Escrow & Title
A Minnesota title company discovers that the seller recently completed a renovation but has not paid the contractor. There are no recorded liens yet. What should the title company do?
AIgnore it since no lien has been recorded yet
BNote the potential mechanic's lien risk and require the seller to provide evidence of payment or a lien waiver✓ Correct
CClose the transaction immediately before a lien is filed
DRequire the buyer to accept the potential lien risk
Explanation
Title companies in Minnesota must address potential mechanic's lien risks even when no lien has been recorded yet. Contractors have a statutory period after completing work to file a mechanic's lien in Minnesota.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
State-Specific Concepts
Mechanic's LienDRE Regulation
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