Standard v. Enhanced: New construction

Too often we hear prospective homebuyers or real estate agents dismiss the need for owner’s title insurance coverage because the property is "new or in a newer development."  In fact, nothing could be further from the truth since a large percentage of title claims occur on new construction properties.

Title insurance claims on new construction mostly involve cases of mechanic’s liens.  A mechanic’s lien is a lien placed on the property by a contractor or sub-contractor for unpaid labor and material performed during construction.

Many times, a mechanic’s lien is filed after a homebuyer has purchased the property from the seller. In other words, a title report performed at the time of closing will not reveal the mechanic’s lien. In this instance, a homebuyer who elects to purchase the standard (limited) owner’s title insurance coverage will be stuck with having to pay off and clear the mechanic’s lien at their own expense since mechanic’s lien coverage is not afforded under this type of owner’s policy.

However, if the homebuyer selects the enhanced owner’s title insurance coverage, there is specific affirmative coverage for a mechanic’s lien so long as the work was performed prior to the date of closing (or policy date).

Title insurance claims on new construction mostly involve cases of mechanic’s liens.