We want to see that the title on that property is held free and clear by the seller.  We don’t want any surprises such as liens that can prevent the seller from actually selling this property.  We also want to be sure that the seller really owns the property free and clear, that there are no others listed on the deed that will need to give permission to sell.  I can’t tell you how often we find someone listed who is dead and then we need to go through all kinds of hoops to clear title.  This can delay a closing by days if you are lucky, or weeks if you’re not.  One of the most common liens is a Mechanic’s Lien.  My friends at North American Title are allowing me to republish this description of a Mechanic’s Lien for your education.

A mechanic’s lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property and is called by various names, most often a construction lien. It is also called a material mans lien or supplier’s lien when referring to those supplying materials, a laborer’s lien when referring to those supplying labor, and a design professional lien when referring to architects or designers who contribute to a work of improvement. Mechanics liens on property in the United States date from the 1700s.

Mechanics Liens exist as a legislative public policy to protect contractors. More specifically, the state legislatures have determined that, due to the economics of the construction business, contractors and subcontractors need a greater remedy for non-payment for their work than merely the right to sue on their contracts.

Under the statutes, the lien is usually created by the performance of labor or the supplying of material that improves the property. Some common examples are:

• Laborers, carpenters, electricians, and plumbers working on the project site
  
• Lumber yards, plumbing supply houses and electrical suppliers
  
• Architects and civil engineers who drew up the construction plans and specifications
  
• Off-site fabricators of specialty items that are ultimately incorporated into the project

The statutes creating mechanic’s liens usually give them a higher priority with respect to other interests in the title than the law gives most real property security interests. Special provisions are made in some states for determining the priority between a mechanic’s lien and the lien of a mortgage that is financing the construction on the land. Some states, like California, provide priority for a construction loan mortgage recorded before the visible commencement of construction where the lender is obligated to disburse the funds.

Mechanic’s liens are enforced exclusively through judicial foreclosure sales. Once all requirements have been met the court can order the property sold and the proceeds of the sale applied to the liens in the order of their priority.

This is why we look at Preliminary Title Reports.  In fact we see several of them before close of escrow.  We look at the one the selling agent has ordered.  We look at the one the title company the buyer selects has ordered.  And, finally we look at one just prior to close of escrow.  We dont’ want to find anything slipping under the cracks and someone filing a lien just prior to close of escrow stopping the sale.

This is one of the biggest reasons you need to have an experienced Realtor on your side.  We know what to look for and how to make sure you find a clear title.  Questions?  You can reach me at 650-696-2820.

Thank you North American Title Company for a great explanation of the Mechanic’s Lien.

California’s builders, in an effort to combat the dual problem of an increasing population and a declining availability of prime land, are increasingly turning to common interest developments (CIDs) as a means
to maximize land use and offer home buyers convenient, affordable housing.  North American Title Company’s parent company, Lennar Corporation (NYSE:  LEN) is one of those builders.  The two most common forms of common interest developments in California are Condominiums and Planned Unit Developments, often referred to as PUDs. The essential characteristics shared by these two forms of ownership are:

1.    Common ownership of private residential property.
2.    Mandatory membership of all owners an association which controls use of the common property.
3.    Governing documents which establish the procedures
for governing the association, the rules which the owners must follow
in the use of their individuals lots or units as   well as
the common properties; and
4.    A means by which owners are assessed to finance
the operation of the association and maintenance of the common
properties.

Before continuing further, it may be helpful to clarify a common misconception about Condominiums and PUDs.   The terms Condominium and PUD refer to types of interest in land, not to physical “styles” of dwellings.  Therefore, when home buyers say that they are buying a townhouse, that is not the same as saying that they are buying a Condominium.  When home buyers say they are buying a unit
in a PUD, they are not necessarily buying a single family detached home. Though the townhouse is the most common style of structure found in common interest developments in California, a townhouse might
legally be a Condominium, a unit or lot in a Planned Development, or a single-family detached residence. The terms Condominium or PUD will say a great deal about the ownership rights the buyer will receive in the
unit and the interest developments offer many advantages to home buyers-low maintenance and access to attractive amenities-however, there are restrictions and duties which come with ownership of a
Condominium or PUD that buyers should be aware of prior to purchase.

