In a previous article, we discussed Mechanic’s Liens in Minnesota. In this article, we are going to go a little further and discuss mechanic’s liens and early start coverage.
In the event that we are unable to the priority of the mortgage over potential mechanic’s liens because the work has started or work will start before closing, we may be able to insure the lender as if they have priority over the potential mechanic’s liens even though they, in fact, would not. This scenario is often referred to as “early start” coverage.
To determine whether the title company can provide this type of coverage to a lender, the title insurance company needs to conduct an early start analysis, which involves reviewing the components of the construction transaction. We usually ask to review the following documents:
- Audited financial statements of the borrower(s) and guarantor(s).
- Sworn construction statement.
- Total project cost statement
- Construction contract
- Statement of sources and uses
- Copy of the first few pages of the appraisal showing the valuation of the property.
There are some exceptions to the rule about any work or any materials provided starting the clock on the priority process. Some of those exceptions are outlined in Minnesota statute 514.05:
- soil testing
- ceremonial groundbreaking
These would all typically be fine and would not result in a priority issue.
Contact Commercial Partners Title
At Commercial Partners Title Company, we have been providing commercial title insurance services to clients throughout Minnesota and across the country for decades. We can put our experience to work for you on your next transaction. Reach out to our team of experts at our Minneapolis office today to learn more about how we can help you with your next commercial transaction.