You’ve signed the purchase agreement, secured the financing, and the closing date is finally in sight. Yet, between contract signing and settlement day, your transaction moves into the legal review phase—a minefield of title issues and forgotten paperwork.

For both buyers and sellers, avoiding a last-minute, catastrophic delay comes down to proactively identifying and resolving the legal pitfalls that kill closings. Forget moving truck logistics; these are the core legal defects that demand expert attention.

Here is your essential pre-closing legal checklist, designed to prevent costly delays and ensure a smooth transfer of ownership.

1. The Ghost of Mortgages Past: Unreleased Prior Liens

A prior mortgage that was paid off but never legally discharged or released from the property records is a common and infuriating real estate closing problem. The title search will flag it as an active lien, meaning the seller cannot convey a clear title.

• The Problem: The seller paid off their last loan five years ago, but the previous lender’s administrative oversight meant the formal “Satisfaction of Mortgage” document was never properly recorded in the county land records.
• The Delay: The title company cannot insure the property until this lien is legally cleared. The process of tracking down the old lender, obtaining the correct document, and recording it can take days or weeks, pushing back your settlement date.
• The Fix: A savvy real estate attorney immediately contacts the old lender’s servicing department (or their successors) to demand the timely production and recording of the release. In some cases, an attorney may need to file an affidavit or request an indemnity agreement from the title insurer to “insure over” the defect if the old documentation is impossible to retrieve.

2. The Property Under Attack: Pending Litigation (Lis Pendens)

A Lis Pendens (Latin for “suit pending”) is a formal, recorded notice that a lawsuit directly affecting the title, ownership, or right to possess the property is currently active. This immediately clouds the title, making it essentially unsellable.

• The Problem: The seller is being sued over a boundary dispute with a neighbor, an inheritance claim, or, most commonly, a foreclosure action. The title report will clearly show the Lis Pendens document recorded against the property.
• The Delay: No mortgage lender will fund a loan on a property subject to pending litigation. The closing is dead in the water until the underlying lawsuit is dismissed, settled, or the Lis Pendens is formally withdrawn.
• The Fix: The seller’s attorney must work to settle the underlying dispute and ensure a formal Release of Lis Pendens is filed immediately. For buyers, your attorney will recommend you do not close until the release is recorded, protecting you from inheriting the legal battle.

3. Last-Minute Surprise: Judgment and Mechanic’s Liens

Judgment liens and mechanic’s liens are financial claims against the property that are often the last things to pop up before closing.

• Judgment Liens: A court judgment against the seller for unpaid debt (e.g., credit card, child support) automatically becomes a lien on all real estate the seller owns in that county.
• Mechanic’s Liens: A contractor, subcontractor, or supplier who was not paid for work on the home can file this lien to secure their debt.
• The Delay: The title company requires that all outstanding liens be paid off at or before closing. If the seller disputes the debt or the final payoff amount is unclear, the settlement must be delayed until a clear resolution is reached.
• The Fix: Your attorney ensures a full payoff figure is obtained for every lien and that the Closing Disclosure accurately allocates seller funds to satisfy these debts. The goal is to ensure the Lien Release documents are executed immediately after the closing funds are disbursed.

4. Expired Authority: Invalid Power of Attorney (POA)

If one party in the transaction (buyer or seller) is using a Power of Attorney (POA) to sign documents—often due to travel, illness, or residency—that document is subject to strict legal scrutiny.

• The Problem: In some jurisdictions, a POA used for a real estate transaction must be “recent” or have specific real estate language, especially if it’s an older or generic document. Furthermore, a non-durable POA automatically expires if the person who granted it becomes incapacitated, and all POAs become immediately invalid upon the death of the person.
• The Delay: The title company’s underwriter may reject the POA at the last minute if it is deemed stale, lacks proper witness/notary requirements, or is not durable. This forces the buyer/seller to appear in person or secure a new document, which is impossible if they are incapacitated.
• The Fix: A real estate attorney reviews the POA document well in advance to ensure it is compliant with state law, is “durable,” and is in the correct recorded form, preventing a closing table surprise.

5. Boundary Blunders: Uncorrected Survey Errors

While not always strictly a lien, an uncorrected or inaccurate land survey can cause an immediate and indefinite legal closing delay.

• The Problem: The survey reveals that a fence, a shed, or even the corner of the house encroaches onto the neighbor’s property, or that a utility company holds an undisclosed easement that impacts the buyer’s planned use of the land. These issues compromise the clear, marketable title the buyer is contracted to receive.
• The Delay: The buyer’s lender will typically refuse to fund the loan until the encroachment is resolved (e.g., by removal, a small land purchase, or a recorded agreement with the neighbor).
• The Fix: An attorney can negotiate and draft the required legal agreements, such as an Encroachment Agreement or a Quitclaim Deed, to legally resolve the boundary issue and satisfy the title insurer’s requirements, clearing the path to closing.

Conclusion

The complexities that threaten a timely closing are rarely related to misplaced keys; they are almost always legal defects found deep within the title history or property documents. Proactive, expert legal review is the only reliable shield against the financial and emotional stress of a delayed settlement day. To ensure your contract closes on time and your investment is secure from hidden legal defects, contact Lforlaw today. Our platform connects you with the expert real estate attorneys who specialize in preventing these costly closing problems, providing the peace of mind and swift action required to get you to the closing table.

---

Sources 

1. American Land Title Association (ALTA) Best Practices: Title insurance standards consistently flag issues like unreleased prior liens and judgment/mechanic’s liens as the primary obstacles to issuing a clean title policy, which is mandatory for most real estate closings.
2. State and Local Land Records Statutes: Laws governing the recording of mortgages, satisfactions, and Lis Pendens notices determine the validity and priority of liens, directly impacting a property’s marketability.
3. National Association of Realtors (NAR) Legal Resources: Regularly cites contract and closing delays caused by third-party issues, including title defects, as a leading cause of breach of contract in residential sales.
4. Consumer Financial Protection Bureau (CFPB) Regulations: While focused on financing, the CFPB’s focus on the Closing Disclosure underscores the need for absolute accuracy on all payment/payoff figures, which are often compromised by unreleased liens or incorrect judgments.