Bulletin: TX000004

Dear Associates:

Periodically, builders will sell property prior to substantial completion of the improvements. For example, the builder may sell a house prior to completion of a swimming pool and may offer to allow you to hold a substantial sum (such as $20,000) pending the completion of that swimming pool. In the alternative, an owner may sell a commercial property or refinance a loan where substantial work (such as extensive tenant finish) remains to be completed.

In each of these cases, Procedural Rule P-8(b) requires that you make the following exceptions in the mortgagee policy:

"Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, to be placed, upon the subject land. However, the Company does guarantee that no such liens have been filed with the County Clerk of County, Texas prior to the date hereof."

"Pending disbursement of the full proceeds of the loan secured by the lien instrument set forth under Schedule A hereof, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects in, or objections to, the title up to the face amount of the policy. Nothing contained in this paragraph shall be construed as limiting any exception under Schedule B or any printed provision of this policy."

You must place similar provisions in the owner policy, which are set out in Procedural Rule P-8(a).
If you are asked to issue without these exceptions where improvements have not been substantially completed, please call our legal department.