Contractor threatening mechanics lien unless his extortion is paid

13 Replies

Originally I hired a contractor in March 2015 for a job that he claimed would take no more than ten days. Three months later in March, he completed 80% of the work and had been paid 90% of balance. He claimed to be on-site five days week from 7 am to 7 pm. In reality he made cameo appearances and outsourced the work. Moreover, he demanded regular payments during the job in order to pay his crew. In actuality, he asked me to pay one of his subcontractors out of the monies owed to him ahead of schedule to cover the subcontractors cost. I did so, but this subcontractor had to travel from San Diego to Orange County to get paid. This contractor left his tools and paint sprayer outside of my property unattended for weeks on end after these tools were no longer needed. Regrettably, the tools are missing. 

Due to the describe issues with the contract, I wrote the contractor outlining the fact that the remaining work to be completed exceeded the balance owed, and that we would rather end the contract now and move forward with another contractor.

He had tentatively agreed to this, but when he discovered that his tools were missing he threatened to place a lien on the property for $3900 this week. If he does this, as he pointed out, it would foil the sale of the property. As an out he is willing to accept $1200 in payment in order not to file the lien. 

This lien claim is wholly unwarranted and this offer, in my humble opinion, is borderline extortion. 

What should I do?

You need preferably an attorney, or at least someone familiar withCA lien laws.  Here, if he filed a lien you could "bond it off"(remove it) by putting up cash in a court account.  I don't Ever believe in giving in to threats.  You probably have to give him a reasonable chance to finish his contract, before putting him in default.  Make sure you follow proper procedures.  He's probably hoping you'll cave in with the threat of a lien.

In California, you can obtain a bond to allow you to close escrow. (known as "bonding around"). For such a small amount, your title company may also allow you to close escrow with the amount in dispute plus a buffer withheld until the lien is removed and you agreeing to defend and indemnify the title company for its losses if the claimant actually attempts to perfect the lien. I have been successful with this approach before.

In California, the claimant has to file suit to foreclose on the mechanics lien within 90 days of it being recorded in order to perfect the lien. If the claimant doesn't, then the owner has the right to petition the court to get the stale lien removed if he refuses to do so and per statute,  can recover a judgment for attorneys fees and costs incurred in getting it removed, regardless of the merits of the underlying claim. Most California real estate attorneys are familiar with this procedure. Cal. Civ. Code §§ 8480-8488

The elephant in the room is still - Do you have a contract with this guy and what does it say regarding work completion schedule including dates, delays and owner liability?

The contract governs the work and completion.  

Generally, the owner is not liable for lost or stolen tools.  That is a claim the contractor can make on their insurance or simply eat.

It may be prudent to contact the state contractor department and see if you can file a complaint and get further information on how to defend yourself if needed.  Contractors are licensed agents just like real estate or mortgage or alike.  They have a state body which governs their actions and can bring discipline as needed.

This may also put you in a better situation to pursue damages when another contractor comes in and you have to pay to fix mistakes or issues, etc.

I too like Wayne dislike hostage negotiations.  If he didn't complete the work and is multiple weeks behind and missing budget with no real explanation, it is difficult to understand what leg he can stand on thus he is just a bunch of idle threats.  If he files a lien with you that is not proper per paperwork and state process he can get in lots of trouble.  Like I said, check with the state construction license department and see what they suggest.

You should have fired him a couple months ago. I say pay him the money and then sue him in small claims court for loss of income due to not completing the work on time. Maybe you can make something off of him

As noted above, what does your agreement with the contractor say ? In regards to missing equipment that will be on him and an insurance claim. I would refuse to give in to his demands he is in essence threatening you to try and get another $1200 One comment that has not been noTed is to make sure to have lots of pictures taken of the work done. If it is not per your standards note it. Also send him an official letter terminating the agreement and note reasons why

This post has been removed.

Tell him you will give him the money, but you need it in writing what the money is for. When he gives you in writing that his claim is over lost tools, you have enough evidence in my opinion to get the lien removed. Don't actually give him the money, just use that to get it in writing.

In my first round of interviews with contractors, I used a boilerplate contract with all of the terms and conditions necessary to cover any and all bases. There was even a clause in this contract that required that the contractor relinquish the right to file a mechanics lien. No one agreed to these terms. 

The second contract was supplied by the contractor. I never provided a wet signature. He never provided a wet signature. This is the contract below. I don't believe that this is a valid contract. 

Contractors name and address withheld.

My name and address withheld.

