THE ALTA STATEMENT AND THE CONSTRUCTION LIEN AND POSSESSION AFFIDAVIT

ATG requires an ALTA Statement or Construction Lien and Possession Affidavit on every transaction we insure where the owner, lender, or both, requires that some or all of the five Standard Exceptions be removed or insured on the final title policy. The ALTA Statement (ATG Form 3004), used in Illinois and Indiana real estate transactions, and Construction Lien and Possession Affidavit (ATG Form 3033), used in Wisconsin real estate transactions, are affidavits that the sellers, buyers, and lender sign. Both affidavits ask each party to swear to what they know about a series of unrecorded title problems to the land, to help you identify outstanding title problems prior to closing. The ALTA Statement asks for information about the following matters:

  1. Whether any work has been done or materials supplied to the land in the last six months, whether as new construction, remodeling, or repair work, regardless of whether the work or materials were paid for;
  2. Whether any goods, equipment, machinery or other chattels have been attached to the land as fixtures in the last six months;
  3. Whether any contracts for any work, materials, equipment, service or machinery have been signed in the last six months;
  4. Whether any notices of lien have been received in the last six months;
  5. Whether any management fees are owed;
  6. Whether there are any outstanding service agreements, security agreements, financing statements, equipment leases, or chattel mortgages on the land;
  7. Whether there are any outstanding unrecorded contracts, options or leases on the land;
  8. Whether there are any unrecorded easements on the land; and
  9. If the land is commercial, whether a commercial real estate broker is entitled to any payments on the land.

The Construction Lien and Possession Affidavit, (CLPA) is slightly different, requiring information about the following matters:

  1. Whether any work has been done or materials supplied to the land in the last six months, whether as new construction, remodeling, or repair work. If the work or materials have been paid for and lien waivers provided, the affiant must provide that information and copies of documentation;
  2. Whether any filed state or federal tax lien is unpaid;
  3. Whether any action for specific performance, foreclosure, to create a trust, impose a lien, forbidding conveyance, or to set aside any deed is now pending against the land;
  4. Whether any sewer, water, sidewalk, curb, gutter, grading, surfacing, or paving work has been done that has not been fully paid for;
  5. Whether the real estate taxes have been paid to date;
  6. How the property has been used;
  7. Whether there are any encroachments of improvements over building lines or property lines and whether there are any disputes or discrepancies with regard to boundary lines; and
  8. Whether there are any unrecorded leases or easements on the land.

Each paragraph on both forms is followed by a space for the person completing the affidavit to explain in detail all information about the above topics. Please observe the following instructions when completing an ALTA Statement:

  1. All the buyers AND all the sellers of a transaction must complete an ALTA Statement or CLPA. You must never coach the parties to answer "no" or "none" on any item, omit information, or lie about items on the ALTA Statement or CLPA. See the casenote summarizing the private reprimand from Wisconsin in the October issue of the ATG concept for an example of sanctions for such activity. The ALTA Statement or CLPA must show every bill being paid out of closing for repairs or work done.
  2. Every signature on the ALTA Statement or CLPA must be notarized.
  3. Once signed, you must examine the ALTA Statement or CLPA to see if the parties answered any of the questions affirmatively.
  4. If the ALTA Statement or CLPA reveals that any outstanding, unrecorded obligations exist on the land, then you must raise an exception on your commitment for that problem or interest in the land. All exceptions must be added before or at closing. If you do not receive the signed ALTA Statement or CLPA until the closing, you must take the time to stop and read it and add exceptions by hand to the commitment for any problems it reveals.
  5. If the exceptions reveal defects in title that the lender and/or buyer will not accept, use standard underwriting guidelines to remove the problem. Please contact the Underwriting Department at 800.252.0402 or legal@atgf.com to obtain help removing exceptions.

While the ALTA Statement or CLPA can sometimes trigger an extra investigation and work on a title problem at the last minute, it also supplies you with information to prevent claims and proof that you have exerted care in waiving or insuring the Standard Exceptions on the final policy/policies. If you have any questions about the ALTA Statement or CLPA, contact the Underwriting Department at 800.252.0402 orlegal@atgf.com.

© ATG UB0210vol7no5

 

Print this page