Do I Need Title Insurance for New Construction in Utah?

You've just signed a contract to purchase a beautiful new home in one of Utah's growing communities—maybe a planned development in Herriman, a new neighborhood in St. George, or a custom build in Alpine. The house has never been lived in, the appliances still have protective film on them, and you'll be the first to turn the key. With everything so fresh and new, you might wonder: do I really need title insurance?

The answer is an emphatic yes. In fact, new construction purchases sometimes carry higher title risks than existing homes. While the structure might be brand new, the land beneath it has a complete ownership history, and the construction process itself creates unique vulnerabilities that can haunt you for years if not properly addressed. This guide explains exactly why title insurance is essential for new construction, what specific risks you face, and how to protect yourself when buying a newly built home in Utah.

Why Do New Homes Need Title Insurance If Nothing's Wrong Yet?

The misconception that new construction doesn't need title insurance stems from confusing the age of the building with the history of the land. When you purchase a new home, you're not just buying a structure—you're buying the land it sits on, and that land has a complete chain of ownership that could stretch back decades or even centuries in some parts of Utah.

Every title defect that could affect an older home can also affect new construction: prior liens that weren't properly released, errors in past deeds, boundary disputes, easements that weren't disclosed, claims from unknown heirs, and more. The title search for new construction must examine the complete history of the land from its original patent or grant to the present day.

Beyond the land's history, new construction creates its own category of title risks. The building process involves numerous contractors, subcontractors, suppliers, and laborers—each of whom has lien rights if they're not paid. The subdivision development process can introduce survey errors, platting mistakes, and easement complications. And the builder's financial situation can affect your title in ways that wouldn't be possible with an existing home purchase.

Title insurance for new construction does everything it does for existing homes—protects against problems in the land's history—plus provides additional protections specific to new builds. Most importantly, it gives you recourse if title problems emerge after closing that you couldn't have discovered beforehand.

What Are the Most Common Title Issues With New Construction?

New construction in Utah faces several predictable categories of title problems. Understanding these helps you know what to watch for and why title insurance is essential:

Mechanics Liens From Unpaid Contractors

This is the number one title risk with new construction. Under Utah law (Title 38, Chapter 1a), anyone who provides labor, materials, or equipment for construction has the right to file a mechanics lien if they're not paid. This includes general contractors, subcontractors, material suppliers, equipment rental companies, and even workers hired by subcontractors.

Here's the frightening part: even if you paid the builder in full, you can still face liens on your property. When you pay the builder, you're trusting they'll pay everyone who worked on your home. If the builder is financially distressed, mismanages funds, or disputes charges with subcontractors, those unpaid parties can place liens on your home—after you've already closed and taken ownership.

In Utah, contractors have 180 days from their last day of work to file a mechanics lien. This creates a substantial risk window. You could close on your new home in March, and in August discover that the drywall contractor who finished work in February filed a $30,000 lien against your property because the builder never paid them.

Subdivision and Boundary Issues

When developers create new subdivisions, they're dividing raw land into individual lots. This process involves surveys, plat maps, legal descriptions, and approvals from municipal planning departments. Mistakes at any stage can create serious title problems:

• Survey errors that place boundary lines in the wrong location, causing disputes with neighboring lot owners
• Legal description errors in the recorded plat that don't match the actual lot layout
• Encroachments where your home, fence, or driveway crosses onto a neighboring lot (or vice versa)
• Lot line adjustments that weren't properly recorded or approved
• Gaps or overlaps in the subdivision plat leaving slivers of land with unclear ownership

These issues are often discovered only when a survey is conducted—and many new construction contracts don't require the buyer to obtain a survey, leaving problems hidden until they surface years later.

Easement and Access Problems

New subdivisions require extensive easements for utilities, drainage, access roads, and shared amenities. When these easements aren't properly created, documented, or disclosed, buyers face surprises:

• Utility easements that conflict with where the builder placed structures, potentially requiring relocation of sheds, pools, or landscaping
• Drainage easements that make portions of your lot unbuildable or require you to maintain drainage facilities
• Access easements giving neighbors or utilities the right to cross your property
• Private easements within the subdivision that weren't disclosed to you
• Easements that were supposed to be created but never properly recorded

Can a Builder's Financial Problems Affect My New Home?

