Escrow & Title
A Florida buyer discovers after closing that the property has an unpaid mechanics' lien from a prior contractor. If they have an owner's title insurance policy, the insurer should:
ADeny the claim since mechanics' liens are always excluded
BCover the lien if it was not listed as an exception in the title policy and existed at or before the closing date✓ Correct
CRequire the buyer to sue the prior contractor
DOnly cover the lien if it was recorded before the policy date
Explanation
If a mechanics' lien existed (was recorded or had priority) at the time of closing and was not listed as an exception in the owner's title policy, the title insurer should provide coverage — paying to discharge the lien up to the policy amount.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
EncumbranceAny claim, lien, charge, or liability attached to real property that affects its value or limits its use.
Abstract of TitleA condensed history of a property's title, summarizing all recorded documents and encumbrances affecting it from the earliest record to the present.
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