The Role of Title Companies in Construction Liens

July 10, 2025

When it comes to resolving or preventing issues related to construction liens, title companies play a crucial role. For contractors, suppliers, and lenders, understanding how these companies operate during real estate transactions and development projects can protect everyone’s financial interests.

In this blog post, we’ll explore how title companies help manage lien-related risks and support both property owners and creditors during construction.

What Does a Title Company Do?

A title company’s primary job is to ensure that the title to a property is clear before a sale or refinance can proceed. They research the property’s history, verify legal ownership, and uncover any outstanding claims, such as unpaid taxes or construction liens.

They also issue title insurance, which protects lenders and property buyers from unexpected legal challenges that could affect their ownership.

How Title Companies Identify Construction Liens

Comprehensive Title Searches

Before closing on a property or loan, title companies perform a detailed title search. This includes checking for liens filed with the county clerk or public records office. If a construction lien is found, the title company will flag it and notify all relevant parties.

Communication With Stakeholders

Title agents may contact the lienholder, property owner, or attorney to verify the validity of the lien and determine the next steps for resolution. This helps clarify whether the lien is enforceable or can be removed prior to closing.

Why Construction Liens Delay Closings

If an active construction lien is discovered during a title search, the transaction cannot move forward until the lien is resolved. This can delay sales, loan approvals, or refinancing efforts.

The title company will usually require a lien release or payment before issuing a clear title. In some cases, funds from the sale may be placed in escrow until the lien is fully satisfied.

How Title Companies Help Resolve Liens

Facilitating Lien Releases

Title companies often work with attorneys or collection firms to help negotiate payment and obtain lien releases. They may request documentation such as lien waivers, settlement agreements, or proof of payment to clear the claim.

Holding Escrow Funds

If immediate payment is not possible, the title company can hold escrow funds to satisfy the lien after closing. This allows the sale to move forward while ensuring that the lienholder is paid.

The Importance of Lien Waivers

Title companies frequently require lien waivers from contractors and subcontractors as a condition of closing. These documents serve as legal proof that payment has been made and the party has waived their right to file a lien.

There are two main types:

  • Partial lien waivers: Issued as progress payments are made during construction
  • Final lien waivers: Signed once the final payment is received

Without these waivers, title companies may assume there’s a risk of future lien filings.

How Contractors and Suppliers Benefit

Working with a title company benefits not just property owners and buyers, but also those providing labor and materials.

When lien rights are respected and properly documented, it becomes easier for contractors and suppliers to:

  • Confirm that funds are available before beginning work
  • Secure payments through structured disbursement processes
  • Protect their right to file a lien if payment is delayed

When Legal Support Is Needed

If a construction lien becomes a point of contention, the title company may refer the parties to a commercial debt collection or real estate attorney. Legal professionals can assist with validating the lien, initiating foreclosure proceedings, or filing counterclaims if the lien is believed to be invalid.

At Miller, Ross & Goldman, we specialize in helping contractors and businesses enforce their lien rights and recover unpaid balances quickly and legally.

Get Help with Your Construction Liens Today 

Title companies serve as the gatekeepers of clean property ownership. When it comes to construction liens, they ensure that debts are disclosed and resolved before a property changes hands. For contractors, lienholders, and property owners, working with an experienced title company is essential to avoid costly delays and legal disputes.

If you need help filing or enforcing a construction lien or if you’ve hit a roadblock during a real estate transaction, contact Miller, Ross & Goldman today to speak with a commercial collections specialist.

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