Absolutely, and this is one of the scariest aspects of new construction purchases. The builder's financial condition can have a direct impact on the quality of your title, even after you've closed and moved in.

When a builder files for bankruptcy, several things can happen that affect buyers. First, the bankruptcy trustee may claim that the builder's interest in properties (including possibly yours) is part of the bankruptcy estate. This can cloud your title and require legal action to establish that you, not the bankruptcy estate, own the property. Second, unpaid creditors—including contractors, suppliers, and lenders—may assert claims against properties the builder was involved with, arguing they have liens or other rights. Third, the bankruptcy can reveal that the builder took buyer deposits or construction loans but didn't pay contractors, creating a trail of unpaid claims that become your problem.

Even if the builder doesn't file bankruptcy, financial distress creates risks. Builders facing cash flow problems often delay paying subcontractors or play "musical chairs" with funds—using money from one project to pay debts on another. By the time you close, your builder might have a long list of unpaid contractors who have lien rights against your property.

Title insurance protects you from many builder-related issues. If liens appear after closing because the builder didn't pay contractors, your title insurance company will either pay to clear the liens or defend you against them in court. If the builder's financial collapse creates ownership disputes, your policy covers the legal costs to establish your ownership.

What Is the Builder's Responsibility for Clear Title?

When you purchase new construction in Utah, the builder has several legal obligations related to delivering clear title to you:

Delivering marketable title: The builder must convey title that is free from defects, liens, and encumbrances (except those specifically disclosed and accepted in your purchase contract). This means they must clear any mortgages or loans they used to purchase the land or finance construction, pay off mechanics liens, and resolve any title issues.

Disclosing easements and restrictions: The builder must disclose all easements, CC&Rs, subdivision restrictions, and other matters affecting your use of the property. Failure to disclose can constitute fraud or breach of contract.

Providing warranties: Most new construction contracts include builder warranties covering defects in workmanship and materials. While these don't directly relate to title, they affect the property's condition and value.

Complying with laws and permits: The builder must obtain all required permits, pass inspections, and comply with building codes and zoning regulations. Violations can affect your title's marketability and your ability to insure or sell the property later.

However—and this is critical—the builder's obligations provide only limited protection. If the builder fails to meet their obligations but has no assets (due to bankruptcy or dissolution), you have little recourse. Your contract might give you the right to sue the builder for breach, but lawsuits are expensive and often uncollectable. This is exactly why you need title insurance: it transfers the risk from you to the insurance company, regardless of the builder's financial condition.

How Does Title Insurance for New Construction Differ From Existing Homes?

While the basic principles of title insurance apply to both new and existing homes, title companies approach new construction with additional scrutiny and often recommend enhanced coverage:

Extended mechanics lien coverage: Standard title policies cover mechanics liens that exist at the time you purchase. However, as we've discussed, contractors have 180 days to file liens even after you close. Many title companies offer extended coverage or "gap" protection that insures against mechanics liens filed within a certain period after closing, as long as the work was done before you purchased. This is invaluable for new construction.

Enhanced survey coverage: New subdivisions often have survey issues. Enhanced title insurance policies can cover losses from survey defects, encroachments, and boundary disputes—issues that basic policies might exclude.

Subdivision and zoning coverage: Enhanced policies may cover losses from violations of subdivision restrictions, zoning ordinances, or building setback requirements. This protects you if the builder placed your home in violation of setback lines or if there are unapproved subdivision changes.

Comprehensive lien waiver collection: For new construction, title companies typically require the builder to provide extensive lien waivers from contractors, subcontractors, and suppliers before closing. Prospect Title maintains detailed checklists of required waivers based on the scope of construction, ensuring maximum protection for our clients.

