When you sign a contract to purchase real estate, or obtain a commitment for a loan or a refinance, you will need to thoroughly review the property’s suitability for your intended use, whether you intend to live in the home as your primary residence, operate your business out of an existing property, or build a new structure for your residence or business. Due diligence review therefore includes: chain of title issues; recorded matters affecting your property such as easements, covenants, terms, and restrictions on the property’s use; zoning; clearing existing liens such as mechanics liens, federal tax liens, local tax liens, condo or HOA liens; survey matters; and more.
Our “title insurance commitment” or “title insurance binder” plays an important role in your due diligence for a residential or commercial purchase or refinance: the commitment will include a listing of the recorded easements and encumbrances on the property. You will receive copies of these “title exceptions” for review by you, your attorney, and your surveyor or civil engineer. It will also include, as “Schedule A,” a list of the conditions that have to be satisfied for issuance of the policy.
The settlement, or formal closing, of a real estate transaction does not occur by itself. Someone has to coordinate the title due diligence process, coordinate clearing of existing liens, drafting and/or assembly of the documents required to close, and the preparation of a settlement statement showing the sources and uses of funds required for closing.
Loudoun Commercial Title provides these important services. We will disclose any issues to you as they come up and assist you with the next steps that must be completed before closing can take place. We also conduct the settlement, making sure that the documents are properly executed, appropriate exhibits are attached, lender’s instructions and requirements are complied with, and the documents are properly recorded in the appropriate land records. After the recordation of documents, Loudoun Commercial Title disburses fund to sellers, lenders, real estate agents, local governments (for recordation taxes and charges, or to pay real estate taxes), and other vendors such as surveyors, as required. We work to ensure that all parties receive the required copies of their documents and that the lender receives its original loan documents in a timely manner for funding. We coordinate issuance of the title insurance policy showing satisfaction of closing requirements and the recordation information for the closing documents.
After completion of the closing, lenders and purchaser’s of title insurance receive a policy of title insurance, which provide long-term protection against the claims, risks, and matters described in the policy, subject to the limitations and exclusions contained in the policy. You should retain the policy with your permanent records, because the policy provides you with protection not only during your period of ownership but also after you sell the property if a claim is made against you by a successor owner for events that occurred prior to your ownership
All owner’s policies of title insurance include protection against:
- Mechanics’ liens
- Third Party claims of interest in the title
- Improperly executed documents
- Pre-policy forgery, fraud, or duress
- Non-recorded restrictive covenants
- Defective recording of documents
- Prior recorded liens not disclosed in the policy
- Unmarketability of the title
- The policies insure anyone who inherits the property from you.
Mechanics’ Liens and the Mechanics’ Lien Agent
A mechanics’ lien is a lien to secure payment for work and materials during the construction or repair of a property. In Virginia, mechanics’ liens filed by contractors, subcontractors or material supplier could have a priority over construction loans and, therefore, are of great concern to lenders. The Virginia mechanics’ lien will also survive a foreclosure or any other sale of the property. Bankruptcy will not defeat lien rights.
When a project involves construction of one- and two-family residential dwellings, a real estate owner may (but is not required to) designate a mechanics’ lien agent (MLA) when a building permit is issued. If an MLA is designated, then any contractor supplying labor and materials to this project must provide notice that the contractor seeks payment for labor performed or materials furnished. This notice must be provided within 30 days of the contractor beginning work on the property. If proper notice is not given, the claimant may not file a valid mechanics’ lien but would have to seek other legal remedies to enforce payment. The contractor can provide notice at a later time but can then lien only for labor and materials furnished after the notice. If no MLA is designated, the property is subject to mechanics’ liens from all contractors who have supplied material or services during construction.
The Mechanics’ Lien Agent Statute has reduced the number of valid mechanics’ liens filed. Because of the notices to the MLA, all parties to the transaction are in a much better position to know whether all contractors have been paid, decreasing the chances that a mechanics’ lien will be placed after completion of the project.
Mechanics’ lien underwriting for commercial transactions is significantly more complicated, because no mechanics’ lien agent protections are available. However, Loudoun Commercial Title has considerable experience in working with your lender in this area.