Mechanic’s Lien Coverage Requires Underwriter Approval.

Priority

Can the Construction Loan Mortgage have initial priority over mechanic's liens?

Yes, so long as the lien is not recorded prior to the mortgage (9 V.S.A. 1921(d)).

Will initial priority as to future disbursements be retained only if certain procedures are followed?

Yes. Future advances are allowed unless mortgagee receives written notice of lien.

If priority is lost, can it be regained?

No.

Is there a difference between on-site and off-site work?

No. The statute does not discuss on-site or off-site (see 9 V.S.A. 1921(a)).

Is priority the same for all contractors and subcontractors on the same project?

Statute does not address the issue.

Time Limits

What are the time periods for recording lien claims by original contractors and subcontractors?

Must file in land records within 180 days from time last payment due (9 V.S.A. 1921(c)).

After what period of time can you waive a mechanic's liens if no suit is filed?

Suit must be filed and attachment filed within 180 days of filing lien (9 V.S.A. 1924).

Removing or Waiving Liens

Is there a statutory procedure for affidavits of completion or notices of completion?

No.

Can a statutory bond terminate the mechanic's liens as an encumbrance on title?

No. Statute is silent on the issue.

Can the original, general or subcontractor's contract or waiver agreement subordinate or waive mechanic's liens by general contractor and/or subcontractors?

No. Statute specifically states liens may not waived in advance (9 V.S.A. 1921(f)).

Can a bona fide purchaser or a bona fide lender take free of mechanic's liens later filed for earlier work?

Yes. (9 V.S.A. 1921(d)). A lien under this section shall not take precedence over a deed or conveyance to the extent that consideration therefore has been paid in good faith before recording of lien.

Title Company Requirements

What are the customary requirements for issuing Loan Policies on Construction Loan Mortgages?

Title update performed before each advance to check for recorded liens.

Is it customary to add a "pending disbursement" clause or mechanic's liens exception in the Loan Policy insuring a Construction Loan Mortgage?

Yes.

Also subject to any bulletins relating to mechanic’s liens.