21.04 Vendor's Liens

21.04.1

In General

In some jurisdictions, a grantor of real estate who is not paid in full the purchase price and does not take any lien or security beyond the personal obligation of the purchaser is recognized as having an implied equitable lien upon the land conveyed. However, it should be noted that the lien of an unpaid vendor of land who has parted with the legal title is not a specific absolute charge upon the property, but only an equitable right in case the purchase money is not fully paid.

Typically, a vendor's lien is not valid against subsequent creditors or purchasers unless they have actual notice of it, or reference to the lien is contained in the recorded deed from the seller to the buyer.

21.04.2

Procedure For The Handling Of Vendor's Lien

If any of these circumstances are present:

  • The instrument recites the existence of the lien, or
  • The proposed insured informs the Company about his or her knowledge of the existence of the lien, or
  • The Company acquires knowledge about the existence of the lien through any other source or method, (Note - The Law in some state is that the mere recital of the non-payment of a part of the purchase price is not sufficient to create a vendor's lien).

Specific requirements should be made to file for record proof of the payment of the unpaid balance. In the alternaive, appropriate exception must be shown in the title policy.