In Texas, subcontractors, suppliers, and other professionals who do property remodeling or improvement may have legal claims known as mechanic’s liens.
These liens allow workers to seek compensation from property owners if they are not paid for their services or materials.
This protection ensures they receive fair payment for their work and prevents exploitation by those seeking to exploit them.
Subcontractors and suppliers can file mechanic’s liens as legal claims against the property. Texas law allows the use of these liens in various situations, including:
1. When materials are specially fabricated, even if not delivered
2. When architects, engineers, or surveyors prepare plans or plats
3. When labor or supplies are provided for the landscaping, construction, or improvement of a home
4. When labor or materials are supplied to demolish specific structures.
Contractors can put liens against property in Texas
Mechanic’s liens secure payment for work or materials provided for real estate construction or repairs.
However, contractors and subcontractors cannot simply file a lien without following proper procedures.
- Lien claimants must notify the property owner
- If applicable, the original contractor of the lien filing
- Filing a lien creates a “cloud on title”
A cloud on the title can prevent the transfer of clear ownership. Therefore, the property is difficult to sell, refinance, or transfer until the lien is resolved, which can be done with a lien release, payment, or court order.
Enter the Title Company
The title company conducts a title search to identify any existing liens or claims against a property. However, before issuing a title insurance policy, they will confirm that the title is clear, meaning there are no outstanding liens, claims, or other encumbrances.
The title company requires resolution before proceeding with the transaction. This could involve negotiating a lien release, paying off the lien, or taking other legal actions to clear the title.
The title company issues a title commitment, a detailed preliminary report that informs all parties (buyer, seller, lender) of the property’s title status and details the conditions under which title insurance will be provided.
What is Title Insurance?
Title insurance protects the property owner and the lender against financial loss from defects in the title, such as undiscovered liens, errors in public records, fraud, or other issues that could impact property ownership.
If the initial title search misses a lien and it later emerges, the title insurance policy may cover the costs associated with resolving it.
Owner’s Title Insurance: Protects the property owner.
Lender’s Title Insurance: Protects the lender (often required by lenders in Texas).
This protection is crucial for property owners because it shields them from unexpected financial liabilities arising from previous owners’ unsettled debts or claims.
Additionally, title insurance ensures that lenders safeguard their investment, allowing the property to serve as secure collateral for the loan.
Title insurance is a one-time premium paid at closing. It covers the policyholder and their heirs for as long as they own the property, protecting against disputes that may arise after the purchase.
This is not intended to be legal advice. Consult your attorney.
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