Accurate “Notice of Completion” Is Vital for New Construction
Many many many many agents complain about companies that have weekly sales meetings. I may be the minority, but I absolutely *love* the opportunity to talk with other agents and hear what’s new in their world. This last Tuesday was no exception – and am I ever glad I went to hear about a new construction experience an agent shared. This story is muddy, so bear with me…
About a year ago, this agent (let’s give her an alias – JenJen) was working with buyers and together they closed a new construction home. One year later, the buyers have received a letter stating that one of the subcontractors had not been paid. As a result, the buyer/homeowner now owes the builder’s debt - over $3,000 for the heat/air unit. The builder is trying to work it out with the subcontractor, but after a year without being paid, I don’t blame the subcontractor trying to get his money.
Because the subcontractor served notice of money owed on the lien, JenJen stated doing research. She found that the “Notice of Completion” was filed with the county before the house was 100 percent complete. One a “Notice of Completion” is filed, there is a mandatory 10-day wait before closing.
In reality, today’s buyers and sellers rarely wait the 10-days, but lenders should slow the transactions down to force this wait.
Work done AFTER the “Notice of Completion” is not guaranteed to be discovered by the title company during the title search. This is why it’s important to ask for the additional owner’s title insurance.
The water gets muddier. Once the new home owner is served notice, they have 10-days to file the title insurance claim against their owner’s title policy. Ironically in this case, the title company has encouraged the buyer to WAIT to file to give the builder a chance to work it out with the subcontractor. Had the buyer listened to that advice and waited two or three weeks to file their claim, the title company would be scot-free and not have to pay out.
Fortunately, the home owner contacted JenJen and she spoke with the attorney my firm has on retainer. They filed immediately.
I don’t know the results yet, but do know there are two huge lessons to be learned:
- Make sure the Notice of Completion is filed AFTER construction on a new home is complete. Wait the two weeks to allow the Title Company time to find liens.
- When in doubt, talk to a real estate attorney to make sure your assets and your money is protected – no matter the transaction, the situation, the location.
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