Q: What are the basic differences between ownership of a Condominium and ownership of a PUD?

A: The owner(s) of a unit within a typical Condominium project owns 100% of the unit, as defined by a recorded Condominium Plan. As well, they will own a fractional or percentage interests in all common areas
of the Condominium project.  The owner(s) of a lot within a PUD own the lot which has been conveyed to them as shown in the recorded Tract Map or Parcel Map and the structure and improvements thereon. In
addition, they receive rights and easements to use in common areas owned by another frequently a homeowner’s association of which the individual lot owners are members.

(The above are basic descriptions and should not be considered legal definitions.)

Q: Besides ownership of my unit, what other amenities (common areas) will I be acquiring use of and how will I own them?

A: Common interest areas may span the spectrum from the ordinary-buildings, roadways, walkways and utility rooms to the extravagant-equestrian trails and gold courses-with more usual amenities including community swimming pools and clubhouse facilities. Your ownership rights in common areas will be spelled out in your project’s Declaration of Covenants, Conditions and Restrictions (CC& R’s will be expanded upon later). As stated in the answer to the previous question, Condominium owners own a fractional or percentage interest in common with all other owners in the Condominium project, in all common areas. PUD owners receive rights and easements to use of common areas through their membership in a homeowner’s association, which typically owns and controls the common areas.  Some PUD projects, however, provide that the homeowners will own a fractional interest in the common areas.  Again, in this case, a homeowners
association will have the right to regulate the use of the common areas and to assess for purpose of maintaining the common areas.

Check your CC and Rs and association Bylaws (basically, rules governing the management of the development) to insure that you understand your rights to use of your unit and common areas.

Q: What services will my homeowner’s assessments help to finance?

A: Your homeowner’s assessments support not only the easily recognizable building and swimming pool upkeep, landscape maintenance but also the unseen association management and legal fees and
association insurance.

As well, reserves must be factored into your assessments, including reserves for replacements of such items as roadways and walkways. In the case of Condominiums, where ownership is usually limited to
airspace within the walls, floors and ceiling of the unit, reserves will frequently fund replacements of such items as roofs and plumbing.

Each member of the homeowner’s association, upon purchasing their unit, must receive a pro forma operating budget from the association. Basically, this will be a financial statement of the income and
obligations of the association, which must include an estimate of the ife of the obligations covered under the assessments and how their replacement is being funded.

Q: What happen if I fail to pay my homeowner’s assessments?

A: Delinquency fees will be added onto the unpaid assessments. Should your delinquency continue, the association has the right to place a lien upon your property. The lien may lead to a foreclosure if the
delinquency is not paid.

Q: Of what importance are CC & R’s and Bylaws?

A: CC & R’s and Bylaws are the rules and regulations of the community, meant to guide the use of individual properties and common areas. Buyers should be aware the CC & R’s and Bylaws may be written so as to restrict not only property use, but also to restrict owner’s lifestyles, for instance, spelling out hours during which entertainment, such a parties, may be hosted. CC & R’s and Bylaws are highly important and should be thoroughly examined and understood prior to purchase. They bind all owners and their successors to the
rules and regulations the community. Failure to follow those rules and regulations can be considered a breach of contract. Legal action may he taken against the homeowners for any such breach.

Q: At what point in the real estate transaction will I be allowed to review a copy of any CC & R’s and Bylaws:

A: Legally, it is the responsibility of the owner to provide the prospective purchaser with the governing documents of the development (CC & R’s and Bylaws), the most recent financial statement of the
homeowner’s association and notice of any dues delinquent on the unit. The law states that these items should be delivered as soon as practicable;however, the prospective buyer should request to see them
as early as possible. If you do not fully understand what is stated in these documents, consult a real property attorney.

Q: Should I object to items included in the CC & R’s and/or
Bylaws, will I have the opportunity to terminate those items prior to
taking ownership?

A: No. The process required to terminate these restrictions is often complex and costly. Termination of restrictions will require, at least, a majority vote by members of the homeowner’s association, and may
require litigation.

Q: What if have further questions regarding Condominium and PUD ownership?

A: Ask any questions you may have before you buy! Don’t wait to take ownership to find out about restrictions and regulations affecting yourhome ownership rights.