New Construction Exception Language

Whenever you find out that one of the following fact situations applies to a transaction where you are preparing a commitment for a loan policy, then raise the New Construction Exception.

  1. If the current owner has signed any contracts for work to be done;
  2. If any work has been done within the last 6 months;
  3. If the buyer has signed any contracts for work to be done;
  4. If any of the loan proceeds for the insured mortgage will be used to pay for work, even if the contracts are not yet signed.

The New Construction Exception Language is as follows:

ATG must be provided with properly executed sworn contractors’ statements, sub-contractors’ statements, and final lien waivers along with proof of proper disbursements of any loan proceeds used for the improvement of the land, or the policy or policies when issued will be subject to the following exceptions:

“(a)  Any lien, or right to a lien, for services, labor, or materials, heretofore or hereafter furnished, imposed by law and not shown by the public records.

“(b)  Consequences of the failure of the lender to pay out properly the whole or any part of the loan secured by the mortgage described in Schedule A as affecting: (i) the validity of the lien of the mortgage; and (ii) the priority of the lien of the mortgage over any other right, claim, lien, or encumbrance that has or may become superior to the lien of the mortgage before the disbursement of the entire proceeds of the loan.”

If you are provided with sworn statements and lien waivers, use ATG's Sworn Statement and Lien Waiver Checklist to review the documents' sufficiency for waiving this exception.

If you have any questions about new construction situations, please contact the ATG Underwriting Department at legal@atgf.com, 800.252.0402 ext. 2020, or 312.752.1990. 

 

Posted on: Thu, 01/17/2013 - 4:43pm