A Lien Surfaces Mid-Escrow: The Claremont Cleanup

The preliminary title report arrives, and there is something on it nobody expected. A judgment against a person with the seller's name. A mechanic's lien from a contractor the seller believed was paid. A tax lien. A second deed of trust from a loan the seller is certain was paid off years ago.

This is one of the more common surprises in a residential escrow, and it is almost always solvable. What determines whether it is a two-day item or a three-week one is how quickly it is worked. Nothing about a lien gets easier by waiting.

Title work exists precisely to find these, which is why the report is ordered in the opening days rather than at the end - the sequencing point the opening-week guide makes.

What is actually on the report

The preliminary report lists what the title company would except from coverage if it issued a policy today. Some of those items are permanent and expected - easements, a utility right of way, recorded restrictions. Others are MONETARY LIENS, and monetary liens are things that get paid or released at closing.

The categories that surprise people fall into four groups.

Voluntary liens the seller forgot

A home equity line that was paid to zero but never closed, so the deed of trust still sits on title. A second loan taken during a refinance years back. These are the easiest to clear because there is a lender to contact and a payoff or release to obtain. The payoff and reconveyance guide covers that machinery.

Involuntary liens against the owner

An abstract of judgment recorded by a creditor attaches to real property the debtor owns in that county. A tax lien works similarly. Neither required the owner's signature, and owners are frequently unaware one exists.

Work-related liens

A mechanic's lien recorded by a contractor, subcontractor, or material supplier who claims they were not paid for work on the property. These are their own category, and the section below explains why.

Items that are not the seller's at all

Title searches by name, and names repeat. A judgment against a different person with a similar name can attach itself to the report and has to be cleared by demonstrating the seller is not that person.

The first question: is it real, and is it yours?

Before anyone negotiates, establish the facts. Ask the title officer what the recorded document actually says, who recorded it, and what the company requires to remove it as an exception.

That last part is the operative question. Title does not care about the moral merits; it cares about what will let it insure. Sometimes the requirement is a payoff. Sometimes it is a release from the claimant. Sometimes - for the mistaken-identity case - it is a statement of information from the seller establishing that the judgment belongs to someone else. Different problems have different cures, and title will name the cure.

Who pays

The default logic is straightforward. The seller has contracted to deliver marketable title, so monetary liens against the seller or the property are ordinarily the seller's to resolve, and they are ordinarily paid from proceeds at closing. Escrow handles that mechanically all day long.

Where that gets complicated is when the liens plus the existing loan exceed what the sale will produce - the short-sale problem, which is a different transaction with different approvals. Or when the seller disputes the lien and does not want to pay it.

As with most cost questions in a California closing, who bears a particular item is ultimately a term the parties can negotiate, the same principle the closing-cost guide works through. But a buyer agreeing to take a lien on is a buyer agreeing to own a problem, and that should be a deliberate, priced decision made with counsel, not a convenience.

Mechanic's liens deserve their own paragraph

A mechanic's lien arises from work on the property, and it can be recorded by parties the owner never hired directly - a subcontractor or supplier the general contractor failed to pay. An owner who paid the general contractor in full can still face a lien from someone downstream.

They also have their own statutory life. A recorded mechanic's lien does not sit indefinitely; the claimant has a limited window to enforce it, and there are procedures for releasing or bonding around a lien. Every one of those points is genuinely legal and genuinely time-sensitive, and it belongs with an attorney immediately rather than after the parties have argued about it for a week.

What it does to the timeline

Two things happen at once. Escrow starts the cure - ordering payoff demands, requesting releases, gathering statements. And the contract clock keeps running, because contingency periods and the closing date do not pause because a lien appeared.

So the practical response is parallel. Work the cure and address the calendar at the same time. If the cure will not finish in the time remaining, the parties extend by written agreement rather than letting a date pass and creating a second problem on top of the first. The extension guide covers how that is documented.

Do not let a title item quietly consume a contingency period. A buyer whose investigation contingency expires while a lien is unresolved has released a protection over an open question.

Payoffs and fraud risk

Clearing liens means moving money, sometimes to parties who are not familiar institutions - a judgment creditor, a contractor, a collection firm. That is a higher-risk payment environment than a routine bank payoff.

Let escrow obtain the payoff or release instructions directly from the claimant, and let escrow send the funds. Do not accept payment instructions forwarded by email from anyone, and if you are involved in transmitting anything, verify by telephone using a number obtained independently rather than a number in the message. A file where an unfamiliar payee suddenly appears is exactly the file wire fraud likes.

Prevention, for sellers

Order or review a preliminary report before listing rather than after an offer. Every lien this article describes is easier to clear with weeks available than with days. A seller who knows what is on title before a buyer does gets to solve the problem privately instead of negotiating it publicly.

Legal questions about validity, enforcement, and release go to an attorney. What title requires to remove an exception goes to the title officer. What escrow has received and what remains outstanding goes to the escrow officer.

The escrow guide covers the sequence this fits into. This is general information, not legal advice.

Anthony Grynchal has been licensed in California since November 2009.