For those who aren't aware, when you purchase a property, municipal code violations, open permits, and unpermitted building structures are not a matter of public record, are not discovered with a title search, and are not covered by your owner's title insurance policy. Only when one of these items actually result in a lien on the property before closing (that is recorded in public record) and that lien is missed at closing by the closing agent is it covered by the policy.
We are seeing in these days of increasing sales of foreclosures that very often the bank's title insurance agent is not conducting a Municipal Lien Search. Municipal Lien Searches are performed in addition to the search of public records to uncover code violations, outstanding water bills (which can result in a lien after closing if not paid), and often open permits & unpermitted building structures as well.
It is unclear as to whose responsibility it is to uncover this information. This particular area is not addressed in the Purchase and Sale contract. Ultimately it is the buyer's responsibility to secure this information. Unfortunately the buyer is not usually aware of the importance of this information and that it may not being searched. The consumer is relying on their professional title insurance/closing agent to advise them.
In the sale of foreclosures, the bank (seller) usually require that the file closes with their title insurance agent as a condition of accepting the buyer's offer. Because foreclosure properties are sold "as is" many banks appear to be taking the position of "caveat emptor" (let the buyer beware) by foregoing this important Municipal Lien Search.
Anyone buying a foreclosed property would be wise to ask if a Municiple Lien Search is being done as part of the title search/closing process. If not, it would be worth the minimal cost to hire a local title agent to review the work done by the bank's agent, order, and review a Municiple Lien Search conducted on the property.
In an important transaction such as the purchase of property, the consumer doesn't want to step over the dollars to pick up the pennies!
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