Executive Summary: Construction lender court records diligence sits on top of one of the most lien-heavy industries in lending: a mechanic's lien is a security interest acquired by someone who supplies labor or material to a property, and it can attach without the lender ever seeing it coming.[1] For a construction lender, the answer is a stacked workflow that verifies the entity, checks the contractor's license, and then searches court records for mechanics-lien litigation and bond disputes. This guide walks that stack and shows where Cobalt's data fits and where it must hand off.
Why does a construction lender need court records and license checks?
What risk hides in a construction borrower?
A construction borrower carries two layers of risk a generic business check misses. First, the contractor may be operating on an expired, suspended, or revoked license. Second, the entity may already be entangled in mechanics-lien litigation or a surety bond dispute, both of which signal project distress and competing claims on payment.
Why check license and litigation together?
License status tells you whether the contractor can legally perform the work. Court records tell you whether prior work ended in disputes over payment or performance. A clean license with a history of lien suits is a different risk than a clean license with no litigation, and the lender needs both views before funding a draw schedule.
What does the honest verification stack look like?
How do the layers fit together?
The construction stack runs Secretary of State entity verification, then contractor license verification, then court records. Each layer narrows the question, and each has an explicit fallback when coverage runs out.
| Layer | Cobalt endpoint | Fallback when unsupported |
|---|---|---|
| Entity verification | Secretary of State search, all 50 states | None needed, nationwide |
| Contractor license | `GET /contractorSearch`, CA, FL, NY, TX | State board lookup for other states |
| Court records | `GET /courtCases`, New York and Miami-Dade | County records or PACER for other venues |
Where does each layer's coverage stop?
The license layer covers California, Florida, New York, and Texas only, searched by license number. The court layer covers New York State and Miami-Dade County, Florida only, searched by business name. Neither is nationwide, so the workflow must route unsupported states to a fallback rather than clearing them silently.
How does the contractor license check work?
What does the API call and return look like?
The license endpoint searches by license number and state and returns through a callback. The documented fields are license status such as active, expired, suspended, or revoked, the license number, the expiration date, disciplinary actions where available, and the license type or classification.
curl --location 'https://apigateway.cobaltintelligence.com/contractorSearch?licenseNumber=1234567&state=ca&callbackUrl=https://your-app.example.com/cobalt/callback' \
--header 'x-api-key: YOUR_API_KEY' \
--header 'Accept: application/json'What does the license check not cover?
The check covers four states only and requires the license number, not a name. It is not a nationwide contractor database, and it does not pull from NASCLA, NMLS, or a state consumer-affairs umbrella.[5] Those are authoritative external sources for context, not Cobalt return fields, so a contractor in an uncovered state routes to the relevant state board.
How does the court records check work?
What does the court API return?
The court endpoint searches by business name in New York or Miami-Dade and returns judgment details, case information including case number and court division, filing dates, the parties involved, and judgment amounts where available. For a construction file, the parties and case type help confirm whether a result is a mechanics-lien suit, a bond dispute, or unrelated litigation.
How do mechanics liens and bond disputes show up?
A mechanics-lien suit appears as litigation tied to the entity over payment for labor or material, and an unresolved one signals competing claims on project funds. A surety bond dispute signals that a project's performance or payment guarantee was contested. Both belong in manual review because both can subordinate or complicate a lender's recovery position.
| Signal | Underwriter action | Why it matters |
|---|---|---|
| Active mechanics-lien suit | Manual review | Competing claim on project payment may dilute recovery |
| Surety bond dispute | Manual review | Performance or payment guarantee was contested |
| Expired or suspended license | Funding hold | Contractor may not legally perform the work |
| No record in covered venue | Continue with documentation | Two-venue absence is not nationwide clearance |
| Entity outside coverage | Fallback search | County records or state board closes the gap |
How should the workflow handle coverage gaps?
Why must fallback be explicit?
The right workflow states one of three outcomes per layer: clean covered result, risky covered result, or unsupported venue requiring a fallback. A contractor licensed in Arizona will return nothing from the license API, and an entity litigating in Texas state court will return nothing from the court API. Both must route to a documented fallback, not a silent clear.
Who runs the fallback?
Assign each fallback to a named step with a source and a logged outcome. License fallbacks go to the relevant state board, such as the California Contractors State License Board,[6] Florida DBPR,[7] or the Texas Department of Licensing and Regulation,[8] and court fallbacks go to county records or, for federal and bankruptcy matters, to PACER.[2]
The practical question is not whether the contractor says the license is current and the prior jobs closed clean. It is whether the license board and the court record support both statements before the construction draw funds.
What compliance limits apply to this data?
How does the FCRA shape use of court records?
Court suits and judgments are public records, and using them in credit decisions can trigger Fair Credit Reporting Act duties. The FCRA bars consumer reporting agencies from reporting most civil suits and judgments that antedate a report by more than seven years.[3] Cobalt is a data source, not a consumer reporting agency and not a decisioning engine, so the lender owns how the data is used.
Where does the lender's judgment stay?
Cobalt supplies license and court data; the lender builds the rules and owns the decision to fund, condition, or decline. A judgment, once filed, can attach as a lien to entity property, which is why these signals feed the decision rather than make it.[4]
How does this fit a complete construction risk stack?
What should run alongside license and court checks?
Pair the stack with lien discovery and sanctions screening. See the pre-funding UCC lien search underwriter workflow for the UCC layer and BSA/AML for alternative lenders and OFAC's role for the compliance layer.
What belongs in the audit trail?
Store the raw responses from both endpoints, the parsed fields, the states and jurisdictions searched, every fallback result, and the decision reason. A lien or a dead license discovered after the draw is only a postmortem.
How can a construction lender get started?
A team can start by listing which contractor states fall inside the four covered by the license API and which court venues sit inside New York and Miami-Dade, then define the state-board and county fallbacks for everything else. To see the contractor and court endpoints return data on a sample file, book a Cobalt demo and walk the stack with the team.
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