Kevin buys a home in Oakland and takes a CLTA standard coverage owner's policy at closing. Eight months later a contractor who had finished work for the prior owner before the sale records a mechanic's lien against the property. Nothing about that work or the contractor's claim appeared in the public record on the date Kevin's policy was issued. How is Kevin's claim under his policy most likely to be treated?
Correct Answer
B) Not covered, because a standard policy excepts labor and material liens the public records did not show
A CLTA standard coverage policy insures the condition of title as the public records showed it on the date of policy. Its Schedule B carries a standing exception for any lien, or right to a lien, for services, labor, or material furnished that is not shown by the public records, so a mechanic's lien that first surfaces after closing for pre-closing work falls outside the insured risks. Buyers reach that risk with an ALTA extended policy, which adds an inspection and covers off-record matters such as unrecorded liens, parties in possession, and encroachments. Relation back matters to the priority contest among creditors; it does not add an off-record claim to what the standard policy agreed to insure.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A quitclaim deed transfers whatever interest the grantor may have in a property without making any warranties or guarantees about the quality of title. It offers the least protection to the grantee.
Recording is the act of placing a document in the public records at the county recorder's office to give constructive notice to the world of an interest in real property. Recording protects the holder's interest against subsequent claims.
A special warranty deed guarantees that the grantor has not caused any title defects during their period of ownership, but does not warrant against defects that existed before the grantor acquired the property.
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Previous Question
In 2020, Owner A conveyed a California property to Owner B via grant deed for valuable consideration, but Owner B never recorded the deed. In 2022, Owner A conveyed the same property to Owner C via grant deed for valuable consideration. Owner C had no actual or constructive knowledge of the prior conveyance to Owner B and recorded the deed immediately. Under California's recording statutes, who holds title to the property?
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Amy wants to add her adult daughter to the title of her California home as a gift. Amy's agent recommends using a grant deed. Before the transfer is legally effective, what must occur?