You’ve been in your new home less than a year when the news comes. You negotiated a great deal for the house. You especially love the way the prior owners updated the kitchen and bathroom. You assume they paid the contractor. Therefore, you’re really confused.
It turns out the contractor skipped out on paying a couple of the subcontractors. Both the electrician and plumber walked away without any type of compensation for their work. As a result, they exercised their legal rights and filed a claim before you closed on your house.
“Tag, you’re it!” Just about everyone remembers some variation of the children’s playground game. As it turns out, the same premise applies when it comes to liens on real property. You could be the one tagged by a creditor owed money by the sellers of your dream home.
Truth be told, liens often attach to real estate, rather than people. It makes no sense to you. After all, you didn’t contract for the work. How can you possibly be responsible for paying for it?
Liens on Your Property
In the first place, you should know that the lien filed by contractors and subcontractors is known as a mechanic’s lien. Meanwhile, suppliers can also file liens against real property. Under Pennsylvania laws, claims must be filed within six months after the company or individual completes their portion of the work or supplied materials for the project.
Other types of liens can also be inadvertently missed in a title search, including:
- IRS liens
- Property tax liens
- Judgment liens for various debt
- Mortgage liens
- Utility liens
All things considered, you may wonder how in the world a title search could possibly miss filings attached to your property. Unfortunately, it happens.
How a Title Search Could Miss a Lien
In some cases, you could blame it on human error. In others, technology isn’t necessarily infallible. Title searchers strive to discover every bit of information that exists regarding your property. In some cases, a clerical blunder proves to be the problem.
Public records act as the source for property liens. However, once again, there’s always a possibility that something was slightly off when filed and not picked up in a title search. And, that you wind up with problems you didn’t anticipate.
Do You Have Title Insurance?
As you might surmise, you’ve figured out one of the most critical reasons for title insurance. Since you are the current property owner, the lien follows you. It’s not what you want to hear, but it’s a reality.
As a matter of course, the title insurance company initiates the title search. Again, your lender will insist on both the title search and title insurance.
Hopefully, if your real property transaction involved cash, you followed the same plan. Otherwise, you may need to fight paying a lien that has nothing to do with you.
Before you make a claim to your title insurance company, you should meet with an experienced real estate attorney. You need to understand the conditions of your policy. Also, you may want to delve into the reasons the lien was missed in the title search.
Mazzoni Karam Petorak & Valvano has years of experience assisting real estate clients in all aspects of their transactions. Finding an uncovered lien against your home represents a true nightmare. Contact us to see how we can assist you.