I am getting leins on my home-will title insurance cover it? (real estate, property)

[sbd78]

About a month and a half ago, my husband and I closed on our brand new home we had built. It was a very exciting time for us. And then, a month later, our builder (Neumann Homes) announced they were filing for bankruptcy. Now we are receiving leins on our home by contractors that Neumann Homes never paid. (Even though we closed on our home and Neumann Homes was paid in full by the bank our mortgage is through.) I'm told my title insurance will cover it. I picked up claim forms from my title insurance company to fill out and mail in to them. This is making me very uncomfortable, however. Do I have anything to worry about, or will my title insurance most definately take care of this for me? I think its really unfair that Neumann Homes can build a house, sell it to me, not pay the contractors they hired, and then the contractors can come after me for their money! I already paid for the house when I got my mortgage and closed on it!

[Greatday]

Originally Posted by sbd78

About a month and a half ago, my husband and I closed on our brand new home we had built. It was a very exciting time for us. And then, a month later, our builder (Neumann Homes) announced they were filing for bankruptcy. Now we are receiving leins on our home by contractors that Neumann Homes never paid. (Even though we closed on our home and Neumann Homes was paid in full by the bank our mortgage is through.) I'm told my title insurance will cover it. I picked up claim forms from my title insurance company to fill out and mail in to them. This is making me very uncomfortable, however. Do I have anything to worry about, or will my title insurance most definately take care of this for me? I think its really unfair that Neumann Homes can build a house, sell it to me, not pay the contractors they hired, and then the contractors can come after me for their money! I already paid for the house when I got my mortgage and closed on it!

I would suggest you contact your title insurance company right away (which it sounds as if you already have)

Title Insurance should take care of this - don't worry -

[mortgageboss]

You might have title insurance, but like any insurance company, they will try to limit their payout. Just make sure you file everything the way they say and do it quickly. In my market, there's a 90 day time limit on liens. You may want to contact all the subcontractors who worked on your home and make sure they were paid. If not, you should include them as well. I hope it all goes well.

[HIF]

Do you have an owners' policy or just the title insurance that covers the mortgage company?

[sbd78]

Originally Posted by HIF

Do you have an owners' policy or just the title insurance that covers the mortgage company?

I have an owner's policy, through Chicago Title Insurance Company.

[HIF]

I'm sure that you will get advice from those in the business, but I believe that they will just have to do whatever it takes to clear your title.

Many people, Realtors included, will advise against the need for an owners policy, but I bet you're glad that you have it. I had one on a home that we purchased from an estate. When I sold it, it turned out that their were issues related to the title- missing signatures from heirs- and it didn't hold up the closing at all.

In your case it sounds as though the title compnay will just have to take care of the liens. I don't know why it would affect your ownership of the property.

Good luck.

[sbd78]

Originally Posted by HIF

Many people, Realtors included, will advise against the need for an owners policy, but I bet you're glad that you have it.

Yep, I'm sure things go smoothly 99% of the time and people usually don't use their title insurance, until something like this comes up! It never would have crossed my mind that my builder would go under a month after I closed without paying the contractors, and the contractors could place leins against my home for the builder's debts! I'm very glad I have my title insurance!

[windtimber]

Get out your policy and read schedule B - exceptions - carefully. Also, Chicago Title usually requires an "estoppel affidavit" at closing which states that there are no unpaid materialmen or craftsmen in the last 120 days prior to closing. That's to assure that no unrecorded mechanic's or materialmen's liens become their responsibility.

The estoppel affidavits could render the title insurer NOT liable. So review your closing documents carefully.

Also, spend some money to visit a real estate lawyer and have him or her explain to you how mechanic's and materialmen's liens attach and the potential effect of an estoppel affidavit.

Remember - what you signed at closing you were presumed to understand. If you "inadvertently" signed an estoppel affidavit which protects the title insurer and if the title company did the closing, you may have a claim that they were self-dealing and not acting in good faith.

An attorney may review things and find you have nothing to worry about...but take the time to get professional help. Liens have a way of getting WORSE not better!

[Greatday]

Originally Posted by HIF

Many people, Realtors included, will advise against the need for an owners policy, but I bet you're glad that you have it.

In 40 years in the RE business, I have NEVER advised against an owner's policy - NEVER. Nor, have I EVER heard anyone else doing so either .

[sbd78]

Originally Posted by windtimber

Get out your policy and read schedule B - exceptions - carefully. Also, Chicago Title usually requires an "estoppel affidavit" at closing which states that there are no unpaid materialmen or craftsmen in the last 120 days prior to closing. That's to assure that no unrecorded mechanic's or materialmen's liens become their responsibility.

The estoppel affidavits could render the title insurer NOT liable. So review your closing documents carefully.

I'm looking through my closing documents. I have what is called an "Affidavit of Title Covenant and Warranty" document that is signed by Neumann Homes employees and notarized. It states that no labor or material has been furnished for premisis within the last four months, that is not fully paid for. Obviously Neumann homes flat out lied about that one.

I'm reading through my Schedule B exceptions from coverage in my title insurance policy. The one thing I see that concerns me is (4) Any lein, or right to a lein, for services, labor or material heretofore or hereafter furnished, imposed by law and not shown by the public records.
Is this something I need to be concerned about? Its hard to understand all the legal jargon.

This is so frustrating! I don't see how these contractors can legally come after me for Neumann Homes debts!