Mechanics lien on Flip property for undone work and no contract

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Mechanics lien on Flip property for undone work and no contract

Christopher Dunson
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes

I have someone who had no license when doing work for me, and now has a handyman's license organizing and subcontracting work on my flip. Initially, I told him that I may have to wait to pay him $15000 for work done until the house sells. He said that's perfectly fine. I have done 3 projects with this guy, and never had a problem. This is a first. I was able to pay him for everything up until we had about $4500 left. We had a disagreement, when I told him I have to wait till the home sells for the rest, and he left without finishing. He only finished around $2000 of work. Later he told me I owe him $4500, I need to pay him, and he'll finish the work. I told him I want to pay him, but he will have to wait. He put a lien on my property for all of the work including the unstarted and unfinished work plus $3500 for nothing. I cannot sell the home, therefor I cannot pay him.

I have since finished the remaining work with somebody else, and got a leaky roof( which he subcontracted out, and then would not give me the phone number to call, nor did he send the roofer back). There are numerous things I later found besides the roof that are done badly or unfinished, ex: 10 outlets not working, or not grounded, or reversed.

I have an offer on the house to close in 28 days, and am looking for quick solution, and or long term action, as trying to mediate the situation with him face to face seems to be costing me and getting me nowhere. Thank you.

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Christopher Brainard
Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
9y
Originally posted by @Christopher Dunson:

@Christopher Brainard Luckily, everything is permitted to the best of my knowledge.

If you're located in Las Vegas, I have some bad news for you, there is no such thing as a handyman license in Nevada and unlicensed contractors can't pull permits, so I highly doubt anything is permitted. Your handyman is probably working under a standard business license, which forbids being paid or accepting payment for more than $1000 on any job or for any customer in a given year. If you're holding the property in your personal name and you intend to live there, you can pull permits, but they make you sign a form under penalty of perjury that you don't' sell or rent it for at least a year. 

So to answer your questions, you can pay the lien at closing and be done with the situation. Any legal action you take against him will definitely last longer than your escrow, the courts in Clark County aren't super fast. You can call the contractors board, but since you knowingly hired him multiple times, that could be bad for you. You can contact him directly and try to work out some sort of deal to get the lien released prior to close, but if he knows you're going to close he has little incentive to cooperate and it sounds like he knows the game better than you do.

-Christopher

P.S. If you don't have the cash to pay your contractors, you shouldn't buy the house or you should raise funds to cover your shortfall. Its been my experience that most contractors aren't fun to deal with under normal circumstances, but if they even suspect they will get shorted, you're almost guaranteed that they'll stop work immediately and you will face this exact same situation again. 

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    Tough situation , however not being able to pay a contractor until the house sells... that is terrible business. Do you have a contract with him? Was he licensed and insured when you hired him? 

    Honestly at this point you might be stuck paying this guy to get rid of the lien. He probably has the upper hand. He can hurt your "business" but there is really nothing you can do to hurt his.

    It might be worth just getting him paid as little as possible to drop the lien and moving on. 

    3Reply
  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    9y

    Hire a lawyer to send a cease and desist letter and file a compliant with the contractors board Let the guy know what actions you are taking and give him 1 shot to settle

    0Reply
  • Jack B.
    Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    From what I understand, liens don't mean you can't sell the house, it means the lien holder get's paid part of the proceeds to cover the lien. That is unless you take them to court. He didn't finish the job and he did shoddy work. You have no contract it sounds like. 50% chance a judge will side with you. If you had a contract and the evidence of shoddy work, I would be laughing all the way to court....

    2Reply
  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    9y

    The person needs a contractors license to perform the work he did and can be fined tens of thousands .a handyman can not do work that needs a permit or is over a $1000 bucks When confronted he will remove the lien or face the consequences

    1Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Brian Pulaski

    @Account Closed

    I have thought about calling a lawyer, but I'm honestly trying my best not to screw this guy over. I am also concerned that it will hold up sale of the property. I have heard that one can set the funds aside in escrow until it is settled and proceed with the sale, but not sure if this is the best action to be taken.

