Over the past several years most New Jersey title insurance underwriters have seen a increase in mechanic’s lien claims specifically on condominium projects. Problems arise when developers sell condominium units prior to completion of all construction on the condominium project. Mechanic’s lien claims are then filed against the project after the sales have already transpired. Such claims may be valid claims against the units that have been sold and insured, which would result in a claim under the New Jersey Title Insurance policy issued to the insured owner and lender. Losses from claims involving such scenarios could be substantial. Therefore, the risk we the NJ Title Company take on with such transactions is very high.
As a NJ Title Insurance Company covering such risks we must insure that the units in a particular condominium project are complete and all work has been paid for. Not just the unit being insured, the units meaning ALL of the materials and labor have been paid for, for every single unit in the project. That said, at times it is possible to obtain a partial release of liens as it relates to a specific unit.
As far as indemnities are concerned a NJ Title Company would always need to seek underwriter approval. Moreover, if there is work continuing on the project, such as continued construction on infrastructure and/or common amenities, an inspection would most likely need to be ordered and providing title insurance would be delayed.
Please note that this post is intended to provide a generalized caution regarding potential mechanic’s lien claims in New Jersey. Each state has different laws and procedures.
If you have any questions in terms of whether Mechanic’s lien coverage can be issued on a particular project or property feel free to call our offices. We have a New Jersey attorney on staff and underwriters that are more then willing to assist.