Builder track record review: Experienced title companies research the builder's history. Have they had prior lien issues? Bankruptcies? Lawsuits from buyers? This due diligence helps identify high-risk situations before you're committed.

What Should I Look for in the Title Commitment for New Construction?

When you receive your title commitment (preliminary title report) for new construction, review it carefully with these new-construction-specific items in mind:

• Schedule B-I requirements for lien waivers: The commitment should require the builder to provide satisfactory lien waivers from all parties who worked on the property. If this requirement is missing or vague, ask your title officer to add specific lien waiver requirements.
• Outstanding construction loans: If the builder financed construction with a loan, it must be paid off and released at closing. Verify that Schedule B-I includes this payoff as a requirement.
• Subdivision plat and CC&Rs: These should be listed in Schedule B-II as exceptions to coverage. Obtain copies and read them carefully—they control what you can and can't do with your property.
• Easements affecting your lot: All easements should be clearly described and, ideally, shown on a plat map. If there are numerous or complex easements, consider ordering a survey to see exactly where they fall on your lot.
• Permit and certificate of occupancy: While not always shown on the title commitment, verify that the builder has obtained a certificate of occupancy or final approval from the municipality. Lack of proper permits can affect your title's insurability.
• Builder's authority to sell: If the builder is a corporation or LLC, the commitment should confirm they have authority to convey the property. This might require corporate resolutions or operating agreements.

How Can I Protect Myself When Buying New Construction in Utah?

Beyond obtaining comprehensive title insurance, several practical steps can protect you when buying new construction:

Research the builder thoroughly. Check their reputation with the Better Business Bureau, read online reviews, talk to previous buyers in their developments, and search for any lawsuits or liens filed against the company. A builder with a history of unpaid contractors or buyer disputes is a red flag.

Require lien waivers at closing. Make it a condition of your purchase contract that the builder must provide unconditional lien waivers from all contractors and major suppliers at closing. Don't let the builder push this off or claim it's unnecessary.

Get a survey. Even though surveys cost $400-$800, they're invaluable for new construction. A survey confirms your lot boundaries, shows any encroachments, and verifies that structures comply with setback requirements. Many title problems are discovered only through surveys.

Read all subdivision documents. Don't just skim the CC&Rs and subdivision restrictions—read them carefully. These documents can impose significant limitations on what you can do with your property, from paint colors to business operations to architectural approvals.

Verify permits and approvals. Ask the builder for copies of all building permits and final inspection approvals. Contact the local building department yourself to confirm that permits were issued and inspections passed. Unpermitted work can haunt you for years.

Work with experienced professionals. Use a real estate agent who has experience with new construction, a title company with a track record in builder transactions, and consider having a real estate attorney review your purchase contract. The money you spend on professional guidance is a fraction of what you could lose if problems emerge.

Consider an escrow holdback for liens. If there's any concern about unpaid contractors, you might negotiate to hold back a portion of the purchase price in escrow for 180 days (the mechanics lien filing period) to cover any liens that appear. While builders often resist this, it provides strong protection.

What About New Construction in Master-Planned Communities?

Utah has seen explosive growth in master-planned communities—large developments with hundreds or thousands of homes, extensive amenities, and multiple builders. These communities present unique title considerations:

Master-planned communities typically have multiple layers of restrictions: the master HOA governing the entire community, sub-association rules for individual neighborhoods, and builder restrictions that apply during the development phase. Your title report should list all recorded restrictions, but understanding how they interact requires careful review.

These communities also involve complex easement arrangements. There may be private roads maintained by the HOA, shared amenities requiring access easements, extensive utility easements serving the entire development, and reciprocal easement agreements allowing residents to use common areas. Make sure you understand which facilities you have rights to and what maintenance obligations come with your property.

Finally, watch for phased development issues. If your home is in an early phase of a multi-year development, future phases might bring changes you didn't anticipate: additional density, commercial development, or changes to amenities. Title insurance won't protect you from these kinds of changes, but reviewing the master development plan and recorded restrictions can give you insight into what's coming.