Frequently repair work is done on property prior to the closing of a sale. What if the seller doesn’t pay for the repair work and a Mechanic’s Lien is recorded after the closing? Keep in mind that the priority of the mechanics lien is established when the work begins, not when the lien is recorded. If the work is started before the closing, and the party performing the work complies with the necessary statutory requirements regarding their right to claim a lien, the subsequently claimed lien may have priority over the rights of the purchaser and their new lender. If the purchaser learns of the recording of such a lien, they should contact their title insurer immediately.
Loss resulting from the lien is likely covered by the policy if:
A) The policy is a Standard Coverage Owners policy with an Additional Protection Endorsement for homeowners, and the purchaser did not join in the contract for the work.
B) The policy is a Homeowners Policy for one to four family residence.
C) An Owners Extended Coverage Title Insurance Policy is issued.