As you, the buyer, pour over the voluminous stack of documents, disclosures and notices provided to you by the title company in connection with the impending closing of your real estate transaction, you will invariably come across one that asks if you want to pay an additional premium to have the standard exception for mechanics’ liens deleted from your Owner’s Policy. The import is that your policy will then insure you against loss or damage and pay costs, attorney’s fees or expenses that arise in connection with any lien, or right to a lien, for services, labor or material furnished, imposed by law and not shown in the public records.
Generally, an Owner’s Policy provides assurance to you that your title insurance company will defend (and pay) if a covered title problem arises after you take title to the real estate. Prior to May 1, 2013, many title insurance companies would remove for no charge the standard exception for mechanics’ liens if the seller provided as affidavit acceptable to the title insurance underwriter. After May 1, 2013, the Ohio Department of Insurance mandated changes to title insurance rates in Ohio and the payment of a premium is now required to remove this standard exception. The premium (which is 10% of the Owner’s Policy premium with a minimum amount of $250.00) is in addition to the premium of the Owner’s Policy.
What once was free (subject to satisfying certain conditions (e.g., a seller’s affidavit)) now comes with a cost, which in some cases could significantly increase the total premium cost for an Owner’s Policy. Foregoing removal of this standard exception could result in a claim for which you have no coverage. As a buyer, you should carefully consider the risk associated in declining to remove this standard exception by consulting with an experienced real estate attorney.