Claims Corner: Owner’s Policy Protects Homeowner from Sewer Installation Lien


The Claims Corner is a Title News Online feature provided by ALTA’s Claims Committee, which reviews claims that have a unique or interesting set of facts or triggers an unusual aspect of a title policy.

Type of Claim: Utility Liens, Charges and Assessments
Facts: In 2006, Alice sought the installation of sewer and other utilities for a contemplated duplex. The Sewer Authority and Alice agreed via contract that she would pay for the second connection over an extended period of time under a second account number and residential address reference. Unfortunately, Alice eventually decided to move to another area of the country without completing the second residence and sold the property to Betty in July 2013. In January 2014, Betty received an invoice and letter demanding payment of a lien of approximately $10,000. The lien information referenced the 2006 second sewer installation on an account number and property address Betty did not recognize. Although the lien was not separately recorded in the public records, the statute allowed for the lien amount to be collected in a variety of ways, including transfer to the real estate tax rolls and foreclosure. Betty was issued the 2006 ALTA Owner’s Title Insurance Policy and was protected under the insuring provision covering “any defect in or lien or encumbrance on the Title.”
Outcome: The title insurance carrier was able to negotiate with the Sewer Authority to collect the amount due from sources other than Betty. A detailed review of the statutes and local law made it clear that the Sewer Authority would not be able to successfully obtain the amount due from Betty due to the lack of notice provided to Betty when she purchased the property. However, litigation was likely to result from nonpayment. In exchange, the title insurance carrier offered to cooperate in the location of additional sources of recovery for the Sewer Authority.

Lesson Learned: Title agents are the eyes and ears of the underwriter. While the typical title and closing process is very thorough, not all items material to a sale and purchase may be ascertained by inquiry of the principals and third parties, especially when dealing with potential assessments or inchoate liens imposed by local municipalities for utilities. Title agents must be thoroughly familiar with applicable local regulations, ordinances and practices, and remain vigilant in reviewing lien and title search information for the entire property being insured. There is no better way to clarify the existence or non-existence of a lien or assessment than by contacting (in person or in writing) the governmental and quasi-governmental agencies in their locale. The type of policy that Betty purchased fortunately provided protection for the lien in question.
This claim summary was prepared by Chris Brink, vice president and associate compliance and claims counsel, and Marjery Lee, executive vice president and national claims and litigation manager, for North American Title Group. Brink can be contacted at Lee can be reached at