- June 26, 2008
- All Issuing Offices except Georgia and Puerto Rico
- Mechanic's Liens on Condominium Projects
In the current market, mechanic's lien claims filed on condominium projects are on the rise. Problems arise when developers sell condominium units prior to completion of all construction on the condominium project. Mechanic's lien claims are then filed against the project after the sales have occurred. Such claims may be valid claims against the units that have been sold and insured, which would result in a claim under the policy issued to the insured owner and lender. Losses from such claims could be substantial. Therefore, the risk associated with such transactions is very high.
When insuring units in a condominium project, including all phases, you must be satisfied that all work on the entire project, not just the unit being insured, has been completed and that all bills for labor and materials have been paid. It is sometimes possible to obtain releases of liens relating to a specific unit. Indemnities should only be taken with appropriate approval from Stewart Title Guaranty Company. If you discover that there is work continuing on the project, such as continued construction on infrastructure and/or common amenities, you must contact Stewart Underwriting Personnel before proceeding to close and insure the property. Proper approval/authority must be obtained from Stewart Title Guaranty Company before closing such transactions.
Additionally, if you find mechanic's liens filed for record affecting the entire condominium project, but not showing your specific unit, you must obtain approval from Stewart Underwriting Personnel before closing and insuring.
Please note that this bulletin is intended to provide a generalized caution regarding potential mechanic's lien claims. Each state has different laws and procedures; therefore, please review the mechanic's lien requirements in your state of business for additional information. These guidelines may not apply in certain jurisdictions depending on the local laws.
If you have any questions, or seek guidance with respect to a particular builder, please contact appropriate Stewart Underwriting Personnel.
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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.