The Ohio Department of Insurance has approved rate increases for Title Insurance Coverage for Mechanics Liens and Closing Protection. Often the Buyer’s or Lender’s attorney will request that the title company remove the standard exceptions from the title policy. One of those exceptions is for mechanics’ liens. These are liens that can be placed on the real estate by contractors, subcontractors, materialmen or laborers. Many real estate attorneys seek protection from the title company for these liens on behalf of the Buyer or the Lender. The new rate increase for the removal of this exception can be substantial. The rate is equal to 10% of the original policy premium with a minimum of $250.00 if the risk of mechanics’ liens cannot be determined, and 40% with a minimum of $500.00 when the risk is determined by the underwriter.
The Closing protection letter is coverage against fraud, misapplication of funds or failure to comply with written closing instructions by the Licensed Agent. The increase approved by the Ohio Department of Insurance is much more modest, of $5.00. Coverage is now: Lender $40.00, Sellers $55.00; Buyer $20.00.
The increase for removal of the mechanics’ lien exception will likely result in more Buyers foregoing this coverage. However, it will probably not impact the Lenders, who will continue to want this coverage, and will require their Borrowers to pay for the coverage. The ultimate result?: Lender obtaining the protection for itself, and the Borrowers/Buyers paying for the Lender’s coverage, but not obtain the same coverage for themselves. No change on purchase of the closing protection.