    0Reply
  • Christopher Brainard
    Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
    9y

    @Account Closed is trying to express is that he knowing hired an unlicensed contractor and probably didn't pull permits for the place he was renovating either. Running to start a legal battle may not be in his best interest.

    -Christopher

    2Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Brian Pulaski, There is no signed contract, and he is not a contractor, he got his handyman license though after the project was completed.

    @Account Closed I read people who have done work on a property liening for more than what is owed can cause them problems. I think that is pretty bad business with someone who has paid you over $100k in a 7 mo period. He was aware if you read my above post of all circumstances before getting into the deal with me. But, you're right, I need to run a business correctly. Any pointers are appreciated.

    0Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Christopher Brainard Luckily, everything is permitted to the best of my knowledge.

    0Reply
  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Christopher Brainard:

    @Account Closed

    I think what @Christopher Dunson is trying to express is that he knowing hired an unlicensed contractor and probably didn't pull permits for the place he was renovating either. Running to start a legal battle may not be in his best interest.

    -Christopher

     I could not agree more I was only trying to give some leverage to move the situation along .There was mistakes on both sides but it is time to light a fire on the problem in light of the pending escrow 

    0Reply
  • Christopher Brainard
    Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
    9y
    Originally posted by @Christopher Dunson:

    @Christopher Brainard Luckily, everything is permitted to the best of my knowledge.

    If you're located in Las Vegas, I have some bad news for you, there is no such thing as a handyman license in Nevada and unlicensed contractors can't pull permits, so I highly doubt anything is permitted. Your handyman is probably working under a standard business license, which forbids being paid or accepting payment for more than $1000 on any job or for any customer in a given year. If you're holding the property in your personal name and you intend to live there, you can pull permits, but they make you sign a form under penalty of perjury that you don't' sell or rent it for at least a year. 

    So to answer your questions, you can pay the lien at closing and be done with the situation. Any legal action you take against him will definitely last longer than your escrow, the courts in Clark County aren't super fast. You can call the contractors board, but since you knowingly hired him multiple times, that could be bad for you. You can contact him directly and try to work out some sort of deal to get the lien released prior to close, but if he knows you're going to close he has little incentive to cooperate and it sounds like he knows the game better than you do.

    -Christopher

    P.S. If you don't have the cash to pay your contractors, you shouldn't buy the house or you should raise funds to cover your shortfall. Its been my experience that most contractors aren't fun to deal with under normal circumstances, but if they even suspect they will get shorted, you're almost guaranteed that they'll stop work immediately and you will face this exact same situation again. 

    4Reply
  • Steve C.
    Las Vegas, NV · Member since 2017 · 89 posts · 52 votes
    9y
    I think Jack B. Is correct in that It doesn't mean the home can't sell, just that he'll be paid when the escrow closes. I'm not sure about the $4,500, but I believe he will get all of the lien amount. Call your escrow company & ask them. If it means you loose 1/2 of the amount that was not performed, but you get the rest, do your numbers make sense to move forward if this is the case?
    0Reply
  • Kevin Delaney
    Investor · Feasterville Trevose, PA · Member since 2015 · 107 posts · 31 votes
    9y

    The lien has to be satisfied at settlement to clear the title.  He would get the full 8k lien unless you delay selling until you fight it out in court.

    0Reply
  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    I would be very scared of the permit issue also. However if you have done homes in the past and he didn't or did pull permits and you sold, you may be able to skirt by again. Doesn't sound like the guy is legit and pulling correct permits.

    I'm not sure how you should proceed with the lien, I think he has the upper hand and knows it. Contact your attorney (assuming you have one).

    In the future, I would make certain you always have funds to pay contractors. If you have to put everything on credit cards so you can pay your Contractors, or find a small loan for it, go that route. Would be much easier and less stressful than a lien at the time of sale!

    Good luck with it all and keep everyone updated.