<snip>

1. REPLACE ALL OUTLETS, SWITCHES AND TRIM COVERS WITH DECORA STYLE. (OWNER SUPPLIES)

2. INSTALL NEW CARPET, TACK STRIP AND PAD IN 3 BEDROOMS, HALLWAY AND LIVING ROOM.

(OWNER SUPPLIES CARPET ONLY)

3. INSTALL TILE IN 2 BATHROOMS, DINING ROOM, FRONT ENTRY AND KITCHEN

(OWNER SUPPLIES TILE AND GROUT)

4. INSTALL CABINETS, FIXTURES, APPLIANCES AND COUNTERTOPS IN KITCHEN.

(OWNER SUPPLIES ALL)

5. CHANGE OUT ALL ANGLE STOP SUPPLY VALVES TO ALL SINKS AND TOILETS.

(OWNER SUPPLIES VALVES, TRIM AND SUPPLIES)

6. INSTALL NEW TUB/SHOWER VALVE BEFORE TILE. (OWNER SUPPLIES VALVE AND TRIM)

7. INSTALL 72" TILE AT TUB WALLS. (OWNER SUPPLIES TILE AND GROUT)

8. REPLACE 2 TOILETS AND 1 FAUCET IN FRONT BATH. (OWNER SUPPLIES FIXTURES)

9. PAINT ENTIRE INTERIOR. CEILINGS, BASE, CASE AND WINDOW SILLS WHITE AND REST OF WALLS

ONE COLOR. (OWNER SUPPLIES PAINT)

10. PATCH ALL DRYWALL AND COAT OR REMOVE ACOUSTIC CEILINGS.

11. PAINT FURNACE COVERS. (OWNER SUPPLIES PAINT)

12. ALL NEW BASE AND CASE ( 20 AND 17 RESPECTIVELY) (OWNER SUPPLIES)

13. REMOVE 2 JAMBS AND DRYWALL PASSWAYS.

14. REPLACE 2 DOORS WITH 24"X80" PRE HUNG 5 X'' JAMBS 1 LEFT AND 1 RIGHT.

(OWNER SUPPLIES)

15. ADD 3 SHELVES AND CLEATS IN HALL LINEN CLOSET.

16. 6 NEW BED/BATH DOOR HANDLES. (OWNER SUPPLIES)

17. INSTALL 2 NEW 30"X30" WALL CABINETS IN LAUNDRY ROOM. (OWNER SUPPLIES)

18. REMOVE WALL BOARD BETWEEN BATH AND LAUNDRY TO INSPECT WATER DAMAGE. COULD BE

A POSSIBLE EXTRA COST DEPENDING ON CONDITION.

19. INSTALL LIGHTS AS FOLLOWS:

4- CEILING MOUNT FIXTURES, 2- WALL MOUNT FIXTURES, 1-D.R., 2 FANS, 2 PORCH, 5 RECESS

IN KITCHEN. (OWNER SUPPLIES ALL FIXTURES)

TOTAL LABOR COST .......................................................................................................... $12,000.00

(ALL OTHER PARTS ARE INCLUDED EXCEPT WHERE LISTED ABOVE)

X _______________________________________ DATE ____________ _

<snip>

Hi Mindy,

My colleague took photographs of all of the dubious craftsmanship. Its inspiring and should serve as ample evidence either in court or in mediation with the California contractors board.

Thanks.

Track down the/all subcontractor(s) and get a lien release from them. This will help in demonstrating that that portion was paid and protect you from the subs also filing a lien.

You must get lien releases before any and all payments made to a contractor. You could file a claim against his bond - they will pay you for all unfinished work and they will collect the money from the contractor. That is what a contractors bond is for. You could take the contractor to small claims court and have a he said she said battle in front of the judge. I hate to say it but... Pay the $1200 and move on with an education. If you are successfully flipping houses your time is worth more than the effort it will require of you to win on principle.

I wouldn't pay him a cent.  He hasn't even filed the lien.  I'd threaten back a complaint to the State Licensing Board as well as tell him that HE will be sued by you if he files a lien that holds up your sale.  And I agree with other posters, IF he files bond off on it and proceed with your sale. 

Chances of actually ending up in Court - he has to file a lawsuit to perfect his lien - are slim to none as he will incur legal expenses in excess of his claim.  If he doesn't perfect his lien within the statutory time requirements, his lien is invalid.  And these requirements are very strictly enforced by Courts.  If he is a Corporation, he can't represent himself in Court and must hire an attorney (at least this is the case in Virginia).  And no attorney is going to show up for a trial for less than 5K.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.