Title Insurer's Lack Of Action On Subcontractors' Mechanics Liens Filed Against Bankrupt Developer Leaves Recent Homebuyers In Refinancing Limbo

In Woodstock, Illinois, the Chicago Sun Times reports:

• Woodstock resident Deborah Sinnett's taste of the American dream has turned sour big-time, and she blames bankrupt Streamwood-based home builder Kirk Homes. Since Sinnett moved into her $355,000 Kirk home in December, 11 liens have been placed against the property by companies claiming they weren't paid by Kirk.(1) She faces the threat of foreclosure because of the liens, according to a local attorney. But her title insurance should cover her.

• Sinnett said the liens also have complicated her plans to refinance at lower rates. Kirk says she's protected. But the title insurer, First American Title Insurance Co., hasn't taken court action to remove the liens, and Sinnett doesn't know how long the liens will remain on her property. It could be a couple of years, according to state law.

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• Sinnett said she received the first lien notice shortly before Christmas. She contacted First American Title and was told by letter that her title is insured, but "because there has been no action taken by the lien claimants to enforce their claims through a court proceeding, there is no action for First American to take at this time." [...] First American declined to comment on Sinnett's case, but said it "stands behind its policies of title insurance." But the company indicated Sinnett and others could be in for a long wait.(2)(3)

For more, see Kirk Homes bankruptcy leaves homeowners in limbo (STUCK IN MIDDLE: With Kirk Homes in bankruptcy, many homeowners can't refinance because of contractors' claims).

For more on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, go here, and go here.

Go here for other posts involving legal issues related to title insurance.

(1) Reportedly, Sinnett's situation isn't unique as builders across the country fold or file Chapter 11 bankruptcy.

(2) Reportedly, Sinnett shared documents showing liens totaling more than $140,000. "It's costing us hundreds of dollars per month to not be able to refinance. No mortgage company wants to talk with us about refinancing with all those liens," she said.

(3) If faced with a lien on your home, attorney Mark Nora, vice chair of the Chicago Bar Association's real property committee, provides this advice in the article:

• Homeowners can "make demand" on the title insurer to take appropriate action to discharge the lien. The insurance policy will specify how soon a homeowner must make that demand.
• Alternately, homeowners can demand in court that the filer of a lien either file a lawsuit to enforce the lien or be barred from proceeding with one.
• Those in the process of building a home can require in the contract proof that subcontractors are being paid as work has been completed and lien waivers to prevent those companies from filing liens on the property related to that work.
• Work with a qualified attorney, make sure you have title insurance from a company with sufficient reserves to handle claims and read the fine print. title insurance legal issues StiffingContractorsTheta