    0Reply
  • Marelyn Valdes
    Investor · Ocala, FL · Member since 2016 · 299 posts · 110 votes
    9y

    Was he licensed (as a handyman) to do the work he was doing?  Did the roofing subcontractor get a permit and inspection on the roof (and you could get the info on the contractor from that permit)?  Electrical work in Florida requires a licensed electrician, not a handyman.  It might be worth getting the place inspected and using the cost of redoing his repairs as an offset.  If you get in a bind, see if you can post a bond to cover his lien and that should clear title to sell.

    By the way, you are filing with the IRS for all the money you paid him as an independent contractor I hope.  

    0Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Marelyn Valdes

    At the time the work was done, he was not licensed for anything at all, nor is there any signed document of any sort.
    @Marelyn Valdes

    @Brian Pulaski

    I am having a hard time grasping how he would have the upper hand with no signed docs of any sort, nor a license at time of work. He has also been in the US for less than a year and doesn't know how things work very well.

    @Christopher Brainard

    Aside from the above points, I am under the impression that a lien has to be filed perfectly to be valid. One of those requirements is being licensed. Also, you mention a good point about him not being able to accept payment for more than $1000, which most likely would not hold up on his end as well. I just don't understand how he can put a lien for 2x the amount of work done, and then tack on $4k for fun(which he wont have any proof for), have no signed docs, no license at time of work, and still have the upper hand.

    I do appreciate though the points where I can be put at fault. The attorney I had, is not a real estate attorney. I have been calling attorney's, and getting a couple of different courses of action all saying this situation is easily in my favor. I am not looking to get involved with an attorney who will tell me anything in light of picking up the case knowing he will be paid no matter win or lose. Does anybody have any recommendations?

    0Reply
  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    9y

    Call Andrew pastwick all he does is real estate very inexpensive

    0Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Account Closed

    Thank you Steven, I appreciate it a lot. 

    1Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    @Christopher Dunson,

    I like lists so I am going to drop th responses down to what has been proposed. He may have not had a license and may have only been here a year etc. However at this point you can:

    1) Fight it in court (Which will not be done in 28 days)

    2) Pay him the 8K

    3) Settle for less than 8K

    4) Threaten with a lawyer

    Any other ideas?

    1Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Mike Cumbie

    Thank you mike for lining that up short and sweet.

    It sounds to me, like pretty much anybody can pick up a simple license before or after work is done, and put a lien on whatever property they did any work on, and say it was for double the amount pretty much even if they were paid in full if there are not proper docs signed waiving the right to lien each category of work completed. Or am I missing something here?

    0Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    Anybody heard of a frivolous mechanics lien?

    0Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    Pretty much, you can fight it and I personally think your odds are pretty good (although I am no lawyer). You can also countersuit for your losses (This deal not going through, time, shoddy work being done that you had to fix etc). I do not think it will be done within 28 days though and then him paying the counter, the lein actually being removed through the courts takes time. So the other option is figure what he actually earned (Sounds like 2500 ish). Take him the 2500 in cash and a release form and lay it out. If he says no, then let him know your lawyer is on it with the counter and you are willing to crawl through this mudpit with him.

    Good luck!

    3Reply
  • Marelyn Valdes
    Investor · Ocala, FL · Member since 2016 · 299 posts · 110 votes
    9y

    http://www.nnbw.com/news/what-every-contractor-supplier-and-property-owner-should-know/

    1Reply
  • Christopher Dunson
    OP
    Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
    9y

    @Mike Cumbie

    I agree, thank you for you input.

    0Reply
  • Matt Geerts
    Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
    9y

    Are you sure that there actually IS a lien? He's not just bluffing? 

    2Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y

    @Christopher Dunson did you check out if he actually file the lien against the property? If he doesn't have any proof in writing, can he still do it?

    If he brought witnesses, do they have to be neutral parties or people who he hired?

    I like the idea to get official inspection done (from the City, for example) and present it as a proof that the work was not done or was done incorrectly, or no proof of permits. If there is nothing in writing, it means his word against yours.

    There better be a lawyer who knows about this game :(

    The lien will be paid at the closing and that's what you don't want to do - because you'll pay twice for the work.

    There should be a solution when contractors get greedy and don't finish the work.

    0Reply
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